So you have a great product or business idea and are ready to take the next step. The only problem is, you have no idea what that next step is. Welcome to every founder’s nightmare. In this article, I will guide you through four steps you can follow to launch a new product in any market. Here are key takeaways from this article;

• How to come up with a good strategy to counter market forces
• How to build your target’s profile
• How to decide if you have a fighting chance in the market you are about entering into.
• How to understand your target audience.

Let’s dive in...

Step 1 - What is your business goal?

This may sound like an obvious question and indeed, it is. But there is more to it than just putting down certain milestones you wish to reach in your journey as an entrepreneur. By goals, I am referring to your intent for the market.

Knowing this will help you understand the level of difficulty you are likely going to face.

To help with this, let me introduce the Ansoff Matrix. Coined after H. Igor Ansoff, the matrix is a simple system that helps you analyze the risk associated with growing your business whether you are a startup looking to enter a new market or an established business looking to expand.

The versatility of the Ansoff Matrix makes it an indispensable tool in business growth analysis. The Ansoff Matrix breaks down market intent into four categories known as quadrants.

These are;

Market Penetration - the goal of the business is to expand its product in an existing market.

Product Development - the goal here is to introduce a new product into an existing market

Market Development - here the business is trying to introduce an existing product into a new market

Diversification - this involves bringing a new product into a new market.

Each category has its risk level. Market penetration has the lowest risk level and diversification has the highest risk level. Most startups will typically fall under the diversification quadrant.

The term “diversification” is loosely applied here to startups mainly because they are bringing in a new/Unknown product and at the same time trying to enter into a market that’s relatively new to them.

Most established companies will follow a top-down approach. That is, they will likely start with market penetration before attempting to diversify. But startups do not have such luxury. They are new to the game and all odds are stacked against them.

This clearly explains why very few startups survive. Now you know full well where you stand as a startup, here is what you need to do next.

Research!!! Research!!! Research!!!

Most people recommend having a marketing plan as the first thing to do, but this is wrong. You can not possibly come up with a good plan to fight against what you do not know. This makes research the first port of call for any startup. What is the purpose of the research?

1. To know who will be interested in your product
2. To have a good knowledge of the market you would be entering.
3. To develop a counter plan against the market forces.

Step 2 - How attractive is the Market?

Market attractiveness refers to the opportunities for profitability that a market offers considering factors such as Market size and growth rate, price trends, number of competitors, and level of competition, etc. All of these factors are analyzed to determine if a market is worth venturing into or not.

To help with this, marketers employ Porter’s Five Forces.

Just like Ansoff Matrix is used to determine the level of difficulty in entering a market, Porter’s five forces can be used to assess the challenges that lie within the said market. The five forces considered are;

The threat of new entry - this considers how difficult it is to enter into a specific market based on the barriers that exist in the market: the higher the barriers to entry, the lower the threat of new entrants and the safer the market is for existing firms.

The threat of substitution - this refers to the ease with which your customers can replace your product or services with that of your competitors. If your customers can easily find a substitute for your product in the market, and make the switch, then you’re facing a higher threat of substitution.

Buyer power - this considers the balance between supply and demand in the market. If the supply is more than the demand, this is known as buyer power. In essence, the buyers have more power since they can easily move from one supplier to another. But if demand is more than supply then buyer power decreases.

Supplier Power - just like buyers, businesses also have to consider just how much power the supplier has before entering a market. If there are relatively few suppliers in a given industry, then they can collude together to raise prices which can have a negative impact on your profitability.

On the other hand, if a business has several suppliers to choose from, then they have the power to jump ship whenever a particular supplier isn’t working out for them.

Competitive rivalry - this considers the number of rivals who will be competing with you in the market. The more the number of rivals competing for the same thing, the less competitor power you have.

But in a market with minimal competition, there’s more competitor power since your suppliers and customers are not being pulled on every side by rivals hoping to snatch them from you.

Barriers to entry

It is impossible to talk about Porter’s Five Forces without expatiating on Barriers to entry. What are the barriers to entry? These are market forces that can prevent or make it difficult for a Startup to break into a new market or industry.

These could be anything from a licensing agreement to high startup costs and even patented technology. As a startup founder, you need to be aware of what market forces will be playing against you and what cards you have to fight back.

These market forces are of two types, those that exist naturally in the free market such as the high cost of startup, economies of scale, high switching cost (time, effort, and monetary cost on the side of the consumer), and a strong existing network or brand.

On the other hand, are those market forces that are artificially created by big corporations as a strategy to reduce competition by deterring new entrants. These include predatory pricing techniques, acquisitions, exclusive rights, or patents owned by existing companies in the industry.  

