Definition of Feasibility Studies: A feasibility study looks at the
viability of an idea with an emphasis on identifying potential problems and attempts
to answer one main question: Will the idea work and should you proceed with it?
Before
you begin writing your business plan you need to identify how, where, and to
whom you intend to sell a service or product. You also need to assess your
competition and figure out how much money you need to start your business and
keep it running until it is established. Feasibility
studies address things like where and how the business will operate. They
provide in-depth details about the business to determine if and how it can
succeed, and serve as a valuable tool for developing a winning business plan.
Why Are Feasibility Studies so Important?
The
information you gather and present in your feasibility study will help you:
·
List in detail all the
things you need to make the business work;
·
Identify logistical
and other business-related problems and solutions;
·
Develop marketing
strategies to convince a bank or investor that your business is worth
considering as an investment; and
·
Serve as a solid
foundation for developing your business plan.
Even
if you have a great business idea you still have to find a cost-effective way
to market and sell your products and services. This is especially important for
store-front retail businesses where location could make or break your business. The Components of a Feasibility Study:
Description
of the Business: The product or
services to be offered and how they will be delivered.
·
Market Feasibility: Includes a
description of the industry, current market, anticipated future market
potential, competition, sales projections, potential buyers, etc.
·
Technical Feasibility: Details
how you will deliver a product or service (i.e., materials, labor,
transportation, where your business will be located, technology needed, etc.).
·
Financial Feasibility: Projects
how much start-up capital is needed, sources of capital, returns on investment,
etc.
·
Organizational Feasibility: Defines the legal and corporate structure of the business
(may also include professional background information about the founders and
what skills they can contribute to the business).
·
Conclusions: Discusses how
the business can succeed. Be honest in your assessment because investors won’t
just look at your conclusions they will also look at the data and will question
your conclusions if they are unrealistic.
·
Summary: Feasibility studies contain comprehensive, detailed
information about your business structure, your products and services, the
market, logistics of how you will actually deliver a produc or service , the resources you need to make the business
run efficiently, as well as other information about the business.
Target audience
A target audience can be formed of people of a
certain age group, gender, marital
status, etc., e.g. teenagers, females, single people, etc. A
combination of factors, e.g. men aged 20–30 is a common target audience. Other
groups, although not the main focus, may also be interested. Discovering the
appropriate target market(s)and determining the target audience is one of the
most important activities in marketing management (Niewenhuizen et al. 2000). The biggest mistake it's
possible to make in targeting is trying to reach everybody and ending up
appealing to no-one.
Strategies for reaching target markets
Marketers have outlined four basic strategies to satisfy target
markets: undifferentiated marketing or mass marketing, differentiated
marketing, concentrated marketing, and micromarketing/ nichemarketing.
Mass marketing is a market coverage strategy in which a firm
decides to ignore market segment differences and go after the whole market with
one offer. It is type of marketing (or attempting to sell through persuasion)
of a product to a wide audience. The idea is to broadcast a message that will
reach the largest number of people possible. Traditionally mass marketing has
focused on radio, television and newspapers as the medium used to reach this
broad audience.
For sales teams, one way to reach out to target markets is through
direct marketing. This is done by buying consumer database based on the
segmentation profiles you have defined. These database usually comes with
consumer contacts (e.g. email, mobile no., home no., etc.). Caution is
recommended when undertaking direct marketing efforts — check the targeted
country's direct marketing laws.
Target audiences are formed from different groups, for example:
adults, teens, children, mid-teens, pre-scholars, men, women.
To market to any given audience effectively, it is essential to
become familiar with your target market; their habits, behaviors, likes, and
dislikes. Markets differ in size, assortment, geographic scale, locality, types
of communities, and in the different types of merchandise sold. Because of the
many variations included in a market it is essential, since you cannot
accommodate everyone’s preferences, to know exactly who you are marketing to.
Your target customers are those who are most
likely to buy from you. Try to describe them with as much detail as you can,
based on your knowledge of your product or service.
Here are some questions to get you started:
- Are your target customers male or female?
- How old are they?
- Where do they live? Is geography a limiting factor for
any reason?
- What do they do for a living?
