If you want your startup to succeed you need a market research plan. The most common reason for failed startups is the lack of need for their product and services. This goes hand-in-hand with the failure to do the right type of market research.
Having the right research on hand will help you be efficient with your resources, time and also attract investors if you need so.
Where to Start?
If you think you have a new product/service idea, inspired by anecdotal observation (e.g. personal experience of your own, family, friends, co-workers, general news) and you have not conducted any foundational market research, follow this 3-step market research plan.
Step 1 – Check Secondary Research Sources
Secondary research is based on data already collected for purposes other than the specific problem you have. In contrast, primary research is originated to address your specific problem.
Compared to primary research, the collection of secondary data can be faster and cheaper to obtain, depending on the sources you use.
Internally, a source of secondary data can be internal management support systems your company may be using (e.g. invoices, sales transactions, etc.).
In the beginning, you may not have any implemented systems yet or if you do, you probably don’t have much data in them.
Externally, you can spend hours doing research on Google, but this is likely to yield limited insights.
You should check professionally gathered secondary research that is often not freely available online.
You can find this type of information in trade publications (e.g. industry journals, magazines) and reports compiled and sold by the piece or in a subscription by syndicated services, database aggregators, and trade organizations.
Although it is rare that secondary research can provide all the answers you need, it can help to:
- Answer certain research questions and test some hypotheses.
- Formulate an appropriate research design (e.g. identify key variables).
- Interpret data from primary research as it can provide some insights into general trends in an industry or product category.
- Understand the competitive landscape.
The usefulness of secondary research tends to be limited due to either relevancy or accuracy or both because it is namely conducted for other purposes.
In evaluating secondary research, consider:
- Methodology used to collect the data: Important to understand sources of bias.
- Accuracy of data: Sources of errors may include research design, sampling, data collection, analysis, and reporting.
- When the data was collected: Secondary data may not be current or updated frequently enough for the purpose that you need.
- Purpose: Understanding why the data was collected and what questions it was trying to answer will tell us how relevant and useful it is since it may or may not be appropriate for your objectives.
- Content of the data: Understanding the key variables, units of measurement, categories used, and analyzed relationships may reveal how useful and relevant it is for your purposes.
- Source reputation: In the era of purposeful misinformation on the Internet, it is important to check the expertise, credibility, reputation, and trustworthiness of the data source.
Step 2 – Qualitative Research
Again, secondary research is rarely enough. Your next step is to do qualitative research to explore needs, motivations, barriers, decision-making in the buying process, competing alternatives of solutions related to your product/service idea.
The emphasis here is on exploration to find a starting point, if non-existing or vague. Don’t go running to make business decisions based on exploratory research. Qualitative research is based on small samples and designed to go deep and get unstructured answers.
Qualitative research methods for this scenario you can use, include:
- In-depth Interviews (IDIs).
- Digital Ethnography.
- Traditional Ethnography.
- Online Bulletin Board Discussions.
- Focus Groups (In-person, Webcam, Chat).
Many of these research methods are often used in customer journey mapping, which helps to structure the insights about how potential buyers and users may come to your product or service.
The research in this step should provide insights into:
- Unmet needs in your product/service category.
- Barriers to meet such needs.
- Steps in the decision-making process to adopt your product/service.
- Potential purchase channels.
- Perceptions about your product/service category, your brand, and your competitors.
- Initial reactions to a product idea /service.
Step 3 – Quantitative Research
Although you will learn a lot from qualitative research, you still need to validate your findings in a large sample of potential customers. This is an essential step in your market research plan to support go/no-go decisions.
The goal is to understand the magnitude of the needs, motivations, barriers, potential decision-making segments, competing alternatives, the appeal of your product/service idea, and willingness to pay for it. This is the best way to scale your velocity of learning.
Quantitative research at this stage is used for:
- Market sizing and segmentation.
- Concept testing of product ideas, features, and positioning.
- Prospect profiling.
- Purchase behavior key driver analysis based on needs, barriers, motivations.
- Understanding brand awareness, attitudes and usage of your brand (if any) and competitors.
- Pricing optimization.
The selection of the data collection method depends on the objectives, budget, and timeline. They may include surveys, POS transactional data (e.g. sales data from test markets), and online A/B testing.
More than one research project/phase may be needed. Don’t expect to get all your questions answered in one survey or analysis. There are limits to how many questions and tasks you can ask to research participants. After a point, data quality and response rate degrade exponentially.
The research in this step should help you make some decisions related to product development and positioning by getting solid answers to questions such as:
- Is there a real need in the market for our product/service idea? What is the market size?
- What are the potential market segments for this product/service idea given the magnitude of the need?
- Which are the potential benefits our product/service can offer?
- What is our unique value proposition and differentiator from the competition?
- Which product feature should we consider and test to support those benefits?
- What is the willingness to pay for this product/service idea?
This applies to the development of physical products as well as digital products including software, apps, and websites.
Where to Continue?
Again, if you haven’t done any research, consider the aforementioned three research steps as the initial market research plan you should follow to be a successful startup.
If you have already conducted some of the suggested research, you will probably still need to do more research in order to tackle some of the issues listed below.
Product Choice Overload
Your users will face choice overload if you have a long list of potential features, benefits, and even other product ideas. This can lead to analysis paralysis or buyer’s regret. In either case, you will lose customers.
Since budget and time are rarely unlimited, your product team needs to prioritize where to invest resources. The insights from this research can also help to determine how to refine the positioning of your product/service as part of your marketing strategy.
Once you have customers, you must figure out how to keep them. This means you need to have a system to gather user feedback on a regular basis to promote an agile product development environment. This will allow you to continuously improve your products and services to sync your brand promise and the user experience.
To become customer-centric, you need to understand the user experience throughout the customer journeys in an iterative way. The goal is to discover and mitigate pain points to retain customers, but also to acquire new ones. This will apply to website design/redesign decisions, your customer service, technical support, sales operation, and other customer touchpoints.
It is not enough to understand the user experience in order to succeed as a business. Your organization needs to have backstage processes to support that user experience. Integral components of your service blueprint are employee engagement, technology, and suppliers that support your business. You will need research to map all those components to become customer-centric in an effective way.
If you are an entrepreneur starting a business based on what you think is a new product or service idea, you are more likely to avoid failure by having a market research plan as outlined above. Otherwise, you risk not learning quickly enough or simply not learning what you need to learn to move your business forward.
Think of market research as an investment. Biased approaches, guessing and ignorance are usually more expensive in the long term.