Bizstartup.ie - Biz Centre

Products/Services

 It is extremely important to research your product/service offering thoroughly. Work through the following list and address those relating to your business:

1. Make a list of all the products/services your business plans to sell.

2. Describe each product/service. Give details of branding, design, packaging and lifespan.

3. What are the features and benefits of the product?

4. Identify what is unique and/or special about your products/services. What differentiates them from your competitors’ products/services? What benefits are offered over their products/services?

5. What testing is involved to ensure each product/service is ready for sale, complies with any regulations, etc?

6. Does each product/service comply with the relevant legal requirements such as environmental issues, food production standards, etc?

7. What production process is involved in making each product?

8. Do you propose to sell and distribute your products/services? How?

9. Can your products/production processes be patented, copyrighted or trademarked?

10. What is your customer base by number and location?

11. How much will each product/service contribute to turnover (give percentage)?

12. Project your sales and market share over the first three years of the operation of your business.

Identifying customers

A new business will succeed, only if the products/services it supplies satisfy a need. The people with that need are your potential customers – your ’market’.

Market research helps you to assess if there is a market for your products/services, to gauge the characteristics of your market and to define your customer base. Use the information you have already compiled on your products and services, and ask yourself who might need your products/services.

Depending on your business, your market could be local or global. You could be selling books in a small locality, or you might be selling books to the whole world, through the internet.

1. What needs will your products/services satisfy?

2. List the people/businesses who might have these needs. Define them as precisely as possible, for example:

- Businesses that use colour printers, but are not big enough to afford onsite maintenance contracts

- Independent retail outlets that want the efficiencies and security of computerised stock-keeping

3. Establish a geographic boundary for your market. If you intend selling over the internet, then the world could be your market. E-business, using the internet, may remove all barriers of location, depending on the business you are in. Incorporate the geographic boundary into your market definition. For example:

- Businesses in the greater Cork City area that use colour printers but are not big enough to afford onsite maintenance contracts

- Independent retail outlets in counties Dublin, Wicklow, Kildare and Meath that want the efficiencies and security that computerised stock-keeping give

 4. Most Irish businesses are very happy to invest a small amount of time to assist another business in getting started. Have a very focused approach to this exercise:

• Compile a list of likely business customers
• Prepare a short, simple questionnaire to ascertain that the market you defined does have a need for your product/servic
• Telephone each business on your list. Briefly explain what you are trying to do and ask to speak to the relevant person who will be able to help. Quickly go through your questionnaire
• When you have finished, thank the person for their help
• Pull the results together and see if they confirm that the market you defined has a need for your product/service
• Use the answers to your questionnaire to refine your business idea and market definition, if necessary. If the redefinition is significant, do a new questionnaire and retest your newly defined market.

 Identify and know your competitors

 No new product/service is sufficiently unique to have no competitors – a business offering trips to Mars would still have to compete with other holiday destinations. The best advice is ’know your enemy’. Take time to get to know your competitors – who they are, what they offer and the terms on which they do business. How they can be a threat to your business and what are their weaknesses? Having this information will make it possible for you to prepare a more competitive presentation of your own business idea.

• Use the internet to research your business idea and on your prospective competitors. The majority of businesses have a website that gives detailed information on their products, operations, costs, etc
• The internet can be a cost-effective way of researching your competitors abroad
• A list of competitors in your field of business will be available in the classified telephone directory – but use a broad definition of your business
• Most businesses have a brochure and will post one out in response to a telephone enquiry. Start by collecting as many of these as you can. Read each one carefully. Summarise and collate the information they contain
• Identify any information gaps and prepare a list of questions designed to get this information. Make follow-up telephone calls, send email enquiries and continue to process until the flow of useful new information dries up
• Visit your local business library and review the business and trade magazines for profile articles on competitor companies. Much information can be gleaned from interviews given by company management
• When you review the information you have gathered, does it seem there is room in the market for your business?
• Review and amend, if necessary, your business and market definitions.

 Sourcing suppliers

Identify suitable suppliers, their attributes, strengths and weaknesses. When considering who will be suppliers to your business, ensure you do not rely on just one to supply raw materials or goods/services to you. The disadvantage of one main supplier is that if he/she has difficulties in providing you with the quantity of stock you need because, say, his/her staff is on strike, or if the business closes down, it could seriously impact on your business. For this reason, you need to ensure you have a few key suppliers to rely on.

• Outline the main production process of your products or services
• What raw materials will you need? How will these be costed and supplied?
• If you have recently worked in the industry, compile information on the suppliers you know and have already used
• Use the internet to see when and where you can source supplies most cost-effectively. With a single currency in the eurozone, it is easy to compare prices throughout this area. Also, if you are buying goods from suppliers in the eurozone, there is no exchange rate risk
• If you plan to import raw materials, click on www.aibtradefinance.ie, which will provide you with practical information and useful pointers in identifying how to approach importing your supplies and exporting your products. The commercial sections of embassies for the countries with which you plan to trade may also be able to advise you
• You can find a ready-made list of other suppliers in the classified telephone directory – but use a broad definition of your business
• Search trade publications for advertisements placed by suppliers to the industry
• From the information you gather, make a list of potential suppliers. Telephone or email them. Request an information brochure and price list. Also try to gauge their willingness to do business with a new entrant to the industry.

 Pricing

 The price you charge will be determined by the benefits your product/service offers to customers, and how much customers are willing to pay to get those benefits.

• Unless your product/service provides some very special or even unique benefit(s), you will not be able to charge more than the going price. If your product/service has some unique benefit, how much more would the customer pay to get that benefit?
• What prices are your competitors charging for similar products/services? How do their prices compare to your price

You will need to decide on a pricing strategy. What are you trying to achieve and what are the different strategies you can choose from?

- Market skimming: charge a high price for your product/service, to skim the top of the market. This strategy is used if businesses want to recover high investment quickly

- Penetration pricing: charge a low price, to win market share early.

This strategy is used to gain high visibility or high market share

- Price discrimination: charge different prices in different market segments, ie a grocery multiple may charge different prices for the same item in different outlets.

This article appears courtesy of AIB

This article © copyright Allied Irish Banks, p.l.c. 2010. The information does not constitute tax, legal, investment or any other advice by AIB. No representations or warranties are made as to the reliability, accuracy or completeness of the information.