Identifying an Existing Hot Demand

Identifying an Existing Hot Demand - Every small business owner knows that competition is tough, but he or she may not be able to pinpoint exactly what changes are needed in order to get to the top. Conducting business as usual may no longer be sufficient. Investing in the technology that is now available can be a great help or a bank breaker. It seems that most small business and home based business are either starving (they don't have enough technology) or they are obese (they have everything piece of new technology that comes down the pike). 

There is, however, some fairly new technology that every small or home business owner needs. It can answer questions like; how can small businesses identify noteworthy trends, Identify an existing hot demand and make better decisions faster? Answer: business intelligence software. Business intelligence is the crystal ball of the 21st century.

Identifying an Existing Hot Demand

Purchasing business intelligence (BI) software is one of the most strategic investments that a business can make. Using data mining, reporting and querying, BI helps businesses understand, monitor, manage and respond to specified situations. This software empowers decision-makers — and staff — to connect the dots around key business numbers in a way previously unimaginable. BI helps you figure out: 

· Which customers are profitable? 

· Which customers appear profitable but aren't? 

· Are you close to — or far from — reaching critical milestones? 

· When is the best time to launch a marketing campaign? 

· What was the best performing product or service last quarter?

Business Intelligence software may be more of an investment than small businesses can bear. It can certainly be pricy. Small business or home business owners, however, can subscribe to BI services on the Internet at a fairly reasonable cost. There are several to choose from. 

eBay also published a "Hot Items" list the first week of each month. It gives valuable information to eBay sellers who use drop shippers.

Eight Analysis Types to Identify Market Opportunities

 

1. Consumer segmentation

To understand your demand, you must identify consumer segments that share common characteristics. These characteristics can be "hard" variables such as age, gender, place of residence, educational level, occupation and level of income or "soft" variables such as lifestyle, attitude, values and purchasing motivations.

Hard variables can help estimate the number of potential customers a business can have. For example, a nappies/diapers producer should know how many children under 3 years live in a certain country as well as the birth rate. Soft variables can help identify motivations that lead to purchasing decisions including price, prestige, convenience, durability and design.

An example of how segmentation can help identify market opportunities is Aguas Danone, a bottled water company in Argentina. Several years ago the company´s sales were falling and they were looking for a new product. Aguas Danone identified two drivers behind non-alcoholic drinks consumption: health and flavor. Bottled water was perceived as healthy but did not offer the attribute of good taste. Soft drinks and juices tasted good, but were perceived as highly caloric. The company realised there was an opportunity for healthy drinks offering both taste and flavour. As a result, they launched flavored bottled waters Ser with great success. According to data from Euromonitor International, Aguas Danone has been the leader of Reduced Sugar Flavoured Bottled Water in Argentina since launching in 2002, beating giants such as Coca Cola and Nestlé. As of 2016, Aguas Danone still had 57% off-trade value share of Reduced Sugar Flavoured Bottled Water as well.

2. Purchase situation analysis

Purchase situations must also be examined to uncover expansion opportunities. Questions to ask when reviewing purchase analysis are:

When do people buy our product or service?

Is it when they need it?

Where do people make the purchase?

How do they pay?

Looking at distribution channels, payment methods and all other circumstances that involve purchasing decisions can teach you how consumers buy and how you can position your product appropriately. Offering new shopping alternatives may bring new customers. For example, vending machines offering snacks like yoghurt and individual juices have been introduced in the hallways of the subway of Santiago de Chile, promoting on-the-go consumption.

Another aspect to explore is the acceptance of different means of payment. For example, Amazon recently launched Amazon Cash in the US, enabling consumers without credit cards to shop online by adding credit to their personal Amazon accounts.

3. Direct competition analysis

In addition to analysing demand and purchasing situations, it is important to analyse supply. Knowing the existing players in the market where you are competing or going to compete is important when evaluating opportunities.  Relevant questions in this case are:

What are the products and brands of our industry that are growing more significantly and why?

What is their value proposition?

