When we were in primary school, there was a method we often used in solving our sums; we called it working-to-the-answer.
|Working to the answer|
How many cooks reading this blog, love cooking so much that they would prepare ten tins of rice, flavour it with the best of spices, garnish it with vegetables and an assortment of meat and dish it out only to be looking for hungry people that will eat it? Don’t we all start out by identifying the hungry mouths that need to be fed, estimating how much they can consume and then gather the ingredients required to prepare the food, before cooking? Don’t we start from the end-user (or consumer in this case) and work backwards to the production of the food?
Why then do we find people nowadays who so love to work for themselves or so love their business ideas that they first prepare their product/service and then start looking for buyers? Why do we have entrepreneurs who buy machines, employ workers, start producing and then begin to look for sales outlets? Why don’t we start by obtaining the end users ever before we roll out? A business myth that is often peddled around is ‘Where the carcass is, the vultures will gather’. How do you know that your carcass is the only one around that the vultures want to gobble? I have a friend who purchased several acres of farmland, ploughed it, harrowed it and ridged it. She then planted improved maize seeds on it, weeded the farm twice, fertilized the crops and then came to ask me if I knew where she could sell off her harvest. Can you believe that moulds, weevils and rodents harvested her crop? Unthinkable you would argue, but it happened right here in Ibadan!
A word that many entrepreneurs hate but must fall in love with is marketing. Marketing consists of all the activities a business engages in to persuade prospective customers to purchase their products or services (key word being prospective). There are many tools of marketing but they all have a singular aim: the identification and conversion of prospects to buyers. The marketing tool I want us to examine in this post which can help you in working-to-the-answer is called market survey. A thorough market survey will provide you with information such as the target audience, market characteristics, trends, distribution patterns, market growth potentials and competition that you need to formulate a marketing strategy. Let’s flesh that out a little.
Target audience refers to those who will buy your product/service. For instance, a car dealer selling new cars in Nigeria will find the chunk of his customers in banks, oil companies and among politicians while other dealers selling fairly used cars (tokunbo) will find theirs in the public sector. Similarly, KFC franchises in Nigeria will find their customers in high-rent neighbourhoods while the mama-put (restaurants serving native dishes) will be swarming with people if located in a low-cost housing area. Level of education, size of discretionary income, age and ethnicity are a few factors determining your target audience. You need to find the demography attracted to your product or requiring your services and not just assume that they exist out there!
Market characteristics, trends and distribution patterns are a little more statistical and require administering questionnaires to get accurate answers. Don’t cringe at the word questionnaire; I am not asking you to conduct a Gallup Poll! Your survey can be as informal as you like, just be sure that it captures all the indices you need. Get a student of statistics to help you design one, if you have to. It won’t cost you more than a bottle of drink and lunch, if you know how to cajole very well. (I’ve done it before).
To understand market trends, consider a wholesaler who wants to sell detergent products. Knowledge of the market trends will inform him that sales spike in harmattan and decline in rainy season. This little information can save him a lot of heartaches as a wholesaler, because he won’t tie down much-needed capital by stocking cartons and cartons of detergent in the rainy season; instead he can diversify and use his funds to stock products like mosquito coils which move faster in the rainy season.
But there is a lot more to market characteristics and you need to find out data such as:
How large is your product/service market? (How many people need the product/service)
How often do they need your product/service? (E.g. Panadol is a recurring necessity, table napkins are not)
How easy is it to get new customers? (Is word-of-mouth enough or is a sustained ad campaign needed)
How accessible are your customers? (Are they clustered in an area or dispersed)
If they don’t buy your product, what other substitutes will suffice? (E.g. If there are no radio-stations to advertise on, newspapers can substitute)
What are the segments in your market? (The various end-users of your product/service and their requirements in aggregate terms e.g. maize is purchased by livestock feed mills, cereal manufacturers, granaries, corn oil extractors etc)
Distribution patterns explain the route your product follows from you, the manufacturer, to the end user. For example a manufacturer of exercise books is patronized by major distributors, large bookshop chains and schools. While end-users can directly purchase at the schools and bookshops, the major distributor will still go through retailers before it reaches the end user. Knowing the distribution pattern of your business allows you to utilize appropriate channels to reach your customers.
Competition consists of direct competitors who provide the same product/service as you do, and indirect competitors who sell the substitutes. The survey should include this information so that you can be armed with enough data to come up with a unique selling strategy. It will help in deciding how to distinguish your business; which may be through extra after-sales services, with advanced technology or the like?
Don’t forget that after production begins, you might need to carry out a second survey using samples of your product to test the market. This is especially required if your product/service is very new or does old things in a very new way. And keep in mind that regular market survey is needful because factors of market characteristics are dynamic and you don’t want to be caught napping when new opportunities come visiting.
Finally, market surveys and analysis are a subset of business plans, which I have longed to discuss for a while now. Soon we will be deliberating on business plans but I am working on a practical approach that will make the topic very relatable to our readers. Watch out! See you next week, same time, same url. D.V.