Published February 2004

Feasibility study can protect your investment

Great marketing ideas (new products, programs and projects) don’t always hit pay dirt. Conducting a feasibility study can help aim your shovel and significantly improve the odds of success.

Typically, market feasibility studies are used to determine the best location for a business or venue. They also can be used to quantify market demand and response levels before making any major investment, e.g. new business, product extension, competitive positioning or promotion strategy.

The basic function of a feasibility study is to help you make a “go” or “no” decision — or determine if a modification is needed. The two key questions your study should answer are:

1. What is the current market condition?
2. How will the market respond to my new offering?

Most studies focus on what I call the three C’s: your company, customers and competitors. In “feasibility speak” they are referred to as project, market analysis and competitive analysis, respectively.

• Company: Based on your company’s project, decide what is acceptable in terms of result. Before you analyze the market opportunity and competitive environment, map out a continuum between your best hopes and worst nightmare. What is the minimum standard of performance? Also, look at strengths and weaknesses. Consider how to best manage the project from a logistical and financial perspective. Based on all of these considerations, weigh your options and frame the project. As with any study, documentation is important — write down all of your findings.
• Customer: Next, you will gather demographic (and possibly geographic) data. The litmus is “who will be most responsive.” Profile who they are, where they are and how many there are. Check out free sources — government Web sites, chambers, economic development councils, trade associations and your own database — before buying data. This information will help you define the current market condition. Once you’ve profiled who would be most responsive, get their opinions. Introduce your new program to targeted customers. Informal interviews work well. Even a small sample is better than no feedback at all. In addition to acquiring customer preferences, you’ll be able to more accurately project market demand.
• Competitor: Understanding what your competitors are doing is critical to the success of any marketing initiative. If there are competitors with a similar program, demand will be fragmented. Your revenue model and breakeven analysis will depend on the extent of your competition. Ideally, the new program should separate you from the competitors.

After you’ve collected information in all three categories, analyze the data; opportunities and challenges will surface from this study and you’ll be better equipped to make a “go,” “no” or “modify” decision.

You need to know if there is sufficient demand, and if your competitive advantage is strong enough to make the venture profitable. It is very common for an original idea to be somewhat askew, but a small modification could make a big difference.

Evaluate every product, program and project as an investment; commensurately, it should be scrutinized as one. You’ll be more apt to strike gold if you study the landscape first.

Andrew Ballard, President of Marketing Solutions Inc. in Edmonds, develops brand leadership strategies for businesses and teaches strategic marketing through Edmonds Community College. He can be reached at 425-672-7218 or by e-mail to andrew@mktg-solutions.net.

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