Market research has evolved significantly since its inception in the 1920s, becoming a cornerstone of business strategy. Recent data indicates that startups engaging in thorough market research have a significantly higher success rate compared to those that don’t.
This is because market research provides invaluable insights into market size, customer needs, and competitive landscape, allowing startups to tailor their strategies effectively. In today’s rapidly changing market, understanding these elements is more crucial than ever for securing a competitive edge and attracting investment.
Table of Contents
Why Market Research is Important
There are a number of reasons why market research is important for startups, but when you really boil it down, it comes down to three insights that you get with it.
First of all, you identify the size of the market, or, in other words, the number of people who might be interested in your product or service. Without knowing this, you cannot even start to make a business model or at least any precise one.
In addition to this, market research will also give you a picture of the market’s needs. Namely, you will find out what your target demographic thinks about the product you are working on, how much they would pay for it, and whether they are likely to become brand ambassadors.
Finally, market research will also give you a ton of insights into your competitors: how their products are faring, what kind of obstacles and challenges they faced, how their revenue grew over time, and much, much more.
When you bring all of this together, market research ensures that your idea is actually a good one, that it will have its customer base, and that, ultimately, you will be able to get funding to realize your idea.
How to Do It
Utilizing Social Media and Online Tools
In the digital age, social media platforms and online analytics tools offer a wealth of information that startups can leverage for market research. By analyzing trends on social media, startups can gauge consumer interest in certain products or services, identify gaps in the market, and monitor the competition.
Additionally, tools like Google Analytics can provide data on website traffic and user behavior, offering insights into potential customer demographics and preferences. This method is cost-effective and can complement traditional market research techniques, providing a broader understanding of the market landscape.
Engaging with Industry Experts and Thought Leaders
Connecting with industry experts and thought leaders can provide startups with deep insights and a better market understanding. This can be done through networking events, industry conferences, or even social media platforms like LinkedIn.
Engaging in discussions with these experts can reveal trends, challenges, and opportunities within the industry that may not be immediately apparent through quantitative research. Additionally, this approach can help build a network of contacts that can be invaluable for future business development and partnerships.
The Idea
Like always, it will start with an idea, and, truth be told, there are ideas that are so good startups do not even have to do market research. These ideas are often about filling certain holes in the market rather than about introducing something revolutionary.
An example of this is Sparesbox, an Australian startup that started selling car parts online, knowing that official dealers have been jacking up the prices for decades in Australia. Later, they added to their car parts store with a mechanic service where you purchase a part, and a mechanic comes over to replace it for you. Uber’s founders probably knew they had a great idea on their hands, as did many other startup founders who turned into millionaires.
Doing Some In-House Market Research
For the vast majority of startups, however, it cannot end with an idea. They need to go a step further, and in most cases, this is doing some DIY market research. Namely, startup owners can do their own market research by conducting surveys and interviews with their acquaintances, friends, and family.
It should be pointed out that this takes some serious work if startup founders want to get useful results. For one, they have to survey enough people so as to get a statistically large enough sample. For instance, 20 people is not enough. 200 may be, although you will target even more. Also, it is important to survey the target demographic. For example, if you plan on launching a piece of accounting software, you cannot survey a bunch of teenagers who know nothing about the industry.
Free Data Sources
If the startup founders cannot get sufficiently good data by doing their own market research, the good news is there are plenty of sources where anyone can get access to pertinent demographic data that has been collected by large organizations. In the U.S., there are a number of sources of such data. In fact, in most countries, you will be able to approach local government organizations, and they will be happy to supply you with some data on your potential market.
Hiring Professionals
If everything else fails, startup owners can approach companies that do market research and find out what they can do for them. It is important to keep in mind that corporate-grade market research is very expensive and that most startups will be absolutely unable to pay those fees.
Luckily, there are plenty of companies out there whose operations are scaled-down and who can provide some very useful data at a fraction of a price. For instance, customer survey companies nowadays offer reasonably priced market research for startups and smaller companies that cannot afford comprehensive market research.
For example, these companies will offer to do surveys that will cost the startup a dollar per survey. In other words, for the price of $400, you can get a perfectly useful survey of 400 people who fall into the right demographic and who will provide you with great insights.
Closing Word
Incorporating these additional methods into a startup’s market research strategy can provide a more comprehensive view of the market, customer needs, and competitive dynamics.
This not only validates the business idea but also enhances the startup’s ability to develop targeted strategies for market entry and growth. By investing time and resources into thorough market research, startups position themselves for success in an increasingly competitive business environment.
