Market research has been an integral part of the business world since the 1920s and the first time advertisers started realizing the importance of demographic when it came to segmenting the market. As the decades passed, market research has become more and more advanced and nowadays, it has become ubiquitous. Unfortunately, many startups are still not doing it when they should be.
Why Market Research is Important
There are a number of reasons as to 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 were likely to become brand ambassadors.
Finally, market research will also give you a ton of insights on 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
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 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 hand, 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, friend 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 for 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.
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 each 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.
Proper market research needs hard work and an investment of time and sometimes money. In the end, however, it is more than worth it and it can really make a difference between a startup that fails and one that skyrockets.