2004 Q2 Conducting a Market Feasibility Study
Most market feasibility studies use a combination of primary and secondary research. Secondary research is the process of gathering pre-existing information about the market to gain knowledge. Once gathered, the next step is to process and translate that knowledge, through analysis and interpretation, into usable intelligence. Secondary research can be a useful tool for collection of external information for verification and comparison purposes.
By contrast, primary research involves gathering and assimilating information directly from the source, through processes such as interviews, written questionnaires, etc. This methodology affords the opportunity to gain very specific feedback against very specific objectives. It is important that the client’s objectives are clearly spelled out so that specific information needs may be addressed.
Typically, there are six steps involved in a market feasibility study as follows:
1. Identify a potential need for your product or service. Segment target markets by:
- Geographic, e.g. region, density, climate, etc.
- Demographic, e.g. age, sex, income, occupation, education, etc.
- Psychographic, e.g. lifestyle, social class, etc.
- Behavioral, e.g. occasions, usage rate, loyalty status, etc.
2. Gauge likelihood / interest level of your product or service satisfying that NEED
3. Determine likely fee / price to be charged for satisfying that need
4. Identify potential obstacles or barriers to entry
- Competitors
- Capital requirements
- Economies of scale, cost disadvantages
- Switching costs
- Technological
- Legal / government regulations
5. Develop revenue projection scenarios using:
- Low case
- Best case
- Most likely case
6. Make GO / NO GO Decision