Coming up with a great idea is just the first step in a long, challenging business adventure for entrepreneurs. One of the most important parts of that adventure is determining whether customers will actually be willing to pay for your products or services.
“People get excited about their ideas. But it’s really about the customer,” says BDC consultant Beth Parker. “You have to step outside yourself and put yourself in your customer’s shoes.”
Making mistakes in the startup phase has a huge impact on the survival rate of businesses. Just 51 per cent of businesses with at least one employee founded in 2001 survived their first five years in operation, according to a 2010 survey conducted for Industry Canada.
A lack of planning and research when launching a new product or service is a big reason behind the high mortality rate, Parker says.
Whether you are in the startup phase or just looking for ways to expand your existing offerings, here are five tips to make sure you will attract customers.
- Know your customer. Parker says your most important challenge is to understand your prospective customers. “You need to find out about who that person is. Don’t assume you already know because you don’t,” she says. “You need to put all your assumptions aside.” Write down everything you can about the customers you are targeting. What do they like, dislike, need? Where are they located? Why would they buy your product? How much would they pay? Do they shop online? The answers to these and other basic questions will help you to decide whether you’re on the right track or need to change course or even start over. One way to determine whether your offering is aligned with what customers are seeking is to conduct an informal survey or set up a focus group formed of potential customers.
- Be different. The key to turning your idea into a success story is to stand out from the crowd. “I am always worried when a client says this about a product: ‘Anyone can use this,’” Parker says. “That means he hasn’t identified his ideal customer.” To differentiate yourself from your competitors, you need to know who the competition is. What are their strategies for attracting customers? How are they differentiating themselves from other businesses? How much are they charging? How have they been doing lately? Do a SWOT analysis on your product by listing its strengths (S), weaknesses (W), opportunities (O) and threats (T). Parker encourages companies to address the weaknesses immediately. “There is no point in identifying them if you aren’t going to do anything.”
- Think long term. Determine whether there is lasting value in your product that will keep your customers coming back for more. “If you develop budget-tracking software, you should plan on creating upgrades and add-on services,” Parker says. “You have to leverage your product into a long-term relationship with your clients.”
- Get help. There are lots of resources to help you research your market. Canada Business is an excellent start. BDC also offers a wealth of advice to help you create and execute a business plan that will put your business on the right course.
- Get feedback. Once your product is out there, don’t stop asking questions. Ask people what they love and hate about it. You shouldn’t be afraid to tweak your ideas as you go along.
Content in this section is provided in partnership with the Business Development Bank of Canada. BDC provides entrepreneurs with financing, venture capital and consulting services. To find out more go to BDC.ca.
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