Every entrepreneurship journey starts with one great idea.
An idea for a product or service that will change the world. Or, at least, will significantly improve the lives of those who use it.
If you’ve recently had such an idea, and would like to turn it into a thriving business, then one of the first things you need to do is market research.
You need to research if the market is ready for the product or service you have in mind before you create your business website, rent office space, or launch that prototype.
Proper, high-quality market research is essential for two reasons:
- Verify the idea’s feasibility
- Prove the product’s attractiveness to investors
Verify the idea’s feasibility
In order to start a successful business, the first thing you need to know is whether there’s enough demand for the product or service you want to sell. If there’s demand, the second thing you need to find out is the source of that demand, i.e., who is your target market?
These are some fundamental questions that high-quality market research will help you answer.
Another question you need to focus on during market research is to do with cost and price. In other words, how much will it cost you to produce the product or render the service you want to sell? And how much is your target audience willing to pay for it?
Even if there’s ample demand for a product, your business won’t succeed unless your target customers are able and willing to pay for it.
Got an idea that’s fresh and new? You still need market research to learn about the needs, wants, and pain points of your target customers. This will help you develop a product or service that truly adds value to their lives.
And that’s the surest way to find success as an entrepreneur.
Prove the product’s attractiveness to investors
Your startup will probably need external funding at some point, and good market research will go a long way in helping you attract investors.
Every investor wants to see the potential for profits when they think about investing in an idea. Market research is a great way to earn investor confidence because it helps them objectively determine how the startup will bring in cash.
Most investors will conduct comprehensive due diligence before they agree to put money into your business. And high-quality, reliable market research can make this process much easier for them.
Granted, conducting market research for a startup isn’t as exciting as building a prototype or designing an influencer marketing campaign. But by showing you’re willing to put an effort into being thorough with your idea and business, you demonstrate your commitment, a go-get-it attitude, and reliability. Those are qualities that investors often look for to gauge execution capability.
4 proven techniques for conducting good market research
Now that you know how important market research is for your startup’s success, let’s talk about the ways in which you can research a market.
In this article, you’ll learn four proven techniques that’ll help you get the best results from your market research, even if you’ve never done market research before.
Surveys, one of the most commonly used techniques, are a form of qualitative market research. Conducting a survey involves asking a large number of people (ideally those who fall within the target market) a series of questions about the product or service you plan to sell.
The questions can be either open- or closed-ended, and you can ask as many of them as you need within reason. Just make sure you’re not handing out fat stacks of paper that people will be reluctant to invest time in.
The four primary modes of conducting market research surveys include:
- Phone Calls: You or your team can make cold calls to potential customers and ask them a few scripted questions.
- Emails: You can send a list of market research questions to your mailing list.
- Online forms: You can create an online form with all your survey questions and send people a link to this form requesting them to fill the form.
- In-person: You can send representatives to high-traffic areas like shopping malls and have them ask people a few scripted questions.
It’s also good practice to offer respondents something in return for their time — a little quid-pro-quo.
Each survey method has its own advantages and disadvantages.
For instance, a phone survey might yield quicker results, but might also annoy some of your prospects.
On the other hand, an email survey might be more accurate, since participants can get a chance to carefully consider the questions and write their answers in private. However, the process might be time consuming.
Similarly, an in-person survey might be unreliable because respondents may be reluctant to share unpopular opinions or go against the crowd when questioned publicly by a stranger.
Interviews are both the most insightful as well as the most resource-intensive. They require a great deal of time, energy, and commitment.
With this technique, you’ll be conducting in-person, in-depth interviews of several people within your target market.
Interviews help you get to know your target market more closely, understand their concerns and pain points, and get crucial information about their thoughts and feelings through non-verbal cues such as facial expressions.
When conducting a qualitative, one-on-one interview, you can ask open-ended questions and encourage the participants to give long, thorough answers. You’ll also be able to ask follow-up questions if you need further clarification on an answer.
However, to make the best of interviews, you’ll need to invest a lot of time —not just interviewing respondents, but also finding the right venue and arranging for transportation, among other things.
To use this market research technique, you first need to have a finished product (or at least a usable product prototype). Once you have a prototype ready, you need to offer it to a small group of individuals within your target audience.
Allow them to use the product for a while — long enough for them to realize the product’s benefits and identify its shortcomings.
For instance, if you’re developing a new type of gym equipment, you may need to offer a few prototypes of the product to a select group of market research participants.
In this case, the participants can be gyms who will allow their members to use the machine for a while. The participants must record their experience, potential issues, and features they believe will improve the product’s value for the market.
Once the field trial ends, you could use these responses to improve your product or iron out the issues before the product makes it to the market.
A field trial can also involve placing a new product in various stores with two different types of packaging to see which one performs better.
The important thing is that field trials must take place in the participants’ natural environment. You can ask participants to use a product in their home, or see how they react to the product when they see it in a shopping mall. But if the participants are called to the office to use the product, that doesn’t qualify as a field trial.
The focus groups technique involves selecting a group of people as a proxy for the consumer demographic. The focus group is asked to participate in a moderated discussion about the product or service.
The primary advantage of the focus groups technique is that it allows you to interact with your target demographic face-to-face for a substantial period of time, without investing the time and money required for one-on-one interviews.
The problem with focus groups is that they are often susceptible to various types of errors and biases.
- The moderator style bias occurs when the personality of the moderator affects the outcome of the discussion.
- The dominance bias occurs when the more forceful and dominant members of the focus group influence the opinions of those around them.
Despite these risks, focus groups are often the best market research technique when you need to ask questions that can’t be answered easily through email or an online form.
For instance, if you’re developing a new product, you could ask your focus group to try out a prototype of the product before beginning the discussion. This allows them to base their answers on first-hand knowledge of the product, adding to the accuracy of the research.
Market Research is Critical
These are some of the best market research techniques that businesses and entrepreneurs use to understand their target markets before they take the leap of faith.
The best market research technique for your specific case depends on various factors, including the time and money you’re willing to invest, your target audience, and your product.
In any case, you should find at least one of the techniques in this article helpful.