Minimizing Risk Through Market Research

Many people have become wealthy, very wealthy, starting and developing a new business. A good number have become household names: Kellogg, Ford and Gates, to name a few. But, they didn't begin their new enterprises without risk. Nearly everything in life involves risk, not the least of which is entrepreneurship.

Are you considering becoming an entrepreneur and starting an online business? You too must expect to face risks. But the rewards can definitely be worth it. To enhance your success possibilities, you must work hard at minimizing the risks and maximize the potential rewards. Undoubtedly, that's what Kellogg, Ford, Gates, Dell and Jobs did to enhance their success possibilities.

You too must minimize your risks in entrepreneurship by turning them into calculated risks. This means that you must study and analyze your risks as a general would study an enemy. Think of your risks as enemies and then go after them, cutting them down to a non-threatening size.

One way of minimizing your risks is to do market research. Do you have a market for your product or service? How can you find out? Well, on a happy note, the internet is an ideal environment for doing market analysis. So, here are three ways to do market research on the internet.

1. SELL ON EBAY FOR MARKET RESEARCH

If your product lends itself to the eBay type of marketing, you can test auctioning or selling there before trying to sell in another environment like a website. And, most products or services have a market on eBay. This includes automobiles, motorhomes and real estate, to mention a few things that might not come to mind right away.

An advantage of eBay is the humongous amounts of traffic that they get. In addition to that, eBay mirrors the internet marketplace. What people search for on eBay is very close to what they search for on the broader internet. So, the market analysis that you do on eBay is applicable, at least loosely, to other marketplaces on the internet. Also, while developing your selling skills on eBay, you are also honing them for other venues on the internet.

Let me put the eBay traffic phenomenon into a little clearer perspective. eBay has recently surpassed Google as the Search Engine with the largest volume of searches. Yes, eBay is, unofficially, a search engine. More people do keyword searches on eBay than on Google or on any other dedicated search engine like MSN or Yahoo!. And there's another positive factor to consider. People search on eBay with their wallets open. Much of the internet is a virtual place for finding information, whereas eBay is a place designed and used specifically for buying and selling. People on eBay are ready to buy.

Now, a negative aspect of eBay: their fees. You must pay eBay to do business in their marketplace. I think you would agree that this falls into the realm of fairness. But, it does take a cut out of your profits. The upshot of this is that when you calculate your profits and try to apply them to another marketplace on the internet, you can discount the fees you are paying eBay. You won't have to pay them on your own website, for instance.

2. USE GOOGLE AS A MARKET RESEARCH TOOL

As the largest and most popular dedicated search engine, Google stands out as a unique market research tool. If there is a market for a product, Google will know about it. Just search on keywords related to your product or service and see who else is exploiting that market. If no one or just a few people are selling in the market represented by your keywords, there are two possibilities. Either, you have a niche that is ripe for you to exploit, or others have tested this market and found that it is not profitable.

It's up to you to figure out which it is through some further testing, or skipping that particular market to find another market underlying other search terms. Generally that requires using search terms that have fewer words and therefore are conceptually broader. Mostly, but not always, You'll find more sellers in markets represented by broader search terms (fewer words) than with markets represented by narrower search terms. For instance, the market that underlies the search term "dog grooming supplies" is narrower than the market that underlies the search term "dog grooming" or "dogs".

Here's something to remember. Competition isn't all bad. It can indicate a market. And with your brain and entrepreneurial talents, you will likely find your profit-making place among them. You just have to develop a unique selling proposition that will make you stand out in the crowd and attract customers. Think of it this way. Where would you rather put up your food stand, in a county fairground with competition from other food sellers, but with hordes of people or in an alley with no competition and no people? I think you get the point that applies to the internet as much as to the brick and morter world.

Where there is competition, there is a market. Google can help you discover that market. It won't supply all the data you will need, but it will give you a huge start.

3. USE ADWORDS AS A MARKET RESEARCH TOOL

This tool is a little more complex than the previous two. Therefore, I will not be able to treat it in detail in this short report. It will have to be the subject of a report of its own.

In short, here is one way you can use Adwords as a marketing tool. Create a free product related to your main product. Maybe it's a report that explains the features and benefits of your product. Advertise it on Adwords and see what kind of response you get. Are people interested enough to request a free product? If not drop that market.

But, don't stop there. Change the keywords that you advertise on and try again. Keep this up until you find out what keywords perform best. If none of them give you any hope, give that market up and try somewhere else.

CONCLUSION

Risk is unavoidable in entrepreneurship. But, you can minimize it, turn it into manageable calculated risk, by doing market research online. I have introduced you to three ways to do market research online: sell first on eBay, use Google as a market research tool and use Adwords as a market research tool.