Market indicators

To assess your market’s growth potential, you can use simple indicators such as:

• Year-over-year trends in industry-wide sales
• Increases or decreases in the number of customers in your market
• Changes in the type and size of purchases per customer

Mapping out these growth indicators for the past one to three years can help you see what’s happening in your market and what to expect. Although these indicators will provide only rudimentary guidelines that aren’t based on statistical formulas or predictive analytics, they’ll give you valuable insights nonetheless.

There are many resources to help you keep your finger on the pulse of the market. In addition to reading business news from Bloomberg, Forbes, the Wall Street Journal, and the like, check out CB Insights (cbinsights.com) and other websites that provide information on where venture capital and private equity firms are putting their money, an indicator of which markets are expected to grow in the near future.

Analyst firms like Deloitte, Forrester, and Gartner, local and state chambers of commerce, and trade associations are also good sources of information on growth trends for regional and national markets.

Also pay attention to the business news in specific cities in which you sell your products. Follow the trends on home sales, new construction, real estate development, job growth or decline, and other similar indicators.

Economic indicators

Many entities, including the federal government and private firms, report regularly on the economic indicators that provide powerful insights on current and future market conditions. The most common economic indicators small businesses need to monitor include:

• Gross domestic product (GDP): This metric reflects the value of goods and services produced in the U.S. As the growth rate of the GDP increases, the overall health of the economy improves.
• Unemployment rate: When more people have jobs, the potential for spending on necessary and discretionary items rises, impacting the growth of businesses.
• Consumer confidence: On the last Tuesday of every month, The Conference Board, a nonprofit research organization, publishes a Consumer Confidence Index report reflecting the current state of confidence in the economy. More confident consumers spend more and drive profits higher for corporations.
• Retail sales and durable goods orders: It goes without saying that the better retail sales are, the better the economy is. The same applies for durable goods orders, which reflect new orders for manufactured goods like cars and large appliances.

Watching economic indicators on a micro and a macro level can help you take advantage of opportunities, correct your operations, manage inventory, and more to adjust to projected consumer spending changes.

Building a presence

At one time, big brands like Microsoft and Dell expanded their market presence by building their own retail stores, which helped them gain total control of product demos and customer experiences. However, with online sales continuing to outpace in-store sales, most brands have shut down this strategy.

You can build a sustainable presence by exploring a wide range of selling opportunities, including third-party online channels like Amazon or eBay, partnerships with ancillary and complementary brands for reselling each other’s products, and so on. (See Chapter 15 for more information on these alternatives.) For business-to-business brands, building a reseller network can be key to growing sales without adding to overhead.

Crowdfunding

Crowdfunding refers to the process of raising funds for a new business, project, or venture from multiple donors, primarily over the internet. While other channels can be used for the same purpose, most crowdfunding today takes place via online sites set up to link borrowers with funders.

Kickstarter and other crowdfunding sites can help you raise money and assist you in creating a strong base of champions to help spread the word about a great new product.

If you create a strong campaign with product demos and great videos and get lots of people talking about your Kickstarter campaign, awareness will skyrocket without you having to pay for most of it. Additionally, if your campaign can create enough emotional enthusiasm to succeed, you’ll likely have a lot of excited backers to tell your story and promote your products and brand to their networks.

Beta testing

Also known as user acceptance testing, beta testing involves giving a product that is almost ready to go to market to a group of prospective users to test performance and functionality for real-world application.

Beta testing can give you valuable insights about your product and what might need to be fixed and it can aid you in getting sales off the ground. Instead of offering introductory or discounted pricing — which can lock you into low profit margins — invite people to be part of a beta program. Give them discounts in exchange for insights on what’s working and what’s not, and for sharing their success stories about outcomes and satisfaction with future prospects.

Once your pilot stage is complete, offer participants further incentives to continue doing business with you and serve as evangelists for prospects.

Offering more products

The more products you sell, the more revenue share you can potentially gain in a given market. However, this approach is not without risk. More products and more sales don’t always mean more profitability. You need to weigh the costs of developing innovative products that support or expand your existing product lines, getting those new products into your distribution channels, and, of course, designing marketing programs to create demand. Overextending your resources can backfire in ways you may not be able to overcome.

