Market Research Proposal
When setting up a market research proposal there is a specific guideline to follow. Follow this guideline below and you will be ranking in the search engines in just a couple weeks, sometimes days.
Find a niche, find a product, and assess feasibility. That’s the key to research. Sometimes it can be very formulaic and precise, almost a science. And sometimes it is more gut feeling and intuition.
We love to browse sites like Hacker News, various startup and entrepreneur blogs, and product and service listings (like Clickbank or website resellers like Flippa) to get ideas.
Sometimes, you’ll hit on something that inspires you to create, if you can find a niche and a product and it seems feasible, get on it!
Inspiration and motivation each have short shelf lives, so grab it by the horns and just do it! However, do your research first. You might want to do something for fun (and you should) but donft confuse ”fun work” with ”work work” (although the two are not always mutually exclusive).
Find a Niche
What is a niche? A niche is a special area of demand for a product or service as defined by dictionary.com.
Almost always you will find your niches inside an industry. An example of a niche, using dog ownership as an example industry, would be someone searching for information about how to train their German Sheppard. Dog ownership is not a niche; instead, we’d refer to it as an industry because
there are so many different areas of interest in dog ownership. Instead, the niche is training a German Sheppard.
As you can imagine, there are hundreds of niches; the only question is, where can you find them?
Tools of the Trade
We love Google. In fact, Google provides one of the best tools around for researching niches. Niches are usually best defined by the keywords that describe them.
Usually, the more specific the keyword, the more specific the niche. You can also bet that the more specific the keyword, the smaller the audience
or market becomes.
Remember, the more [ laser focused] you become in finding niches, the better your chances of creating a product that will best serve that niche. If you become too broad, some of your prospective customers (which are very expensive to reach) maybe leave and look for others solutions or sources of information that seem to better fit their needs.
You’re a salesman, and you can’t sell hammers to a secretary.
So, how do we start using the tools to find niches? Well, let’s start with one of our favorite ways, pick a broad topic and find a forum for that topic and start digging around.
Why not choose a huge industry and start to get a little more specific as we carry on: dieting. Let’s find a forum first. Open up a browser and point it at Google.
In this demonstration we are looking to see what people want to accomplish in the dieting industry. Although we get many results, we can usually expect to find what we are looking for within the first 3 results.Let’s try clicking on the second link from the ad.
Already we have at our disposal a massive source of public customer feedback in the form of a forum. If you spend an hour or two browsing this forum looking for more specific dieting niches, I bet you can come up with several dozen. In fact, keep a list or Excel spreadsheet of possible niches as you search.
As you can see, we used the keyword diabetic diet recipes as a seed, which seemed to be a pretty common topic in the diet forum. We’re given a massive list of other keywords that we might be interested in. For the moment ignore variations on the same theme and look for other, more specific keywords to key in on. Add those to your list as well.
After a while you’ll have a strong set of keywords and niches to dig through. We’ll talk more about about the feasibility of the market research proposal later, but for now, just set the Excel file to the side.
Services vs. Products
This is a major aspect of niches. Basically, you’ll be asking yourself: is the niche better served by a service or a product? A service usually entails fleeting or temporary benefits. For example, a nanny provides a service. A consultant provides a service. A therapist provides a service. UPS and FedEx both provide a service. A product is something more tangible and provides longer term benefits. A shoe is a product. A book is a product. A digital file is a product. The ways you approach and research niches depend heavily on if they are a product or a service.
For example, a product based niche like youth golf shoes requires you to sell a golf shoe to someone to make money. It would be quite a stretch to sell a service around youth golf shoes. Would you provide a service to clean golf shoes or a service to judge the quality of the golf shoe? How would that work? How would you need to alter your marketing approach to find the demand for your service?
On the other hand, think about something like child care nannies. Generally, this will be a service. Either you will provide the nanny or you’ll put them in touch with a nanny service. However, what about a product like a book about becoming a child care nanny? How do you sell that to someone looking for nannies?
Both services and products have pros and cons, so we’re not going to steer you in either direction. However, do think about this while you are doing your niche research. Have you found a service niche or a product niche?
When we say assess feasibility, what we mean is: is our niche going to have a fighting chance at making money? In the business world, we like to call this due diligence. Is the market big enough to make any money? What about competitors? How much are the competitors charging? And finally, what will it cost to reach the customers? These are all important steps, and ignoring some signs early on can set you on a path of doom later on. So, embrace a motto we love: fail early.
