4 Steps to Assessing Your Product's Profit Potential Is it a market or just a mirage?
By Derek Gehl
Opinions expressed by Entrepreneur contributors are their own.
I've talked to a lot of people who have found a promising market by coming up with a product or service that would solve a problem. But they're paralyzed about taking the next step. What if they put in the time and effort--and possibly money--and it flops?
There's one process they're missing. Validating your market after you've come up with a niche business idea is a crucial step you can't afford to skip.
Of course, there's no way to guarantee success, but ask yourself the four questions below. If you can check off every one, you'll know--as much as possible--that you're onto a winner.
1. Is there a demand for your product or service?
You need to make sure there are enough potential customers out there to keep you in business.
Are people trying to solve this problem on the internet and not finding a suitable solution? If you've done keyword research to find a niche market, you should already have a good idea about this.
Don't overestimate the numbers. Just because you think every cat owner in America needs to buy your revolutionary cat bed doesn't mean everyone will. A good number to use is 2 percent. If 2 percent of the visitors to your website become customers, you'll be doing well.
2. Is there any competition already supplying the market?
Search for your top keywords and look at the rival sites that come up. What do they sell and how do they make money?
Most sites you find won't be actual competition--they may just have some related content or be luring traffic for the sake of advertising revenue.
When you find real competitors offering something similar to what you want to sell, dig deeper into their businesses.
What can you do better than they do? Build a more professional, easier-to-use website? Write better pay-per-click ads for the same keywords? Put more keywords in your copy and code to attract the search engines?
These answers will put you ahead of the game and give your potential customers a reason to choose you over your rivals.
3. Will you get high-quality traffic?
Are people looking for something free, or will they actually buy from you?
Search for the terms (free) + (your keyword). Is there a free product competing with your product? If so, people won't pay for your version.
It's also a good idea to search Amazon and eBay for previously sold items to see whether people are willing to buy products similar to yours.
4. Does your internet business have a high lifetime value?
Lifetime value means the total value of each customer to your business as they buy from you again and again.
Can you turn one-time buyers into repeat customers? Are there add-on products or services you could offer to develop lasting, valuable relationships with them?
If you have a single product or service, try to come up with more things your niche market would buy--because it's much easier to sell to repeat customers than it is to develop new customers.
Once you've thoroughly--and honestly--assessed your niche business idea by answering these four questions, you should feel much more confident about making it a reality.
