If you currently operate an established enterprise, want to launch a new product or service, or if you are contemplating a fresh startup idea, usually the same fundamental screening questions will apply to help shape your new concept.
As you screen business ideas, the following questions will guide you, and focus your thinking as you further develop your concepts. Start by zooming in on these important focal points:
Who are Your Ideal Customers?
Begin with a generic description, not a specific list of customer types. For example, will you market your products or services to consumers, businesses or some other entity?
If your business is consumer products, will your target market be white or Hispanic teenaged girls in New York City, Baby Boomers throughout North America, or 40+ music lovers with a disposable income of over $50,000? Whoever your target audience may be, be as clear as possible.
Do You Know Your Customer’s Wants or Unmet Needs?
Another way to state this question, is what are your customers’ pain points? This is a term we hear all the time that simply refers to the reasons why customers will choose your products or services. It is the point they recognize you have the solution their problem (pain).
This can relate to a specific unmet need, such as a pacemaker for a life-threatening, unpredictable or slow beating heart. On the other hand, the “pain” might be more of a want, and less of a need. For instance, some businesses realize that many fashion-conscious consumers want access to top designer shoes and handbags, but can’t afford the high price tags, so they offer such products at competitive prices.
How are Your Target Customers Currently Meeting their Needs, if at All?
Even if you have the most innovative and attractive approach, keep in mind, your ideal audience found a way to meet their needs before you launched your products or services. Long before the first automatic dishwasher was created, people managed to get their dishes clean by hand. Although it may be hard to remember, or even imagine now, we all survived without mobile phones. Landlines at home and work, along with public telephone booths served us well. How will you help them meet their need better?
How is Your Competition Effectively Meeting this Customer Need?
Be very aware of what your direct competitors are doing. Know them all by name, study their all their ads and other promotional materials. Engage with their loyal customers and research their pricing. Know what competitors are doing well and what is lacking or failing and come up with your customer solution.
How will Your Target Customers Benefit from Switching to Your Brand? What is Your CVP (Compelling Value Proposition)?
Why would your ideal customers choose to address their need with your product or solution, instead of sticking with a competitor? What benefits do you have to offer?
If customers accept your solution to their problems, exactly how will you meet their needs significantly better, cheaper, faster, or in a more fashionable, reliable or trendy way than they were formerly doing?
What is the Size of Your Total Addressable Market (TAM)?
If each potential buyer purchased your product or service, at the preferred price, either from you or one of your competitors, what would be the annual revenue? Although the TAM is a theoretical number, it is still an important figure because it quickly shows whether your concept is worth pursuing.
Determine your TAM by answering the following questions: Inside your geographic market, who could benefit from your product or service? How many people does that equal each year? Multiplied by unit sales at your current asking price, how much does that equate to in annual revenue? If this market were completely saturated, what would be the size of this market?
How Do You Compare to Your Competitors?
Uncover and describe what makes you different and your strategic positioning. Never forget, that even though you are offering a solution, you will be asking consumers to make a change to the way they currently operate. Therefore, you will need to provide a much better way that provides more value than the way customers are addressing their pain now.
How Can You Involve Potential Customers in Your Solution Strategy?
Develop a plan for involving prospective customers in your solution. The best run startups incorporate customer input, and the most successful players bring top customers into the thought process. These lead consumers are involved in the creative process of critiquing, specifying, altering and improving the company’s products or services.
Can Your New Idea Generate Sustainably High Profits?
After all the necessary expenses are covered, will you gain a good profit? If so, do you foresee a good future sustaining these high-profit margins? If your concept looks promising per unit, how many units will you need to move to cover overhead? Do you have a good idea of how much lead time and expense it will take to get your new product or service on the market?
Obviously, these are very basic, yes or no questions. Answering these questions properly simply require you do the math. In addition, to ensure you generate high profits for the long term you need to gain the competitive advantage. Have you uncovered exactly what your sustainable competitive advantage will be, for the long-term?
Does Your New Product or Service Have What it Takes to Stand Out in a Competitive Marketplace?
If you just happen to offer a unique product or service, that is so unlike the rest, that no else provides, it is a piece of cake to be the best. But that is a fairy tale reality for most businesses. To operate a successful business with a strong presence, you need to use every possible advantage. Do your research, give consumers what they need, treat your audience well, and make sure to stay a step above your competition.