Research Can Answer Questions
Market Research
October / November 2009
Volume 7 Number 5
As we near the close of 2009, some entrepreneurs are readying products and business plans to submit for business plan competitions or equity-seeking events in the coming year. They may want to ensure that they incorporate the customer viewpoint into these efforts; doing so will give them a greater chance of success in either securing funding or in marketing the products. Conducting some research can help in obtaining these perspectives.
There are four major questions to ask potential customers for industrial products, and others may be added depending on the product, industry, and application.
The first and most basic question that must be addressed is whether or not the potential customers have a need or desire for the product. The product in development may in fact be a quantum leap over what existing products can do, but is it truly needed? Let's say a product measures particles on a very minute scale. Is this something that customers really need? It probably depends on the industry and the possible product use. If the product is in the medical field, and the minute measurements can contribute to a diagnosis, it may be needed. If, on the other hand, the diagnosis can be done with larger measurements, it may be unnecessary. If the measurement device is used to detect faults in equipment, perhaps that very small-scale measurement may help reduce surgical equipment failures that can lead to surgical and post-surgical patient issues. If that same measurement device is used to detect faults in consumer household appliances, measurements that small may not make any difference or provide any benefits to manufacturers. As the answer to this question can be a non-starter for funding or marketplace acceptance, it should be explored as fully as possible.
Once a product need has been established, the second question is to determine, from a customer's perspective, what features and benefits are desired. This question is a bit easier to ascertain if there is a real need for the product. A word of caution, however: the benefit needs to be able to support the feature. This means that whatever form the benefit takes (time, money or other resources positively impacted), it should be able to pay for the feature.
Suppose customers want raised lettering on a metal device, for the purpose of ensuring that employees remember how to put it together, and further suppose that the raised lettering adds $1000 to the cost of the equipment. Stickers serving the same purpose could be attached and replaced periodically for $100, including the labor for replacing them multiple times. Is the benefit to the raised lettering enough to warrant the extra cost? That depends on a customer's perspective.
For industrial products, it's also important to understand whether or not customers are able to purchase the product and under what conditions. Even if a product is needed and provides sufficient benefits, it may need to provide a specific return on investment (ROI) and be able to fit into an existing capital budget. If the product's expected purchase price allows the customer to meet both of those conditions, that's good. If not, this is the time and the opportunity to find out what alternatives may exist for the customer to be able to purchase the product.
The fourth very important question to ask when developing a product is about the kind of service is expected by potential customers. The answer will vary wildly depending on the type of product and the industry. Enterprise-level software, for example, may require a range of service, from on-line customer service to a virtual helpdesk to in-person training and service. Products used in industrial settings may require a certain level of parts inventory and delivery times, in-person service, or web tools. Some of these items may in turn affect overall product pricing, and the level of service required may impact financials and funding levels. It's good to have some of these identified upfront so that they can be incorporated into strategic planning.
Researching these questions is the only viable means of finding the answers; they should never be assumed, especially on the issue of determining if there is a need for the product. There are several ways to find the answers to the questions. In some cases, they may be found in published reports or in trade journals. They may be found by talking with analysts or other industry experts, perhaps at a trade show. In most cases, however, they are likely available only by interviewing potential customers or others in the target industry. It is worth the effort, as gaining insight upfront into potential customers' perspectives on new products may enable entrepreneurs to more effectively position their requests for funding, to have a successful product launch by being able to react to known and immediate customer needs, and to minimize the impact of future needs.
Betsy Gillette is market research director at Technology Ventures Corporation.
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