Using that Excel sheet, start browsing through each keyword and let’s assess the feasibility. I tend to keep track of each stat on a relative (and imperfect) scale. If there are lots of competitors, I’ll give the keyword a bad competitor score. If there is a massive market, I’ll give the keyword a good market size score. And so forth. The key here is to find the best mix. If you run across a keyword with great scores in each category, maybe this is a keyword you should further pursue.
We love Google’s keyword tool for feasibility assessment. We’ll talk in more detail about what to look for below, but for now, you should understand the difference between broad and exact matching.
Broad matching matches a keyword based on any separate word that is in any number of keyword phrase. For example, dog grooming will match keywords like grooming your dog, small dog grooming, and dog grooming for dummies. Exact matching is exactly what it sounds like; it matches only the given keyword and that keyword alone. For example, dog grooming will match dog grooming.
We generally recommend using the exact or phrase method of matching keywords because broad searches can distort true searching patterns.
Market Size (or Volume)
Market size can go either way, if the market is large (IE: lots of people are searching for that keyword) you can rest assured there will be lots people bidding (lots of competition). On the other hand, if you have a small market, you might not be able to find enough people to sell to. But, the good thing about this is that you will likely find a lot less competition and bidders, which is good.
Generally, what we use to measure market volume is, well, volume. Namely, we like to watch the local monthly searches (as well as global monthly searches). Below, you can see we’ve even sorted our table via the local monthly searches.
This gives us an idea of how many times this keyword (or broadly matched set of keywords) is searched in a month’s time. Any keyword with over 15,000-20,000 monthly searches (with exact match) is considered fairly large. Anything lower than that is about average and anything near or below 1000 is very small indeed.
Don’t think you should be aiming for large or medium. Our biggest successes have been extremely small keywords (and usually, lots of them).
If you look at the above screenshot, you’ll see a build in competition meter. You’ll also see that this is usually maxed out. This is extremely common on popular keywords. As the keywords become more and more niche and less searched, you’ll notice the competition decreasing.
Another important component (and some would say more important) is the estimated average CPC, shown to the right (this is normally hidden). This tells you how much the competition has bid up the keywords. As you can imagine, a keyword with average CPC of $5 certainly is more competitive (price wise) than is a keyword with an average CPC of $0.40. You’ll see how this factors in shortly.
This one is going to require you to set up a market research proposal because Google isn’t going to tell you the revenues of its customers (heck, they don’t even know) and you certainly aren’t going to get the number from them. Instead, try researching how much their product is selling for and about how big of a chunk of the market they possess. Do lots of research. Are they #1 in PPC and SEO?
This can also tell you a lot about your competition. What are they doing? Are there lots of them? Are they strong? Are they small and weak?
You’ll also have to consider if you can charge as much as them and stay in business. A lot of times, you don’t want to charge less because costs can completely destroy your revenues, leaving you nothing. On that subject, let’s talk shortly about some of the associated costs.
Costs can be various. If you have employees, that would be a cost. If you are paying for internet services, that would be a cost as well. However, we’re going to focus on the cost to you as a direct result of marketing.
Generally, there are two common methods to generate traffic via marketing: PPC and SEO. We have chapters on each later on, but to suffice to say, PPC is much more instantaneous and SEO is more labor intensive. PPC gives you only a temporary benefit, SEO is much more long term. However, both can be expensive propositions and how expensive they are is usually a factor of the revenue available in the niche and the competition you will be facing.
For example, a niche with lots of competition that sees lots of revenue generally attracts a lot of competitors. In PPC that means that a lot of people are going to bid up your keyword, which means you pay more for a click (and therefore have to charge more for the project or have a great conversion rate). On the other hand, if there is a lot more competition in the sphere of SEO, you will need to work much harder to rank for that same keyword.
This is the universal problem with highly desirable niches, they are all you read about and therefore are all everyone else is reading about. Therefore those niches are flooded with competitors that increase the costs associated with doing business. Our recommendation, find a small niche first and keep costs very small. Then expand.
This is my favorite one to consider because way too many people look at the competition and think: “They are charging too much! I could charge less than that!” Well, what you may be forgetting is that the costs associated with acquiring customers may force them to charge a higher price.
If you go rushing into a niche with low profit margins with the bright idea of charging less than the competitors, you can rest assured that you will get your ass handed to you in the beginning. Why?
Because chances are you can’t make up in volume what you are losing in sales.
Think about it this way: product A costs $100 but product B costs $10. If you want to make $10,000 in revenue, product A will require 100 sales and product B will require 1,000 sales. Chances are you won’t sell to every prospective customer who sees your website, so let’s say only 2.5% buy product A (most see the huge price tag and leave) and 5% buy product B (hey, it’s a great deal, right?). These are fairly realistic numbers.
