Up to this point we have still existed in a bit of a cloud. We had fun brainstorming an idea or two, and got through the work of defining that the idea we like best. In looking at the market we now get to figure out whether or not everyone else will take to our idea. "The Market" is really a broad concept and there are entire blogs dedicated to this, and no single entry can to it justice but we can get an idea of how this will go and what we are trying to accomplish.

Our goal is to gain a clear understanding of who we are targeting with our idea (i.e. who is likely to buy) and how much they will pay. Peripherally, though no less important, we need to understand how large that group of potential buyers is and what motivates them to give up their credit card numbers to us in exchange for whatever it is we are doing/creating.

We're still researching a lot at this point but now we have to shift gears and get analytical about our research. When we finish the "Market" phase we should be able to attach concrete findings to the following attributes:

- Niche Definition: Who exactly is our market. This should be as highly specific as possible. e.g. "people who own a German Shepard" is a better mark to shoot for than "people who own a dog" because the latter will have lot more competition and noise in the market place. Go into extreme details to know your buyers, research demographics and buying trends among that demographic as much as possible. This will help you make more realistic projections.

- Market Size (how many buyers are in our market): The market needs to be big enough to be worthwhile but not so large that we are over generalizing. The danger in overgeneralizing is that you, as an individual entrepreneur will be competing with the big dogs of your area. But if your market is too small you won't make any money.

- Projections: The bottom line is how many buyers times how much we make per sale = revenue. Keep in mind, only a percentage of the potential market will buy, and that is likely to be a small percentage. I usually expect a conversion rate of about 2% for online selling. I have seen much higher, though anything above 6% has been rare to my eyes with most at about 2.5% or below. I prefer to project conservatively though as accurately as possible. I have heard too many people say "even if only half the people who see my [whatever] buy, I'll make $XYZ." You won't get a 50% conversion rate unless you only have two possible buyers and 1 of them buys. So be realistic here.

There are a lot of ways to map out your market. Once you have the basic market defined and know a bit more about your customers keep the following in mind as you move into the build phase:

- What up-sell opportunities can I attach to my idea?
- What partnerships or alliances can I form to help drive sales or add value?
- What extra information or services can I offer that will give me an excuse to keep in touch with my customers? This kind of follow up will lead to more sales later?

Think about different revenue streams you can attach and look at how others are doing it for examples. The easiest (and least expensive) customer to sell to is the one


(Idea Lifecycle Frameowrk, Phase 3. click to enlarge)





















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Labels: frameworks, ideas