In this case, the business is built around making coconut hair oil.
Evaluating the Product Idea
The evaluation process involves answering 16 questions. Perfect answers are not exactly necessary; you can make educated guesses.
Market Based Criteria
These criteria focus on external factors such as trending trajectory, target customer and market size, among others.
What is the potential demand or market size?
It is not easy to perfectly gauge the demand or marketer size but you should have an idea before investing resources. Make use of services such as Google Keyword Planner Tool or Buzzsumo.
In Canada and the USA alone, there were more than 73,000 searches for “coconut oil for hair” and related keywords per month.
This means that there are people who are interested.
Who are you competing against?
Know your competitors to avoid surprises in future.
In the coconut oil for hair market, there are three main competition areas; commercial coconut products for hair, DIY recipes for coconut oil and pure coconut oil.
Is it a growing market, a trend or just a fad?
You need to know the direction of the market.
The search for coconut oil, according to Google Trends, has been growing over the last years.
Can your target customers buy it locally?
If they can already buy the product locally, they may not be interested in looking for it online.
Who are you targeting?
Use Twitter to see who is searching for your product.
Product Based Criteria
What is your selling price?
Check other similar products from similar companies to see the average price. With that price, what will be your profit margin?
What is your markup?
The markup will be your profit and cover your overhead. Consider the cost of raw materials and production. Compared to the selling price, can you enjoy a healthy markup?
How many SKU’s will you stock?
SKU’s are styles and types of products. The more you stock, the more hectic the business will be.
Will you offer a subscription?
Being able to offer a subscription increases lifetime customer value. A subscription would not work with coconut oil because people are likely to use it as needed.
What is the weight and size of your product?
Heavy products are expensive to ship and may turn away customers.
Is your product durable?
The more durable the product, the better. You will pay less for shipping.
Will you have to deal with seasonality swings?
Seasonality wings will affect your cash flow. Coconut oil is not quite affected by seasonality swings.
Does your product solve a pain or serve a passion?
Products that solve problems are more marketable. Coconut oil, for instance, solves the pain of dry hair.
Is your product disposable or consumable?
Disposable or consumable products are likely to win you repeat customers.
Is the product perishable?
Perishable products are a recipe for disaster if you do not make sales.
Is your product regulated or limited?
Knowing this will help you plan ahead and be prepared.