Each novel product concept raises two critical questions:
Do people need this?
Are they willing to pay for it?
What is the best way for an entrepreneur with a big idea to determine how potential customers will react to your product? Market research can provide the data necessary to determine whether your product is a good fit for your target market.
Before embarking on a new venture, it is necessary to understand market research. This article will explain how to conduct market research for a startup and why it is critical.
Market research is the function of collecting data about customers and the market as a whole to determine the viability of a product or service. Market research aims to gain a better understanding of prospective customers, how well your offering meets their needs, and how it compares to the products and services of competitors.
Conducting market research can also assist you in developing a pricing strategy by determining the willingness of customers to pay for your product. Additionally, it can enhance the user experience by highlighting which features are most important to prospective customers.
The practices include interviews, surveys, focus groups, and analysis of industry data.
There are two types of research you can conduct:
Primary research entails gathering data to learn about a specific customer or market segment(Such as interviews and surveys). It's beneficial for developing buyer personas, segmenting your market, and optimizing your product to meet your customers' needs. Feedback from people who fit your target demographics can be invaluable as you iterate and improve your product.
Secondary research is conducted using data that was obtained through third parties (Such as industry reports and trend analysis). You can use industry reports, public databases, and proprietary data from other companies to gain insight into your target market segment and industry.
Investors place a high value on thorough market studies that show promising potential when deciding which startups to fund. Therefore, providing tangible evidence that your product meets market expectations and demonstrating that you've taken the time to iterate and improve it indicates that your startup is a worthwhile investment.
The five steps of conducting Marketing Research
1. Develop a hypothesis
What are the inquiries of your market research, and define your hypotheses accordingly? Forming your hypotheses in advance can guide your approach to subject selection, research questions, and testing.
A possible inquiry is: "What are the user's primary challenges, and is my product/service satisfying their needs?" Your hypothesis could be something like this: "I believe the user's primary issue is a lack of an unintimidating method for learning fundamental car maintenance, and I predict that my solution addresses that need."
"How much are consumers in my target market willing to spend for my product?" is another example of a question you might ask. Your hypothesis could be: "If my product retains all of its present features, people will pay $1,000."
While you can test several hypotheses simultaneously, try to limit yourself to a few per test to keep the research focused.
2. Determine the Type of Research Required to Validate Hypotheses
If your hypotheses center on establishing your startup's market position, conduct secondary research first. This approach may entail analyzing existing data to ascertain market size, the percentage of that market that your firm may plausibly own, who your primary competitors are, and how your brand and offering compare to theirs.
If primary research is required to test your hypothesis, choose the data gathering approach that is most appropriate for your needs. These may take the form of one-on-one interviews, surveys, focus groups, or polls. Primary research enables you to elicit information about customer happiness and loyalty, brand awareness and perception, and real-world product usage.
3. Determine the demographics of the target market
To elicit actionable insights, you must first comprehend your target population. Are you targeting busy parents, young athletes, or pet owners? Determine the demographics of the people who will benefit from your product.
Primary research requires subject recruitment. This can be accomplished in a variety of ways, including the following:
Social media: Many social media sites allow you to target users based on their demographics or interests, enabling you to reach a large number of qualified individuals.
Third-party company: Some organizations offer comprehensive market research services, including participant recruitment and research.
Word of mouth: The easiest but least reliable method of recruiting participants is through word of mouth. Request referrals from people you know for additional study subjects, and then evaluate them to ensure they suit your target demographic.
Regardless of how you recruit participants, ensure they complete a screener survey beforehand to establish whether they meet the demographic you're studying or have a feature that disqualifies them from the research pool. Additionally, it includes demographic information—such as age and race—that enables you to choose a diverse subset of your target market.
Additionally, you might give incentives such as cash, meal vouchers, gift cards, or early access to your product to encourage participation. Make it abundantly apparent that money is offered in exchange for subjects' time and candid input.
4. Initiate your studies
Conduct your study after determining the type of research and target demographic essential to test your hypotheses. To minimize bias, recruit individuals unfamiliar with your hypotheses to conduct interviews or run focus groups.
Inquire about your target audience and hypotheses. For example, if you're attempting to ascertain previous customers' purchasing reasons, you may inquire, "What problem were you attempting to tackle when you first purchased the product?"
When conducting brand impression studies, your audience should be made up of potential buyers who are unfamiliar with your brand. Provide them with a list of competitor logos — including yours — and ask them to rank the companies according to their perceived reliability.
While the questions you ask are used to test or refute hypotheses, make sure that they do not lead individuals in a direction. Use neutral phrasing and alter the sequence of options in multiple-choice questions to create unbiased research questions.
Once data has been obtained, ensure that it is organized efficiently and securely so that the subjects' identities may be protected.
5. Collect the Insights and develop your Action Items
After organizing your data, conduct an analysis to derive actionable insights. While some data will be qualitative rather than quantitative, trends in responses can be identified to make it quantifiable. Consider the fact that 15 of 20 individuals expressed feelings of overwhelm when attempting to assemble your product.
After studying the data and visualizing emerging trends, create a list of action items.
If the majority of consumers in your target demographic expressed frustration while constructing your product, possible action items include the following:
Developing multiple versions of assembly instructions for testing with additional groups, including varied diagrams and instructional language
Conduct research on the best practices for instruction manuals
Each cycle of market research can provide more insight into how potential users view and experience your product.
While conducting market research before launching your product is essential, you should reassess your hypotheses and develop new ones while establishing your business.
By performing market research on successive versions of your product, you can incrementally enhance it and guarantee that it continues to meet the needs of your target clients.