Carrying out proper research before you launch a product can determine whether your business sinks or swims. It can also help you to identify competitors, find similar products and learn the best ways to sell and develop yours.
Around 30,000 new products are launched yearly, and a staggering 95% fail. One of the main reasons behind their demise is there’s no demand and customers’ needs aren’t considered upon launch.
In this guide, we’ll take you through how to conduct thorough market research on a product to help you launch in confidence and reduce the risk of your business succumbing to the same fate.
What Is Product Research?
Product research is the process of gathering and analysing information about your product. You’ll look at the current market, key competitors and your potential audience. This research will help you to identify any opportunities if there’s a demand for your product and assist with any decisions regarding product development, costs involved and distribution.
When done correctly, product research can help minimise potential risks and determine whether your product will succeed before spending money.
This method can also be used to optimise existing products as you can monitor how competitors are evolving and adapt your product in response.
How To Do Product Research
Now you know why effective product research is so important, here are some practical tips on how you can carry it out:
1. Evaluate market size
You won’t be able to get the exact market size for your product, but these handy methods give you a rough estimate:
- Use Google Trends: Search for your product and look at the interest over time to determine popularity. This is also useful for identifying regions where your product is most popular.
- Search for your product: Google your product and see how many competitors are out there. Also, look at who’s ranking — is it bespoke sites or marketplaces like Amazon or eBay? This can help you decide where to market your product.
- Find reviews: Following your Google search, look at competitors’ reviews. Are there tons or just a couple? If there’s a lot, this indicates a larger market, whereas a few would suggest it’s more niche.
2. Look at competitors
This point loosely ties in with the first. When you conduct market research for your product, note how many competitors you have. If there is competition, then there is a market present, but it also means you’ll need to figure out how your product is different or better.
On the other hand, if you’re the first, be prepared to undertake lots of research to decipher whether you have a market. A smaller market size does mean you’ll have a limit on your revenue potential, but it may make it easier and more cost-effective to market your product.
It may also be helpful to use a keyword research tool such as Ahrefs to identify potential search volumes for product names. This can inform you how competitive your target keyword terms are and what possibility you have to rank for them.
3. Determine product longevity
Product markets fall into four categories: stable, growth, fad and trend. Depending on where your product lies, it can significantly influence your business’s success or failure.
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- Stable: A product needed by all, such as a fridge, would be in a stable product market. You’re unlikely to see many sharp increases or decreases for such products.
- Growth: This refers to a product growing in popularity that shows signs it’s here to stay.
- Fad: Demand for fads rises
- rapidly but dies out just as quickly. Fads can be lucrative if you get in at the right time, but it’s hard to predict, and demand will disappear quickly.
- Trend: The trend product market is longer-term and grows slower than fads. It also doesn’t burn out as quickly. There’s potential to grow into longer-term markets, but it’s hard to predict.
Google Trends is an excellent way to see the trajectory of a product over time. This will help you to determine whether your idea is here to stay (stable or growing) or one that’s had its moment in the spotlight and is to be avoided (fad or declining trend).
4. Figure out markup and selling price
Before you get too far ahead with your product research and development, calculating markup is critical to determine whether you’ll make enough profit. Particularly with selling online, you’ll find many fees that quickly add up and eat into your profit margin.
Think about the following things when calculating markup:
- Cost per unit or cost of materials
- Packaging: product and shipping
- Import shipping
- Customs and duty fees
- Shopping cart fees
- Credit card processing fees
- Shipping fulfilment fees
- Shipping cost
- Advertising costs
From here, you’ll be able to work out a selling price. Bear in mind that if your product is inexpensive, you’ll need to sell a lot to make a profit, and with increased sales comes more work in terms of customer service and operations. Expensive products, on the other hand, may take longer to sell.
5. Think about shipping
You may be surprised by how much high shipping charges can impact your sales. In fact, 66% of customers expect free shipping, whereas 80% think it should be free over a specific cost. Aside from shipping costs to customers, you’ll also need to consider how much it costs to ship to you and any storage fees if you’re not using the dropshipping method.
Think about the fragility of your product. This may seem odd to consider, but you’ll need to spend more on packaging materials for fragile items. Otherwise, you’ll face a lot of refunds or returns due to breakages.
Extra Tips for Product Research
- Research early on: Don’t wait until you’ve got the product before starting your research. Start looking as soon as you have the idea.
- Keep costs down: As a small business, it’s vital to keep costs down initially. When carrying out product research, try to use free information. For example, Google Trends is an excellent source of free information.
- Find out what customers are saying: If you already have a competitor, use this to your advantage. Look at subreddits about their products and read reviews. This can help you determine how to improve your product before you start developing.
Want to get started with your new product? Register your business with Mint Formations today and begin trading in confidence. If you have any questions, get in touch with our team today, and we’ll be happy to help.