4 Phases of Market Research to Ensure Success
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And there's a lesson there: No matter how good your idea, you need to make sure there is a market out there that wants to experience your vision -- not the other way around. That’s why researching your idea is just as critical as having it to begin with.
To ensure you keep your business on track, don’t just conduct market research before you launch. Dig deeper at each and every phase of your startup. Here's how.
1. Identify the problem you're solving.
The ideation phase is where you have that aha! moment, gaining clarity on not just a problem, but its solution. This is also the phase where you need to conduct your first round of market research.
Take a company called Pay By Touch. Though that now-defunct organization seemed to be on to something with its biometric payment technology, market research would have told its founders that consumers didn’t yet see a need to pay with the touch of a finger.
It wasn’t until much later that people saw the benefit of such technology -- most notably with Target’s 2013 data breach, when 40 million customers' credit card numbers were hacked.
Avoid Pay By Touch’s fate by identifying the problem you plan to solve. Does a solution already exist? Can you improve upon it? This will be the raison d’être of your business. But don’t stop there. To determine the size of the potential market and to capture competitive data, conduct first-hand research with online services.
Ideally, you should try to reach random, anonymous users, to ensure a good fit for your product. You can get a truer sense of potential customers’ opinions via in-person meetings, social networks or through a Quora post.
2. Get the green light on your intuition.
If you’re confident your idea is an interesting one, next ask yourself: Can I actually build a product people want? This is the validation stage, where you back up your intuitions with reliable data.
WebTV, for example, failed to validate its assumptions with the launch of an interactive TV service. Founded in 1996, WebTV's device promised to bring the internet into more homes without the use of a PC. That was an interesting concept, but one riddled with problems -- chief among them, need. This was the question the company's leaders failed to ask: Do people want to surf the web, and read their email, on their televisions?
People didn’t want to use their TVs for web-browsing 20 years ago, and they don’t use their smart TVs for the same task today. Turns out, only about 10 percent of people who own TVs use them for web browsing, and even fewer for gaming, shopping or email. And this data was culled back in 2012! With adoption at such a low rate even now, the idea certainly was not ahead of its time.
Market fit is crucial, so you have to determine whether your target audience is truly interested in your product and willing to pay for it. To make that detrmination, gather both quantitative and qualitative data through in-person interviews and anonymous surveys. What data points can you use when talking to product teams? You will need to represent your data in easily digestible, bite-sized pieces that are both easy to remember and effective.
3. Adjust according to customer taste.
Congratulations! You’ve made it to the process improvement phase. People have shown genuine interest in your product, and you’ve started to convert consumers into customers. Now is the time to focus on conversion, but the question remains, how?
Back in 1998, boo.com set out to become the world’s first online global sports retailer. It had a massive $60 billion target market, $130 million in funding and the first-mover advantage. On its day of launch, the site brought in roughly 50,000 unique visitors. However, only one in 250 people placed an order -- a conversion rate of just 0.25 percent.
The company hadn’t done the research to determine whether consumers had the technology necessary to use the site, so download times were slow, and prices were higher than consumers were willing to spend, especially given the prolonged shipment time.
To overcome problems like these, you should continue to test reactions post-launch, gathering feedback from users to improve efficiencies and adjust as needed. Figure out what you lack. Do you have a clear call-to-action (CTA) and gated content on your homepage to drive users to sign up? Analyze their behavior to learn who chose not to, even after diving into your pricing and other details.
4. Turn traction into momentum.
You’ve achieved product-market fit, and you’re scaling web traffic to sizable numbers. Now you have to decide whether to expand or pivot -- the growth stage. Can you scale? Can you enter a new market? You must weigh customer acquisition costs against lifetime value.
Nearly 70 percent of startups fail due to premature scaling, illustrating just how tricky it can be to determine scalability. If you find you’ve built the wrong product, added the wrong features, hired too many people too early or not raised enough money, you might be trying to scale too quickly. Stay focused on your business model, and adapt it as necessary to the changing market. It should always be a work in progress.
To scale in a sustainable way, you need a larger portion of the market. So test your marketing out in competitors’ key markets too and even in totally different markets, locales or demographics. Focus on differentiating your product by adjusting your message to outmaneuver the competition.
In the startup space, you’re bound to make mistakes. Succeeding is all about how you react to them. Will you learn from missteps, and move forward? Or will you ignore the signs that say your product isn’t a market fit?
All the information you need is at your disposal; you just need to research it.