- How much money do they make? This is most significant
if you're selling relatively expensive or luxury items. Most people can
afford a carob bar. You can't say the same of custom murals.
- What other aspects of their lives matter? If you're
launching a roof-tiling service, your target customers probably own their
homes.
Market segmentation is a marketing strategy that
involves dividing a broad target
market into
subsets of consumers who have common needs, and then designing and
implementing strategies to target their needs and desires using media channels
and other touch-points that best allow to reach them.
Criteria for segmenting
An ideal market segment meets all
of the following criteria:
·
It is possible to measure.
·
It must be large enough to earn profit.
·
It must be stable enough that it does not vanish after some time.
·
It is possible to reach potential customers via the organization's
promotion and distribution channel.
·
It is internally homogeneous (potential customers in the same segment
prefer the same product qualities).
·
It is externally heterogeneous, that is, potential customers from
different segments have different quality preferences.
·
It responds consistently to a given market stimulus.
·
It can be reached by market intervention in a cost-effective
manner.
·
It is useful in deciding on the marketing mix.
Methods for segmenting consumer markets
Geographic segmentation
Marketers may segment according
to geographic criteria—nations, states, regions, countries, cities,
neighborhoods, or postal codes. The geo-cluster approach combines demographic
data with geographic data to create a more accurate or specific profile. With respect to region, in rainy regions
merchants can sell things like raincoats, umbrellas and gumboots. In hot
regions, one can sell summer wear. In cold regions, someone can sell warm
clothes. A small business commodity store may target only customers from the
local neighborhood, while a larger department store can target its marketing
towards several neighborhoods in a larger city or area, while ignoring
customers in other continents.
Behavioral segmentation
Behavioral segmentation divides
consumers into groups according to their knowledge of, attitude towards, use of
or response to a product.
Segmentation by occasions
Segmentation according to
occasions relies on the special needs and desires of consumers on various
occasions - for example, for products for use in relation with a certain
holiday. Products such as Christmas decorations or Diwali lamps are marketed almost exclusively in the
time leading up to the related event, and will not generally be available all
year round. Another type of occasional market segments are people preparing for
a wedding or a funeral, occasions which only occur a few times in a person's
lifetime, but which happen so often in a large population that ongoing general
demand makes for a worthwhile market segment.
Segmentation by benefits
Segmentation can take place
according to benefits sought by the consumer or according to perceived benefits which a
product/service may provide.
Using segmentation in customer retention
The basic approach to
retention-based segmentation is that a company tags each of its active
customers with three values:
Is this customer at high risk of canceling the company's service?
One of the most common indicators
of high-risk customers is a drop off in usage of the company's service. For
example, in the credit card industry this could be signaled through a
customer's decline in spending on his or her card.
Is this customer worth retaining?
This determination boils down to
whether the post-retention profit generated from the customer is predicted to
be greater than the cost incurred to retain the customer.
What retention tactics should be used to retain this customer?
For customers who are deemed
worthy of saving, it is essential for the company to know which save tactics
are most likely to be successful. Tactics commonly used range from providing
special customer discounts to sending customers communications that reinforce
the value proposition of the given service.
Environmental
scanning
The segmentation of the macro
environment according to the six presented factors of the PESTEL analysis is
the starting point of the global environmental analysis.
PESTEL analysis
The six environmental factors of
the PESTEL analysis are the following:
Political factors
·
Taxation Policy
·
Trade regulations
·
Governmental stability
·
Unemployment Policy, etc.
Economical factors
·
Inflation rate
·
Growth in spending power
·
Rate of people in a pensionable age
·
Recession or Boom
·
Customer liquidations
Socio-cultural
·
Age distribution
·
Education levels
·
Income level
·
Consumerism
·
Population growth
·
Life expectancies
·
Expectation of society from the business
Technological factors
·
Internet
·
E-commerce
·
Social Media
·
Electronic Media
Environmental
factors[edit source | editbeta]
·
Competitive advantage
·
Waste disposal
·
Energy consumption
·
Pollution monitoring, etc.
Legal factors
·
Unemployment law
·
Health and safety
·
Product safety
·
Advertising regulations
·
Product labeling
·
labor laws etc.
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