Who will buy?
By now you have probably narrowed down your shortlist of ideas. You
may know which market you want to enter; you may have got your eye
on a product that you think has potential. What you must do next is to
study your prospective marketplace in detail. Researching the marketplace
comes before raising money, making prot and cash ow forecasts, nding
premises or any of the other steps you have to take to form your business.
This is especially true if you need to raise money for your proposed business
and have to produce a business plan. You will not obtain nancial backing
unless you can show with condence that you understand the structure of
your market and have a clear idea of where your product will be positioned
compared with the competition. The crucial questions are who will be your
customers, why will they buy from you and how much can you sell.
Knowing the number of customers is not the only information yielded by
studying the marketplace. More importantly, you should be able to obtain
information about what your potential customer needs. This, in turn, should
aid you to angle your product or service to satisfy the greatest demand.
It is much easier to persuade people to purchase something they already
want; educating a market to buy your product if the market has expressed
no great desire for it can be a long haul.
What is in this chapter?
This chapter is about market research and how you can proceed to nd out
about your particular market. But the rst part of the chapter concentrates
on what it is you need to know, rather than how to carry out the research.
14 The Financial Times Guide to Business Start Up 2012
First, the chapter helps you to dene the bit (or segment) of the market you
are specically going for, who will buy? (p. 14): which are your customers
and what are their common characteristics?
The next section, why will they buy? (p. 17), helps you to form your sales
proposition to your target market. What are the main features and ben-
ets that your potential customers are looking for? Can your product
supply them? This process helps you to dene your service or product
specically, and in relation to the competition, so that your product is dif-
ferentiated from the run-of-the-mill.
The third section, how much will they buy? (p. 19), leads into how you can
utilize the information to make realistic sales forecasts.
The nal section, how to do the research (p. 22), looks at the nitty-gritty of
carrying out the market research needed. How is it done? What sources do
you use? Are some more important than others?
Who will buy?
Knowing which market and which product is only the start of the
work you need to do before you will be able to begin selling. First, you
have to research the market. You are not simply looking for lots of statistics
to blind potential backers. You need the details to help you to plan your
It would be a mistake to assume that you have an equal chance of
selling to every customer in your market. If it is that sort of market, it
implies that you are looking for volume sales. In turn, this suggests a
market that is very sensitive to price levels and in which it is difcult to
sort out one product from another. If this is the sort of business you are
planning, think carefully. Few small businesses have the resources to make
a success of this.
Basically, you should be looking for a niche in your proposed market that
allows you to charge a reasonable price and so maintain reasonable prot
margins. To achieve this, your product needs to be clearly distinguishable
from the competition (called product differentiation).
The purpose of your research at this stage is to look for that niche. This
process is called market segmentation. In everyday language, it means
looking for a group of customers within your target market that has