Market Research Means Money

I recently made a critical mistake in my progression towards

business success. I had decided that I was going to make some

money with an online store. After a bit of brainstorming, I

picked a few things that I thought might be good to sell online.

I then started to look for suppliers. This may seem like a

reasonable course of action, but it is not. It is missing a key

component of any business plan: Market Research.

Competition is involved with any business. Even if you make your

own, unique product, similar products will compete against

yours. But the existence of competition is not necessarily bad.

The fact that online retailers are selling items similar or

identical to your own means that people want your product.

Competition is only bad for you when the market is becoming

saturated.

Check the electronics market for a good example. Electronics go

for rock-bottom prices online because there are so many stores

that sell them. The difference in prices between stores often

comes down to the cost of shipping. Competition in this area is

extreme. Electronics dealers depend on volume, and very good

suppliers, to make their money. Small retailers cannot sell at

those prices and turn a profit.

In order to be successful it is essential that you know what

you're up against. If you are selecting your products, then you

need to know which stores already sell those products. You need

to know how many stores there are, how much they are charging

and, if you can find out, how well they are doing. Could you

sell for less (if only a little)? What are other ways you could

differentiate your store?

If you already have your product, then you need to know where

and how your competitors are advertising. Are they concentrated

in one location? Are there good places that they have

overlooked? How much is it going to cost to compete with them

for prime ad space?

So where do you begin? The answer is Overture. Owned by Yahoo,

Overture is one of the largest pay-per-click advertising

services. What you need for research are two tools in the

Overture Advertiser Center. The first is the Search Term

Suggestion Tool. This tool allows you to look up a keyword, like

"digital camera", and find out how many searches there were for

that term last month. The tool will also suggest a list of

related terms, like "digital camera review".

The number of searches per term comes from Overture's partners

like Yahoo, MSN, AltaVista, CNN, etc. This is critical

information because it tells you whether or not people are

looking for your product online and, at the same time, shows you

how they are searching for it. This indicates a certain interest

for your product. You may be able to judge the amount of

interest by the number of searches for your terms. For example:

Digital Camera – 1,337,422 (high interest) Used Car – 890,346

Mountain Bike – 133,553 Blender – 26,648 Bubble Gum Machine –

1,502 Chapstick Raspberry Vanilla – 25 (very low interest)

Tip: Users searching for 'digital camera' are not necessarily

shopping for one. They may just want information.

Also: If people are searching on Yahoo and MSN, then you can bet

that even more people are searching for the same things on

Google.

The second tool Overture provides is the View Bids Tool. This

allows you to take the keywords that you found and see how many

ads there are for each term and how high the bids are (higher

bids get top listings). This can help you judge your

competition.

For example, at the time of this writing there are 131 ads for

the term digital camera. The top bid is 79 cents. Bubble gum

machine has 13 ads with a top bid of 49 cents. Chapstick

Raspberry Vanilla has no bids on the term which means that the

top spot could be purchased for the minimum price of 10 cents

per click.

Google is your likely next step. To my knowledge, Google

analysis tools are only available to registered advertisers.

However, it is easy to find your competition on Google. Simply

enter your search term and check the right side of the results

screen. Those ads are from the top advertisers. Checking

subsequent pages will reveal the entire list of advertisers for

that term.

Tip: Sometimes advertisers target your term, but don't sell your

product. Read the ads and visit the sites to get a more accurate

idea of your direct competitors.

The natural results (the normal, non-ad results) of your search

are important as well. Check those to see the top ranked sites

in your market. Users are much more likely to click on the

natural results than they are the ads. The stores at the top of

the list are likely to be well established and may represent

some solid competition.

Visit your competitor's web sites and see what they are selling.

Get names and site locations. This may seem time consuming, but

it will help with future research. Check for site quality,

organization, and ease of use. If their site is ugly or hard to

navigate, that can work to your advantage.

Next, check out Yahoo Shopping. Retailers setup stores with

Yahoo's services and are then included in Yahoo Shopping's

listings. This can be a good way to get fast traffic. For market

research, it means easy access to competitor sites. On the Yahoo

Shopping main page, do a search for your product (Braun blenders

for example). The results show sponsored ads and normal

listings. The sponsored ads come from Overture, so you should

already be familiar with those.

The normal listings come from Yahoo Product Submit results and

Yahoo's web-crawler database. What is important in this list is

displayed just below the top sponsor listings and just above the

normal listings. There should be two numbers: Number of products

and the number of stores. 'Braun blenders' shows 989 products

from 76 stores (at time of writing). Those numbers give you an

indication of how many stores you're up against.

Finally, visit eBay. Find the eBay Stores area (located in the

Specialty Sites box on the homepage at time of writing). Enter

your search term to see how many eBay stores are selling your

product. 'Braun blenders' shows ten items in eBay stores. The

search may show regular listings below the store results. These

results can give you some idea your product's popularity as well

as the feasibility of selling it on eBay.

Remember, some competition is good because it shows that there

is an interest in your product. Too much competition is bad

because it means low profitability. The spot where you can make

good money is somewhere in between. A solid business plan built

on thorough market research will certainly boost your chances

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