What competitive advantage do we have over them?

For example, SKY airline, competing in the Chilean market against a notably positioned brand such as LAN, found there was an opportunity to differentiate itself with a low cost model, which until then had not existed in Chile. SKY lowered its costs, by eliminating complimentary food and beverages for all passengers during flights and in doing so lowered its ticket prices. This helped the company increase its share of carried passengers from 10% in 2008 up to 20% in 2017, according to Euromonitor International.

4. Indirect competition analysis

Opportunities can also be found by analysing substitute industries. For example, thanks to the decrease in air fares, airlines may look for opportunities in consumer segments currently supplied by other means of transport.  Air carriers should research how many people travel on long-distance buses and trains, which routes are the most in demand, how much travelers pay for their tickets, what the occupation rate of long-distance buses and trains is and what is necessary to persuade a current passenger of buses or trains to choose to travel by plane instead. This type of analysis helps establish competitive advantages against indirect competitors and provide insight on additional opportunities for growth.

5. Analysis of complementary products and services

Companies should monitor the performance of other companies' products, which are complementary to their own. For instance, a packaging company should monitor sales of products that it could potentially package, while a company producing coffee machines should gather insights on the evolution of different types of coffee sales. Trends in complementary markets should be taken into account when making investment decisions.

6. Analysis of other industries

In some cases the objective of companies is not to continue operating within an industrial sector but to expand a certain business model or philosophy.  For example, a British holding of companies, Easy Group, started maximising the occupancy rate of flights with the airline Easy Jet. Easy Group understood that it was preferable to sell a seat at a lower price than not selling it at all. Easy Jet opted for a rate management model that depended on the occupancy rate of flights and the time remaining until the day of the flight. With this business model it managed to increase occupancy rates. Easy applied the same model to cinemas when it created Easy Cinema and then with buses for Easy Bus. In any case, to enter a new industry it is important to learn about competition first: market sizes, market shares, growth rates, unit prices, per capita sales and brands positioning.

7. Foreign markets analysis

When a company operates in a mature or saturated market, exploring other countries may lead to additional opportunities. Markets in different countries grow at different paces for several reasons, including disparities in the level of economic development and local habits. Knowing the evolution of per capita consumption of a given product in a given country can serve as an indicator of the maturity of the product's life cycle. Having information on the size of the market and competitors in other countries will help to estimate the business potential.

In addition to product sales you can also investigate what happens in more developed countries in terms of consumption habits. For example:

What is the percentage of people who use the smartphone to pay for their purchases?

What is the market share of private labels in a certain industry?

Answers to those questions in more developed countries can serve as indicators of the potential the indexes have in the own country. On the other hand, monitoring what happens in other countries may lead to new products or services present still absent in your current market.

8. Environment analysis

Market opportunities can also be identified by analysing changes in the environment with technological and scientific developments generating new business opportunities. For example, the growth of Internet and smartphones' penetration has enabled the arrival of companies with new business models such as Airbnb and Uber. According to Euromonitor International, the share of mobile internet subscriptions to mobile telephone subscriptions in the world was 20% in 2011, reaching 53% in 2016.  And while globally only 17% of households possessed a smartphone in 2011, this percentage reached 45% in 2016. Beyond mobile and the Internet, artificial intelligence, robotisation, internet of things, biotechnology and renewable energy sources also provide multiple business opportunities.

Changes in a country's regulatory framework can also create opportunities. Since June 2016, Chile requires companies to include labels on products high in calories, sodium, sugars and saturated fats. This obligation may represent a growth opportunity for healthier products not affected by the new labels. Euromonitor International expects product sales in Chile will be impacted depending on the product type. Obtaining more market research on category and product sales in Chile may help identify categories that have growth opportunities for new products without labels.

Other transformations in the environment such as climate change, geopolitical movements and changes in financial markets also influence market opportunities. It is imperative to consider using market research to gain insight on the local business environment; ensuring that your strategy will flourish in a new or developing marketplace.

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