Farwah Jafri | October 27 2021
To compete in any industry, we must gather crucial data about how it operates, what is the nature of competition within the industry, what recent changes have taken place, and the consumption patterns of the target market. This article will walk you through the essentials of market research for startups – from defining the purpose of this research to the useful tools at your disposal to get the information that you need to succeed in business.
Learning how to do market research for startups, in essence, is the process of gathering data on the market you want to operate in, such as consumer needs and preferences to determine the viability of a new product or service that you are planning to launch.
Market research for startups is about gaining a deeper understanding of who you are competing with, who exactly your customers are, and what segment of an industry you are approaching and targeting. It is a non-negotiable undertaking for startups in particular, as they tend to be a riskier endeavor than most types of businesses. The insights you stand to gain from conducting market research for startups put you ahead of the learning curve, which is why it should be an utmost priority for anyone looking for business-related intelligence.
If you are reading this article, you are either hoping to find a startup idea through extensive research, better solve problems or attract investment that will bootstrap your startup in the next round of funding. Regardless of which category you fall into, learning how to do market research for startups will help.
Investors are always looking for market-related data in startup pitches, but rarely do they find them, so doing market research for startups can serve as an opportunity for you to stand out from the crowd. However, it is up to you to make sure that your data is accurate, current, and updated with the most recent statistics. When you conduct qualitative analysis and talk to consumers, you are bound to stumble upon a problem that you can solve or help improve.
Some industries tend to be rather saturated, while others give you a lot of leeways to explore. Here is a detailed, but not exhaustive, list of things you can do to better understand your customers.
Before you start, figure out which businesses and areas you would like to study in-depth. Look for companies in the same industry or segment as the one that you are operating in or plan to enter, preferably with a similar ownership structure (joint partnerships, for example). For conducting rigorous market research, the following tools are helpful.
2. MarketResearch will let you find and search from over 25,000 marketing research reports.
3. BizMiners is also great for generating insightful marketing research reports.
4. SimilarWeb will help you find statistics and user behavior patterns in your competitors.
5. Google Keyword Planner is a handy SEO-oriented tool for finding the latest market trends and related keywords.
Most industries have certain barriers to entry and you should be ready to run into them as you go about doing business. What you are essentially hoping to find, through this research, is data on trends, the scale of the industry, the growth trajectory, and the current life-cycle for most startups operating in your industry.
Most companies produce marketing reports every few years, focusing on company-specific internal data, such as sales and marketing figures, user data, consumer purchase information, and consumer account information. The average revenue per sale, client retention rates, and historical information on the stability of old and new consumer-related accounts may all assist you in determining what your buyers are currently interested in buying and how these buying patterns might change in the future. This constitutes a big chunk of what we consider essential market research for startups.
Thanks to the vast array of online services and readily available information, most businesses now do most of their market research for startups online. You can start by looking at consumer internet services that provide access to corporate databases (examples: Encyclopedia of Association, Gale Engage Learnings).
Pay very close attention to the keywords that your competitors use. Comparing the traffic numbers on the websites of other key players in the industry is a good point of reference for future forecasts. It will also help you evaluate, with the right conversion rate (customers who end up buying your product from the website), how many leads you can expect to generate.
The World Trade Organization also regularly publishes trade statistics and data on the regulatory and policy environment for several of its member nations. As far as competitive research is concerned, your competitor’s financial filings are public and can be found on the United States Securities & Exchange Commission website.
For the specific companies and businesses competing in your niche, you want to understand their pricing strategies for several reasons. Not only will you gain an understanding of what your customers are willing to pay, but the right product pricing could be the difference between products that run out of shelves and the ones that stick around.
Furthermore, a prototype is a great way to conduct usage-based research on how users interact with your product. This is usually part of a user experience (UX) audit, but it boils down to knowing the roadblocks that your end-users may hit when using your product. This is one of the more difficult processes when learning how to do market research for startups. If you have a website, Hotjar is a great tool to create a heatmap of how the users interact with different sections of the website.
Most sectors of the market have dedicated media that focus on important news and developments, such as newsletters, popular websites, blogs, and online forums. Themes may range from determining industry size and product kinds to debating important problems. These will be the most fruitful avenues for obtaining important secondary data. For example, in the fitness industry, you can follow popular fitness blogs for new market insights.
Interviews are a more personal way to get to know your audience, as they allow for more in-depth exploration and lengthy dialogue on the subject matter. Make sure that the questions you ask are open-ended and seek to understand the customers rather than confirm your preconceived biases.
There are several ways to find the people you need for interviews. Ideally, you want a diverse group of subjects from different age groups, gender, ethnicity, and more. You can request for participants on social media, or pull a list of customers who either made a recent purchase in your niche or were part of an evaluation. You can also use your social circle and networks to select people who have already interacted with you, telling them that you are conducting market research for a startup.
Surveys are great for reaching out to the largest section of the population at once. While not as extensive as interviews, they allow you to operate and collect data at a large scale. Because of the variety of potential question forms and choices, surveys are also very flexible, which is why they are so widely employed in market research for startups.
Focus groups, while sometimes difficult to conduct, tend to be less time-consuming than interviews for gaining personal insights through dialogue. They often require a moderator who keeps the conversation from going astray and asks questions from a checklist. It is usually a room with a group of people discussing one topic. If you have a working prototype of your product, this is the perfect time to give it a demo.
After you understand the products you’ll be up against, you can hone in and evaluate them to see what end-users have to say about them. Negative reviews cannot be deleted on Amazon, so it’s an excellent starting point.
Social media pages and online groups are some of the most convenient and accessible ways to gather information about your competitors, as it is readily available at your fingertips. You can rest assured that the ones sharing their experiences in, for example, Facebook groups, are genuinely interested in the category of products that you are researching. The insights you gain tend to be specific and very handy.
When it comes to market research for startups, the end goal of your research strategy is to create customer profiles. Buyer personas are a great reference point for guiding your marketing decisions. This can include the minute details from their daily routines to their specific needs. These are also called personas, and often contain the following: age, gender, location, job title(s), family size, income bracket, Current needs, and major challenges. Knowing your ideal customer will help you curate your products to their specific needs better than your competitors.
Perhaps what’s most important here is that you are open-minded to the results from your market research. Often, as entrepreneurs, we find ourselves solving the wrong problems or having a flawed pricing strategy. The goal here is to know what to fix or create an outline of things to get right when you are in the initial stages of your startup. The perfect initiative may not exist, but undertaking market research for startups can nudge you in the right direction.
See Also: 14 Most Disruptive Startups Of 2021
Farwah is the Product Owner of Monily. She has an MBA from Alliance Manchester Business School, UK. She is passionate about helping businesses overcome challenges that hamper their growth, which is why she is working at Monily to facilitate entrepreneurs to efficiently manage business finances and stay focused on growth.