This is an article “A Practical Guide to Research for Startups” by Marc Primo
Thanks to artificial intelligence (AI) and machine learning (ML), drawing up proper business insights from data derived from reliable algorithms is easier for aspiring startups. However, there are far more important factors to consider when building an evergreen startup from scratch.
According to CB Insights, 42% of new startups agree that operations falter on depleted capital; 23% on the wrong team members; 18% on setting the wrong price range for products and services; and 14% on bad marketing. Other important factors why startups without the proper research fail are wrong niche concentration (or when a tagged market doesn’t need the services offered), and getting outcompeted by competitors. Somehow, underestimating the importance of researching these factors and making them the foundation of your business model can prove to cause the biggest failures.
It’s no secret, but all of these can be avoided when you conduct proper market research based on high-level data science. Aside from giving you a clear picture of how your products or services will be received by an audience, you get to study the behavioral patterns of your target market and determine what approach you should perform in terms of marketing.
Like an art masterpiece, a mix of analytics-based market research and primary information can paint your core audience, competitors, and the particular niche market you are getting into. Further review of your research outcomes will show where your business currently stands in terms of value.
For startups, things don't have to be too complicated or expensive. As long as you gain a more vivid picture of your marketing path, business model, and direction, you’re on the right track.
‘Market research’ what?!
If you’re a newbie who’s just jumping the startup bandwagon without a clue what market research is, you might as well hang up your gloves now to spare yourself the wasted effort.
In a nutshell, market research is the process of collating information about the market you’re getting into – from its dynamics to consumer patterns to effective marketing strategies of competitors. By analyzing data you’ve derived from such online marketing tools and software as Google Analytics, Questback, or Key Survey among many others, you can gauge potential buyer personas while reducing potential risks once you launch your product or service.
Startups can benefit a lot from performing comprehensive market research as it helps business owners understand the various facets of their chosen market including industry trends, various ways to create customer profiles, applying various research methods, and learning about tools that make market analysis easier and more reliable.
Defining your research purpose
The first step in performing effective market research that’s supported by data is defining its main purpose. What are the possible risks or issues you might be faced with? What are the historical figures that say the business is feasible? What are the available tools and networks you can tap into to streamline your operations? These are just some of the many questions you’ll have to answer when defining the purpose of your market research.
Before you proceed with your market analysis, outline a clear mission statement that specifies which niche market you are entering, why people need it more than others on offer, and your unique selling propositions (USP). These factors will help you package your product or service and overall brand into one that you can market and sell to both core and lookalike audiences as you grow.
Determine the parallel between relative markets, demographics, and locations so you can pinpoint your potential distribution areas. Once you have determined these factors, focus on answering both internal and external questions on increasing revenue, streamlining operations, or making your team more productive towards your defined goals. Other factors that can help define your market research purpose are your microenvironment, industry trends, and startup paths which will all be useful when you prepare your deck for Series A investors.
Determining your market research focus
There are two types of market research when it comes to identifying which market you have to focus on concerning your business goals.
Primary market research entails gathering information that will help you gain insights on current sales volumes, metrics, and customer data. In this type of market research, you’ll have to analyze your business’s level of operational efficiency and compare it with your direct competitors.
On the other hand, secondary market research focuses more on high-level data science from your third-party partners. This involves reviewing analytical reports and aligning them with figures from external entities such as government agencies, relative companies, and other industry players to gain more insights into how your business is currently performing.
To complement your market research, whether you’re performing a primary or secondary review, tap into as many offline and online resources as you can and reconcile relevant data you can use to draw up useful insights. Different types of data concerning your target market may stem from various sources wherein primary sources can give you more personal and in-depth information, while secondary sources can deliver easily accessible data that are reliable and inexpensive.
Effective market research methods
Once you have defined your market research goals and determined your focus, choosing which research method will work best will be your next step.
In surveys, you’ll have to ask relevant open-ended questions among a random group of your target audience and average responses to gain insights. It is different from conducting a focus group discussion or interviews wherein your representatives can freely discuss your given topics in a controlled environment.
Then there are also the newer forms of market research methodologies, such as social media listening and observational. Social media listening collates data and analytical information using software and online tools for real-time results to determine consumer behavior and preference. Observational research is one of the most preferred ways to gain insights into your target market, though a bit more challenging. This method involves setting up video documentations of brick and mortar stores to study the physical behaviors of your potential customers in their natural state; rather intrusive yet highly effective, to say the least.
Regardless of which method you choose, every startup’s main objective for performing market research should be to gain valuable insights into the market climate and potential consumer reception. It should be a continuing best practice as any business continues to grow into wider markets and more competitive marketing situations.