The How-To: Market Research On A Tight Budget
For any business it pays to know your market, but especially for a startup. Whether you're trying to assess the level of market demand before releasing a new product or service, choosing the best location in which to sell, or simply trying to understand what factors will influence customer spending, market research is the only way to truly understand your customers' needs and expectations.
Yet, market research might strike you as a time-consuming and costly investment, reserved for larger companies with huge research and development budgets. Actually that couldn't be further from the truth. These days, thanks to an increasingly available range of online resources, market research is readily accessible and doesn't require huge amounts of funding.
Let's take a look at the different types of market research, the benefits it can bring to a startup, and the ways you can make it cost-effective for your business.
What is market research?
Market research is a method of gathering and analyzing information about the market in which you're about to release your new product or service. It helps you work out whether your idea is feasible before diving in. It assists you in finding out about the features, spending habits and needs of your target customers, as well as potentially valuable information about your competitors, their products, services and pricing.
Every year, hundreds of thousands of businesses across the globe conduct market research, and it's now a multi-billion dollar industry. According to the American Marketing Association, in 2016 the US market research industry alone generated over USD 11.5bn in revenue, and consistently achieves a stronger year-on-year growth rate than the wider economy.
How is it used?
Market research is the foundation of many successful businesses. Large global corporations, such as Apple and LEGO, routinely use market research to inform their strategy and help them evolve their products. As an example, a few years ago Apple started using their "Apple Customer Pulse' research group to gain direct customer feedback and make specific, targeted changes to their products, improving their offering each time in line with what their customers want.
So, let's look at some of the most important ways that companies leverage market research.
1. Getting a feel for the market: Simple desk-based research can tell you a lot about the fundamental aspects of the market you're about to enter as a new business owner. You'll want to know the total size of your market, any historical trends, the traditional route to market, and how market share is currently distributed between suppliers. Getting this kind of feel for your market will help you avoid pitfalls and better navigate the landscape in which your customers and competitors are operating.
2. To understand your target customers: It's also important to get perspectives from target customers. Questionnaires and surveys are a useful way to assess how your potential customers interact with the prevailing products and brands, how often they purchase and how much they spend on products or services like yours.
3. To see how your product will be used: Conducting face-to-face interviews or focus groups will give you a chance to find out about customers' use of your product or service and their attitudes to it. The more hands-on the experience, the more useful the feedback will be. By letting your customer trial your product, you can see their immediate reactions to it, how they use it, and the extent to which it fulfils their demands and needs.
4. To find out what your customers are looking for: Conducting keyword searches relating to your market will help you to get inside the mind of your customer. It might reveal new terms or phrases to use in your marketing, or highlight new features to create in your product or service, or identify different ways that customers interact with businesses like yours. And if you want more detailed insights into customer segments and behaviour, there's a wide range of free analytical tools now available online to help you, including Google Analytics and Facebook Audience Insights.
5. You can find out who will buy your product or service and why: This is vital. If you know who your primary customer is, you can gather valuable information about their attitudes and purchasing habits. For instance, you might want to know what factors influence their decision to buy, what circumstances would make them more likely to buy, or what would make them choose your product over another. Having as much of this information as you possibly can before releasing your product or service will give you more power to target them effectively.
6. You can anticipate demand: Realistically, you need to know how many people are going to buy your product, and estimating demand levels is important when deciding whether your idea is financially feasible. You can also find out how much people are willing to pay for your product, and use it to make those all-important, but awkward, pricing decisions before you start.
7. You can make a better product: Many startups are convinced their product is already perfect, but it's worth giving it a test run, as even a small mistake at this stage can prove costly further down the line. Carry out a focus group in the early "prototype' phrase, and you'll get a vital first look at how your customer will engage with your product or service. You can use their response to catch any potential problems, shape the current features, or simply fine-tune your product or service before release.
8. You can establish brand positioning and messaging: Market research is a great opportunity to engage with your customers. Asking them for feedback on your product or service helps to build relationships and can be an effective way to grow traction and foster brand awareness. And if a handful of attendees happen to share their discovery on social media, it could amplify your reach and generate awareness before your product is even launched.
9. You can uncover market opportunities: Whether it's to move into a different area of the market, or tap into an uncharted customer base, market research can highlight current or future opportunities for your startup.
How can I do market research without breaking the bank?
Market research doesn't need to be costly. As a startup or SME, there are plenty of ways to get valuable and credible market insights without hurting your budget.
Before you start, take some time to think about what you want from your audience. Are there any key decisions you're facing as a business? What questions will help you make those key decisions? What answers are going to be most valuable for you? Make sure every question has a clear purpose.
Start with those closest to the business, for example your employees and their relatives, and take the opportunity to ask your customers for their feedback too. Use social media platforms like LinkedIn or Facebook to reach out to friends and family and gather opinions, both about the market and about your product– just make sure you select your sample carefully so you're getting impartial opinions from the people who matter the most.
Online tools such as Survey Monkey or Zoho Survey are quick, easy ways to create online surveys and questionnaires. They're simple to complete, and results are easy to track. Once you've created your survey, you can send out an email encouraging customers, suppliers and employees to take part, and even host it on your website. Whether it's a voucher, discount or the chance to win a prize, give your customers a motive to provide you with feedback. Not only will you attract more people, but it's also likely to improve the depth and quality of the responses you receive.
When it comes to market research, can you afford not to?
Before investing significant money and time in your startup, you need to know your market as best you can. And to develop and maintain your advantage in a market where trends often move quickly, you need to listen to your customers. That's where market research is so crucial. Rather than making slapdash decisions or relying on intuition, you can find hard evidence that you're hitting the right targets, that your product or service is performing as well as it can, and that your marketing strategy is robust in the face of both expected and unexpected changes.
Even simple, low-cost research can deliver significant long-term benefits and profit. So whether you use desk-based research, surveys, focus groups, or other tools, there's no excuse for avoiding market research. The more you know about your customers, the more equipped you are to create more targeted marketing, anticipate changes in spending behaviour, and ultimately, deliver a better product or service.