The answer to this question lies in the Marketing 101 textbooks...... You must first do your market research before you spend your first penny on advertising or you will lose your shirt.

Step one in any business plan must include market research, for without it, your business will fail. Too many start up Internet businesses have jumped online without the benefit of the advantages they would gain as a result of doing market research.

Two Essential Elements of Your Market Research Must Include:

Knowing who your customer is...this will help you to target your advertising message.

Knowing who your competitors are....this will help you to obtain a larger market share.

Internet Marketers have a great advantage over brick & mortar businesses, in that they can easily access the information they need for market research through the search engines.

Keywords and keyword phrases entered into your Internet browser will bring onto your desktop every piece of information you will need to market your product and service effectively on the Internet and gain a larger market share.

Here's the steps to "market researching" your customers and competitors:

Step 1.... Define Your Customer's Profile

Do not make the assumption that your target audience is larger than it really is, this will cost you sales... because you will attract visitors who are not buyers.

Tailor your customers profile to fit your ideal buyers, not "tire kickers" and "freebie addicts"(if freebies are geared towards your product, that's okay).

Create a thumbnail sketch for each segment of your target audience. There is probably more than one type of customer for your product or service, don't leave any one out.

Make a list of what your customers want, what they need, what they can afford to buy, what their sense of urgency is, and what their concerns are.

Write a benefit that your product or service offers for each item on this list.

Now you have the ammunition you need for the next step.

Step 2.... Choose Keywords and Keyword phrases

Make a list of all the keyword and keyword phrases that your customers would use if they wanted to find your product or service on the Internet.

With the help of the Goto.com keyword suggestion list and JimTools' Keyword Research Tool, you can come up with 100's of keywords you may not have thought of otherwise.

Take your time with this. Put yourself in the shoes of your customer... the longer your list of keywords, and keyword phrases, the greater your chances of gaining a larger market share.

Enter your keywords and keyword phrases into the major search engines, and bookmark all the web sites that turn up as a result of your searches. Now you know who all your competitors are, and where your customers are hanging out.

Step 3... Analyse your Competition

Naturally it makes sense to take a closer look at the web sites you bookmarked that have ranked the highest in the search engines, as they will be your biggest competitors. For example, the web sites ranked in the top 10-30 in any of the search engines are more than likely drawing larger market shares.

Determine why.....

Take a look at each web sites meta tags in the view source function in your browser. You can view the source code of any open web site in your browser by selecting "Source" in the "View" function of Internet Explorer or "Page Source" in the "View" function of Netscape.

Examine the keywords, description, and title that your competitor is using in their meta tags and see how your own meta tags compare (you do use meta tags don't you??).

Do you need to fine tune your meta tags in order to increase your chances of ranking higher with the search engines, then do so. This activity alone will bring your more targeted traffic.

How does your web sites sales copy compare to your competitors. Chances are that your larger competitors are using benefit rich sales copy. Fine tune your web site sales copy to address how your product or service will be about helping your customer get what they want and need.

How about the design of your competitors web site? You can learn more about what is more attractive and compelling to your customer by comparing your web design to that of your competitors. For example... is your web site easy to navigate? Do you have a consistent focus on one or two products/services? Do you have a web site that is cluttered with gyrating banners for unrelated products/services?

Does your competitors web site offer more online payment options than you do? Are they easier to use? Do they send an automatic thank you with each order?

What about customer service? Does your competitor follow up with their customers to determine their level of satisfaction? Do they offer real time online customer support?

What about price? Where is your pricing compared to your competitor?

How about added value? Does your competitor offer more to the customer with the purchase of their product/service? For example, a guarantee, a bonus, or a trial version.

How much advertising does your competitor do and where? To find this out, simply search the Internet using your competitors web site name, or product name to find out where else they are linked to.

Keep in mind the above suggestions do not suggest or encourage copying any web site, web site copy, or HTML code from your competitor's web site. There are copyright laws that protect us all from this kind of activity. You can use the information obtained from your Internet searches for ideas on how to improve your own web site only.