Evaluating business ideas before you put in your resources

All business ideas have something in common, all of them sounds great when they first come to your mind. It’s only after you start poring over these ideas, the loopholes start to appear and sometimes these ideas are rejected right away, others are postponed and only few of them gets “a go ahead”. So far so good, but at times trying these ideas (and eventually failing) means a huge loss in terms of finances or other resources. Sometimes, it just happens despite careful evaluation and pre-planning but most of the times it is a result of slipshod planning and little or no assessment. Given, that it doesn’t take anything but some time to carefully evaluate a business idea, it is a must to scrutinize an idea before you invest, no matter how eager you are to give it a go.

Idea evaluation should always be carried out by more than one person (especially if the person is also the originator of that idea). If it is an expansion idea, the head of all departments should come together and discuss. If it is an idea about starting a new business, you should contact the experienced persons in your friend and families and ask for their opinion. Ask others to come up with constructive criticism and write down all plus and minuses, don’t get too bogged down if you get negative opinions from most of your friends. Just compare pros against the cons and decide if the idea is worth giving a try or not.

Ideally the product or service in question must have some unique features; if the product is not unique then you must make sure that the demand is there. If the demand is not there and the product or service has no competitive advantage to boost, it will most probably be a waste of resources to launch this product. Make estimated figures of the start up cost and the cost of running the business and see if the idea is profitable or not, don’t start some business for the sake of it. There are many aspects to peruse, for example the size of market, barriers of entry, exit plan (yes every business plan must have one), profitability, target market, pricing, etc. Also, you must do a test run before fully launching your product or service to see the actual demand, doing this test run will also give you an idea about your personal capacity and the possible barriers.

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Consumer's income and its implications on your marketing plans

Marketing plan is not just a yearly ritual that managers should perform, so as to give an impression of being proficient. If truth be told, a sound marketing plan plays a pivotal role in the success or failure of any product (or product line). Along with many other aspects, a core function of marketing plan is to look at the marketing environment and how it will affect the product in question. Marketing plan comprised of (but is not limited to) taking into consideration the overall situation of the market and economy, consumers, competition, upcoming trends and consumer behavior. Another part of marketing plan is customer segmentation based on different preferences, age, demographics or social class.

The most influential factor in consumer’s purchase pattern is of course, their income. Income plays an important role in distinguishing social class and consumer behaviors. A significant shift in consumer's income can invariably change the way they look and decide about purchasing some specific product. When the income increases, normally the quality of the product and the satisfaction they are getting out of this purchase becomes more important, on the other hand when it goes down, the cost may become the most decisive factor. Consumer’s income is also said to effect the hedonic consumption.

There are other factors for sure; however a shift in income can outweigh many of them. Therefore, when you are in the initial stages of making marketing plan, keep in mind the income level and social class of your targeted customers, and build up your plan around it. You can conduct your own research, to get an idea of the average income of your targeted customers; or you can also rely on secondary resources if you are a small business.

The information will help you in determining future demand for the product, consequently helping you in setting prices for your products. Also, when you are about to launch a new product (or an old product in a new market); you must consider the personal income of your targeted customers. For the reason that they are less likely to spend on trying a new product and experimenting when their income is decreasing, no matter how good the product is, except for when someone comes up with an alternate product or service which is cheaper than the existing one (that is why the recession is the best time for small businesses to get a jump start by providing low cost alternatives to the consumers caught in financial crisis).

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