That means product A requires you to reach 4,000 prospective customers (100/2.5%) to sell the minimum 100 copies and product B requires you to reach 20,000 prospective customers (1000/5%) to sell the minimum 1,000 copies. We already know that each product made $10,000 in revenue but we need to find the costs. Now, assume it costs an average of $2 to get a prospective customer to visit your site: it would cost $8,000 to advertise product A (4,000 * $2) and $40,000 to advertise product B (20,000 * $2). Guess who made money? The folks selling product A at a massive price made $2,000 in profit ($10,000-$8,000) and the folks selling product B lost $30,000 ($10,000-$40,000).
Add to that the problem that when trying to taking a larger chunk of the market, you end up paying a premium and you’ll find your dreams of being a low cost seller going out the window. When in doubt, price high. You need profits.
Find (or Create) a Product
Now that you’ve figured out a brilliant little niche that has the right volume, estimated revenue and costs, it’s time to dig in and make a product or find a product to sell. There are a lot of good things and bad things about each method, but we’ll cover each in due time.
An affiliate is someone who sells a product on behalf of another. For example, Bob sees Alice is selling software for creating sewing patterns. If Alice has a system set up for it, Bob can sell copies of Alice’s software for a cut of the revenues. This way both Bob and Alice can make some money.
One of the most popular sites for affiliate marketers is Clickbank. They provide hundreds of thousands of products that you can sell, and you can even add your own! Our favorite technique is to start with a product from an affiliate service, judge how well it does and then build your own product in that niche to replace it if you are successful, here’s how…
Building a Product
After you’ve judged the market with an affiliate product, it’s probably about time to build your own. There are two reasons you will want to do this:
1. You keep all the money on sales you make yourself
2. You can let others become affiliates and make money on their behalf
There is nothing like outsourcing work and letting other people make you money. The basic idea is this: they do the work and get a little chunk of the pie (though we recommend giving them a large chunk). What extra work are you doing to earn your chunk of the pie when someone sells your product for you? You aren’t probably doing anything at all.
One thing about building a product is you need to be extremely good at what you are dealing with or have some sort secret that makes it much, much easier. Remember, you need to create real value here, because if you don’t, you’ll have upset customers. In this day and age, you can’t hide from upset customers.
They will find you and your prospective customers and scare them off. So spend a lot of time organizing your thought process and designing the product before you start ever building it. It doesn’t matter if it is an electronic book, an entertaining video, a piece of software or even a website that requires a one-time fee to access; you need to think it through.
Also, and polish that sucker. While the saying is you can’t polish a turd, you can certainly make your product much more appealing through presentation. Just think of 4 and 5 star restaurants. Do they really possess some magical food that is worth 10x the price? I don’t think so. However, they are professionals at presentation, so pay very close attention to your appearances.
Building a Service
This is a little more in depth and requires some specialized knowledge, but if you can swing it, creates a product that isn’t a one-time deal. In fact, this has your customers coming back every single month for more (and paying each time).
Generally, web services are something like software. An application that tracks your time spent working or any number of things can be considered a service. You can charge a monthly subscription fee and as long as they stay subscribed, you have some money in your pocket. Scale it up and you can have a LOT of money in your pocket.
You don’t need to be a super great programmer to do this. With the tools out there today (like Django and Ruby on Rails) you can spend a couple weeks learning the ropes from hundreds of awesome tutorials. Just be prepared to spend the first weeks utterly confused. But stick to it like it’s an investment and you may surprise yourself.
Services are definitely more lucrative, but are infinitely more complicated. For example, if you have some customers sticking around for years and some that leave after a couple weeks, how can you estimate the revenue you earn per customer? These are questions easily answered when you sell a product but can be elusive when you are selling a subscription around a service.
Going back to our previous talks about profit, don’t instantly take the easy way out and price under your competition. This only works on new markets with few competitors that have massive margins. Instead, try to find a way to make a product or service stand out.
It doesn’t matter why. Make it long. Make it of higher quality. Make it extra funny and entertaining. It doesn’t matter, just give yourself something to grab onto that lets you say “we are worth x amount of money because of y”.
Another thing to try (which we will also discuss later) is to come up with several different prices and see with one works best (IE: gives you the most profit). This is a form of A/B or split testing, and requires a little technical knowledge.
Also, be sure to keep an eye on your competitors. Pay close attention to their pricing as well.
This is just about all you need to know to set up a market research proposal. Please email me if you have any questions.