One of the earliest and most essential steps before a startup goes to market is to conduct market research. You might say it’s laser eye surgery for a business venture. With exhaustive and vigorous market research, the product launch is bestowed with 20/20 vision – it becomes possible to predict the result, because you already know who wants the product, how to communicate with them directly, and what kind of competition the product can expect. On the other hand, with scant or inadequate market research, your startup is going in blind: it’s always possible the launch will be a success, but it’s far more likely that it won’t.
What’s the most effective way of conducting market research? There will never be an easy answer to this question, because market boundaries and modes of consumer engagement are in constant flux. Consider the process of opening a legal practice 50 years ago. An entrepreneur might have studied a demographic profile of the neighborhood, noted any competing practices, monitored and profiled pedestrian traffic, costed out ads in local newspapers and magazines, etc. The overriding purpose was to identify and carve out a local niche. Now consider the modern-day equivalent, where legal services can be provided remotely to clients anywhere in the country, even to those on the other side of the planet. Previous non-factors like expatriate trends, international tax legalese, and even rural internet access suddenly merit close examination, and the field of potential competitors widens to span the globe.
Fortunately, there are some dictums of market research that remain immutable, even in the face of an ever-changing world. They include:
- Know your target market. A startup should identify their target market early on and make sure their product or service is laser-focused on catering to it. The question of “who is this product/service for?” is just as important as “does this product/service work?” because no matter how revolutionary the product, it’s ultimately doomed to fail if no one is willing to buy one. Consider factors such as age, education, spending power, interests, lifestyle, and location when constructing your model. Two low-cost resources are preexisting customer data and social media analytics, which together can shed light on which demographics your product is engaging with. After the information has been gathered, draft a target market statement that sums up who you’re targeting and why they’ll buy your product.
- Adopt a methodical approach. Every poll, focus group, telephone survey, and analytic data dump is a puzzle piece in a much larger picture, and each of these market research tools should be designed and implemented using a strict methodical approach: 1) define a research goal; 2) determine research design (e.g., exploratory, descriptive, or casual research); 3) determine and design the research tool (e.g., focus group or online survey); 4) collect data; 5) analyze data; 6) adopt conclusions. Ideally each of these market research tools will inform and improve the following one, leading to the next point…
- ABR – Always Be Refining. When conducting market research for your startup, you should always be striving to refine qualitative and quantitative research methods. It’s not enough to attach a survey to a weekly email blast – you need to ensure that the right customers are filling out the survey, and that the survey is asking the right questions in the first place (i.e. the questions that are helping to meet your research goals as outlined above). Market research is a sector that scales dramatically in terms of resources and methodological complexity, from a single entrepreneur all the way to the corporate giants atop a $22-billion-dollar industry in the United States. But there’s always marketable insights to be gained from perfecting market research methods, and these insights continue to be invaluable long after the initial launch period (customer loyalty and retention, new competitor research, etc.)
- Market research means more investors. Exhaustive market research helps attract new venture capital by clearly laying out the risks and opportunities to investors. You can think of market research as a way of effectively pre-empting the questions that investors might have. Some examples include: 1) What is the problem you’re product/service is trying to solve?; 2) Do you have an engaged customer base?; and 3) Is it the right time for this kind of product launch? (Incidentally, one survey of 200 companies discovered that 42% of startups cited timing as the top factor for their success, ahead of team composition, product idea, business model, and even funding).
Startly Capital can help your business get started today. We offer a suite of services intended to help entrepreneurs turn inspiration into a marketable reality, including market research, pitch decks, venture capital, information technology, and organizational development. Schedule a call today to learn more about our range of market research services.
The information in this article is for educational purposes only and does not constitute legal, financial or investment advice.