One of the key factors determining the success of a project is conducting market research. Indeed, understanding who is the target audience of your product helps you select the right approach to its positioning and promotion. Below we will answer the question: “How is market research conducted?”.
Before we describe how to do market research for startups, let’s define the central concept. In a nutshell, it is the analysis and evaluation of the market that a startup is going to enter. This study helps to identify the prospects of the project, as well as adjust the strategy for its implementation before it actually starts. Also, this procedure helps to effectively present the project to stakeholders.
Why Does Your Startup Need It?
In general, here are the main aspects that can be identified through market research:
- the current state of the market. Market research allows you to assess the size of the market, the compliance of a project with trends, and the possibility of its positioning in the current conditions;
- prospects. Also, it usually includes an assessment of the leading directions of the market, global approaches to the implementation of solutions for it, as well as an analysis of how these approaches can be applied to get the most out of them for a specific project;
- target audience and its behavioral patterns. You will have to determine the main demographic characteristics of your target audience, their ability to pay, as well as interests, pain points, needs, and everything else that affects their buying behavior;
- the main competitors. Another aspect that you have to find out is to define competitive solutions that occupy a stable position in the market, as well as identify their advantages and disadvantages to find out how exactly you can present your project against their background;
- demand. And finally, you determine whether your potential target audience will be able/willing to purchase your product, as well as whether its presentation format will be pleasant and relevant to them.
All this information will help you build an effective business strategy that will help you create a working business model for getting a profit from your startup in the future.
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5 Steps to Conduct It
Now we propose you learn how to do market research for a startup.
Based on the types of data (we defined them above) that you need to obtain during the market research startup process, you will have to form hypotheses that you will either have to confirm or disprove. It looks like this.
For example, for your startup market research, you may assume that your target audience is millennials and zoomers who are looking for new ways to express themselves in the digital space. They live in the same country as you (usually, it is easier and faster to promote the product to the local market and then move to the international level) and have a minimum income (or none at all), and therefore monetization will be implemented through advertising. Their main pain points are the lack of the possibility of self-realization and self-identification as a mature, holistic personality.
As a result, you should formulate at least 2-3 hypotheses for each type of data (about the current state of the market, the development prospects of your project, its target audience, main competitors, and demand) and start their testing.
Selection of research type
At this stage, you have to decide on the type of market research for startups. For example, if the coverage of your target audience is wide enough, it makes sense to use statistical data for analysis. This is called secondary research.
If your niche is not yet clearly formed, the market research startup's performance should be primary. In this case, you will need to choose the methods of collecting information: these can be online surveys, personal interviews, as well as live focus group surveys.
Identifying target demographics
Now you can start drawing up client portraits. This can be done either through the analysis of your acquaintances who, in theory, may be interested in your product, social networks (here, users usually provide full information about themselves), or hiring a third-party agency that specializes in market research of a business.
After collecting data, you will be able to highlight the main purchasing characteristics of the average user (usually, there are several such groups of users). Based on these characteristics, you can create client portraits. After that, you can select real people who match these characteristics to conduct a survey with them.
As you may understand, the primary goal of market research by entrepreneurs is to test your hypotheses. Therefore, when you understand who your target audience is, you will need to assemble focus groups for each of the pre-composed client portraits (usually, they include no more than 5-10 people) and test your ideas.
In particular, you will have to understand what exactly your users want to get from interacting with your project at each stage of the sales funnel, from the initial acquaintance to the stages accompanied by monetization.
You will also need to find out how reliable your project will look in the eyes of your target audience. To do this, you can offer representatives of the focus groups a list of competing solutions, among which your project will be present. They will have to make a reliability rating on its basis. Try to keep your questionnaires as neutral as possible so that you do not inadvertently push people to the answers you want.
Analyzing obtained results
Finally, after you have completed the startup research, you will need to apply the results to your business strategy. Often, it is in the context of the implementation of start-ups that these results are qualitative rather than quantitative – primarily due to time and financial constraints.
Thus, your task will be to adjust your business concept according to:
- the current state of the market and its trends;
- the development prospects;
- the needs and characteristics of the target audience;
- main competitors;
- purchasing power of the target audience.
As soon as these steps are done and you already have all the information for the start, you can carry on with the discovery phase, prototyping, and defining the scope of your MVP.
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Now that you know how to do market research before starting a business, you will choose the right direction to promote your project. If you want to entrust all stages of the startup implementation to real professionals, including a research startup stage, feel free to contact us. Over the years of our existence, we have successfully launched more than a hundred projects and allocated more than 240 hours to consulting startup teams. That is why we are sure that we can help you with the realization of your business idea.
What is market research for startups?
Market research involves: interviews, surveys, focus groups and industry data analyses. The purpose of market research is to better understand potential customers' needs and how well your product or service fits into those needs in relation to competitors' offerings.
Why market research is important for startup businesses?
Businesses should understand the needs of three major types of customers: market research helps you adapt to these needs and turn potential customers into regular customers, who in turn may become advocates for your brand and product.
How does market research benefit a business?
Market research is an effective tool for business planning. It provides insight into customers' thinking, buying patterns, and location. In addition, market research can also assist you in monitoring trends and keeping an eye on what your competition is doing.
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