To launch a new product successfully, you would like to know if the demand really exists in the market before starting to invest time and efforts in developing products. That is why the stage of Proof-of-Concept (POC) is an inevitable process for hardware startups to do the research in the problem they’d like to solve and test the efficacy of the technology behind the concept. In the following article, we are going to guide you through the 3 main things, from market to funding, you need to consider while doing market research.
1. Find the Opportunities in Market
A. Issues to Solve
The opportunity always comes from issues. For example, you find infant babies need to be taken care carefully, especially monitoring breathing in sleeping. Once the issues are identified, then you will see the opportunities. Here are two types of opportunities: Improvement and Creation. Improvement is to propose a replacement solution based on the existing market. For example, developing a mini-personal computer station will be the replacement for the PC market; it is not creating a new market for the PC industry. On the other hand, Creation is to create new values to make the market bigger. Take WeWork for example. WeWork is a co-working space that could save those who want to start their own companies lots of money. Because of this, those startups do not need to pay the high upfront cost and enjoy the affordable workspace.
B. Get to Know TAM (Total Available Market)
Total available market is one of the must-know; you need to understand how big the market is. For example, the population of China is around 1.3 billion people. Then you may assume that everyone should have at least one cell phone, and the TAM should be 1.3 billion cell phones. Also, you can also convert it to the dollar amount.
C. Understand Market Segmentation
Once we know the TAM, then we will need to break down the TAM a little bit to different market segmentations. Generally, market segmentation includes four elements: demographics, behavioral, geographic, and psychographics. Take the cell phone market as an example. If you are making a cell phone, you will need identify if your target audience is a boy or a girl, a woman or a man, in US or in China, for teenage or for senior.
D. Research Your Competitors
Market segmentation is identified. Based on the segment, you will need to do the research to study your competitors to understand their strength and weakness. At the same time, you will know your product’s strength and weakness.
E. Pricing Strategy
Now you have done the research on the TAM, market segmentation, and competitors. It’s about time to talk about the pricing. Generally speaking, you have two ways to set the pricing for your product. The first method is from the bottom to the top. For instance, you are building something not available in the market and no one has a ballpark figure about the product. Then you can consolidate all the costs, such as, development cost, manufacturing cost, marketing cost, and then come up with the retail price. And the second method is that you are building a similar product in the market, you will need to understand your retail price first. Once the retail price is set, you need to break down the retail price to every puzzle, e.g. margin, development cost, manufacturing cost.
2. Product Planning
After the market opportunity research, it’s time to plan how to develop and realize your product.
A. Issue to solve
The journey begins with a specific problem that you are trying to solve. For example, you would like your milk to be ordered automatically when it is about 300ml (one cup) left.
B. Why current solutions cannot solve
After identifying the problem that you are trying to solve, you would need to think why the current solutions on the market cannot solve your problem. Continue with our example, you can buy a smart refrigerator to solve the problem. But it is costly, and you still need a person to monitor the level of the milk in order to put into the shopping list. So the smart refrigerator can order it for you automatically.
C. How to solve
You have identified the problem and also surveyed the solutions on the market. Now, it is time to think how you want to solve the problem. For this specific problem, you could hire a house keeper to monitor the milk to solve the problem or you could insert a camera to your current refrigerator and monitor the level of the milk. Once the level is lower than the certain mark, the camera sends out the notification to your phone. While finding suitable solutions, you may need to take types of technical issues into consideration. We understand It would be challenging for startups and hardware innovators who are not familiar with electronics manufacturing. TechDesign is here to provide professional support and facilitation to help find appropriate resources.
One thing that we would like to point out here is about the legal. There are some many patents out there that we were not aware of. If you want to commercialize your product, you need a consulting firm to double confirm if the way you solve the problem has been patented to make sure you are protected in the future.
Funding is the key element to begin your hardware journey. Here you will need to consider all the possible cost so that you will have a clear picture on the funding that you will need to deliver the product to the market. There are several major costs you need to consider.
a. Labor cost: how many people you need to build the product, run the operation and conduct the marketing.
b. Unit cost: calculate the unit price (electrical and mechanical)
c. Development cost: NRE (non-recurring engineering), tooling, certification
d. Operation cost: office, office supply, computer, water, electricity, internet, etc.
For those who have little experience in manufacturing, it would be difficult to understand and estimate what the development cost covers. We are here at TechDesign providing professional consultant services to help you have better understanding what NRE includes, and the cost of tooling and certification.
Ready for the market research for Your Innovative Product?
If you are about to start your hardware product, TechDesign would love to hear your story and facilitate the preparation for product development to shorten your time to find feasible and appropriate resources and manufacturers.