Barriers to entry determine the threat of new entrants in a given industry. An industry with a high barrier to entry would have a low threat of new entry whereas an industry with a low barrier to entry will have a high threat of new entry.

Your market research will shed light on what barriers exist in the industry you plan to enter and with that, you can develop a strategy on how to counter them. For instance, if the cost of a customer switching is high, then you have to make it worth their while.

How? By coming up with a new and innovative product that is too good to ignore. Here’s a bit of history to drive home the point.

Back in 2007 when Steve Jobs announced the first iPhone, it was nothing like what was in existence. At the time, the QWERTY keyboard was King, and mobile companies like Blackberry and Nokia dominated the market.

Apple was the new kid in the block and they weren’t trying to fit in. Instead, the company made a bold decision by being as unique as possible, the iPhone had no physical keyboard and just one button.

By today’s standards, the first iPhone looks ridiculous. But back then, its design was like wearing a red cape in front of a charging bull. They stole the show.

Combining that with Steve Jobs's remarkable marketing skills, Apple was able to stir enough curiosity in the market effectively reducing the cost of switching. Most people wanted to try their hands on the latest smartphone whether out of curiosity or sheer admiration.

How to overcome barriers to entry

It is not always possible to come up with a groundbreaking technology that you can leverage to break into the market. Therefore you might need to rely on the following;

Cost-cutting strategies like; acquiring an already existing business, leasing equipment rather than purchasing them, adopting lean manufacturing techniques, and viral marketing.

Adopting a disruptive pricing model; instead of locking horns with the competition by attempting to cut costs, you can adopt a pricing model that appeals to a specific group of people within the competition’s customer base. It’s easier and cheaper to win over those who are underserved than it is to enter a tug-of-war with an existing company.

Accept initial losses; this may be a hard pill to swallow especially for investors. But it is not uncommon for businesses to operate without any profits -initially-  until they find a foothold in the market. Amazon, a company valued at trillions of dollars today made no profit for several years after going public in 1997.

This strategy may not be for everyone and Amazon may be one of many exceptions.

Another difficult route to take is to hold on until you have significant leverage to break into the market.

Step 3 - Research your target audience

The first thing you would want to know after you have an idea for a product is “Who would be interested in the product”? Without a market, there is no need for a marketing plan or developing the product any further.

It is a grave mistake to assume that there is a good market for a product simply because it is innovative, advanced, or disruptive.

Sometimes, a product is just way ahead of its time and there aren’t many people willing to make the jump. This could be a problem especially when the company is unable to turn a profit soon enough to become self-sustaining. Investors become weary and develop cold feet, heralding the startup's slow and painful demise.

One example that highlights the need for comprehensive audience research is Quibi. The company launched in 2018 and raised a total of $1.8 billion in 2 rounds of funding before shutting down in 2020.

Despite having some of the best teams and connections to bigwigs in the entertainment industry, Quibi’s marketing team got one thing wrong, the audience or more precisely, what its audience was interested in.

The company focused its marketing efforts on distinguishing itself from the competition by showcasing the unique features of the app. In addition to that, the content did not fit its target audience.

According to Whitman, Quibi’s target audience was between the age bracket of 18 - 34 years old. However, its contents can best be described as out of touch for a typical millennial. Old shows, no new celebrities, and of course, turning a deaf ear to the requests of its audience, eventually led to its downfall.

This example goes to show how building a buyer persona is important for the growth of a startup.  

Step 4 - Market Testing

Once you have a good understanding of your target audience, then it's time to run some test. Market testing should give you a good idea of how your product will perform when released.

Market testing is exactly what it sounds like, getting your products to prospective customers, letting them have a feel of the product and then they give you their honest opinion.

For it to be effective, you will need a prototype of the product and a general idea of its cost price. The next step is to get the prototype to prospective customers and have them give their honest opinion.

Asking the right question is important at this point because it will help you narrow down what the crux of the problem is, if any.

For example, will a prospective customer be willing to pay a particular price for the product, or how much they will be willing to pay for it? You need to also know if buyers that find the product interesting are willing to make the switch from a similar and more established product in the market.

If not, then you need to know what’s holding them back.

Thirdly, Market testing will give you a good idea of how your product will fare against the competition. If there is something similar being offered, you need to know how it stacks up against yours.

A good place to start is by signing up for trade shows and exhibitions where you’ll get to see the latest products in your industry that could be a direct threat to yours.

If you’ve come this far, congratulations. By now you should have a good understanding of three things, your goal, the market, and your target audience. Here’s one last piece of advice before I wrap up, don’t forget to use market psychology to your advantage. If you don’t know how to, then I recommend you read;

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10 Marketing Psychological Principles To Help You Become A Better Marketer

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