For example, if you own a restaurant and plan to expand to new locations, be sure you have the capital to cover the full cost of operations for a given period of time while you staff up and build a new following and customer base. If the new location fails, it can send a signal to customers that something is wrong with all your locations, causing you to lose even more revenue.

Risks and costs increase when you experiment with new products. Consequently, you should discount your first year’s sales projections to reflect the degree of risk. A good general rule is to decrease sales projections by 20-50 percent, depending on how new the product is to your brand.

But you should also consider how launching a new product slowly and on a small scale can tip off the competition to a really good idea they may be better poised to develop and market faster than you can. They’ll become the market leader and “innovator” of a new idea, and you’ll be the “me too” if you end up launching after they roll ahead with your idea.

You can introduce new products and services at trade shows or kiosks at airports and other high-traffic public places at a relatively low cost. You can gauge interest in your new offerings by asking for feedback from visitors to your trade show booth or monitoring sales at kiosks. This feedback will help you make improvements and identify winning and losing ideas before scaling them for larger distribution.

Riding a best seller to the top

Some marketing experts define best sellers as products that achieve sales at least ten times the norm for the overall category. If you have a best seller — a product that substantially outsells your other products — it may make sense to put most of your resources toward maximizing sales for this product and using the profits to grow other areas of your business.

To use a best seller to help fund new product development, look to expand demand by creating new experiences around your best-selling product, partnering with others to expand distribution, or bundling your best seller with related products. If you sell comfy throw blankets, for example, partner with a company that makes fuzzy slippers or herbal teas to help round out the cozy-at-home experience.

When one of your products continues to outperform others, refocus your marketing efforts on that product. Make it the heart of sales calls and ads, feature it at the top of your website’s home page, talk to the media about it, and offer special promotions to spark interest and trials among new customers. Be sure to cross-sell your other products to any new customers you acquire.

Use some of the profits from a best seller to build your next best seller, because like all good things, your current best seller will eventually lose its momentum. Always be looking for your next top product so you can have it ready and waiting in the wings.

While your products are selling and your customer satisfaction is high, referral marketing and reward programs are critical to maximize your sales and profit potential. Reward customers who continue to buy your products by giving them discounts for repeat purchases. Also consider giving referring customers a financial reward and see what that alone can do for your profits.

Referrals are essentially free sales. Your cost per lead is only the cost of the rewards you offer customers for bringing friends and family to you. If customers are happy, they’ll often bring you new customers without being rewarded, dropping your cost per acquisition down to almost nothing.

Making a hot product even hotter

Another strategy is to influence the supply and demand, and thus sales and pricing, for a product that’s showing signs of becoming one of your top sellers. You can do this by releasing a limited number of the promising item to specialty stores so that people have to seek out your product.

Remember Beanie Babies? Those useless but adorable and coveted collectibles are a great example of the influence of supply and demand. Creator Ty Warner released his Beanie Babies for short periods of time and then retired them, making them collector’s items that people wanted even more. And he produced only a few hundred of certain kinds of Babies, turning them into instant and rare collectibles. The value of some of his products at the peak of the Beanie Baby frenzy reached upwards of $3,000. In 2022, many years after their peak, a rare, mint condition Princess Bear, made in honor of Princess Diana after she died, was getting bids well into the six figures. Scarcity pays off when you have something people really want.

Take a look at your distribution strategies for your top products. Can you produce fewer and make them more valuable? Can you change your access points to make them seem more exclusive? Or do you just want to keep marketing a product until it doesn’t sell anymore and pocket the profits while you can?

Whatever your plan for maximizing the growth of your current top-selling products, have an exit strategy in mind, too. Be prepared to answer the following questions:

• At what point will you cease production before you end up manufacturing more than you can sell if trends and fads change?
• At what point are you willing to let your product become a commodity, selling at a fixed price?
• At what point will you replace this product with a new one that’s likely to have the same appeal to the same consumers, so you have an opportunity to create another highly profitable product and earning cycle?