Testing Your Business Idea Part 3
Advertising Being Done (Sign of Profitability)
Advertising is expensive. Businesses won’t spend money on advertising unless it works for them. If something is not working, they will quickly exit the campaign. Use this information to determine if your product or service has potential by checking advertising for your product, service, or industry.
Here is a tip: track your ads over a certain time period. When you search in Google, at the top and right-hand side of the results usually contains ads. Search using product-related keywords and take a screen shot of your results.
Do this daily for a week or more. Look for advertisers that continue running the same ads. If companies are consistently advertising a product or service, it’s a good indication they are making money from it.
You can go through the same exercise with the following:
Ads from Social Media
Magazines – check your library to find back issues.
There are several tools available that show what kinds of advertising your competitors are using. Examples include Google Alerts and Social Mention.
Why Competition Can Be Good for Your Business
Competition indicates a viable market for a product. It keeps all players on top of their game and weeds out those who become complacent. Innovation stays strong in competitive markets.
Competition can help lower the cost of manufacturing products and services as is described in a paper by the Federal Trade Commission, “Competition can lead companies to invent lower-cost manufacturing processes, which can increase their profits and help them compete—and then, pass those savings on to the consumer.”
Sizing Up the Competition
Evaluate only your core competitors. Not every competitor is going to be a direct competitor. Although PetSmart may sell interactive cat toys, that is not their sole focus. Find competitors in your niche, if possible.
The SBA has a tool that can help businesses determine who else is competing in a given industry. It uses the Sizeup engine. You can use the tool from the SBA website or directly from Sizeup.com.
The tool does have some limitations, especially when trying to narrow your focus to a sub-industry. The classifications may not quite align with those of your products and services. Nonetheless, it is worth trying it out and coming up with as close a category as possible. You can make a determination from the results.
Cat toys is a perfect example of this limitation. There is no classification for cat toys. At best, you would have to lump it into the category, “Pets, Pet Supplies, & Food (Retail)”.
Unfortunately, there is no data-exporting functionality provided. You will have to scroll page-by-page and copy the data from the website. This could take several hours of your time, unless you decide to outsource it.
To find out more about your competitors, try the following:
Ø Sign up to your competitors newsletters - Go through your list of competitors and see which of them offer newsletters. Sign up to those newsletters. This is a great way to keep track of them and get notifications of any updates.
Ø Use Google Alerts - Set up Google Alerts and use the name of your competitors as the keywords. Whenever something new appears in Google about those competitors, you will get an alert.
Ø Buy products and services from your competitors - If you have the budget, buy your competitors’ products and services that are similar to yours. Pay attention to the sales process and how you are treated. Contact customer service asking questions. Make note of any weakness in their business processes.
Ø Check competitors’ products being sold on Amazon, eBay, Target, and Walmart
Your competitors may be selling on these platforms. With Amazon, you can see how well a product is selling via its product rank. eBay will show you completed listings of products and whether they sold and for how much. You won’t be able to get that kind of data with Target and Walmart. However, the fact that they are selling products of your competitors is telling.
Considerations for Digital Products
If you’re planning to sell some type of digital product, there are a number of online marketplaces where you can list your own product. These sites also provide a wealth of information you can tap into for both finding new ideas and assessing the potential of your current one.
ClickBank and Amazon
ClickBank and Amazon are two of the most popular marketplaces for both digital AND physical products. Use them to gather information on products similar to yours. If possible, buy and go through the products. Take notes of what you liked as well as any weak areas. You can use this information to improve your own products and services.
Read through the reviews, both good and bad. Use the good reviews as a clue to the types of topics people enjoyed and use the bad reviews to improve your product or service.
In many digital marketplaces, you can also see statistics for what is selling well and what isn’t. While part of poor performance can be due to a lack of marketing, look for trends in specific types of products. Those are ones you’ll probably want to focus on or avoid.
~ The Game Changer Team
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