Conducting market research is a pivotal step for any startup or new business venture. Without it, you’re just flying blind. 40% of marketers are using consumer research to drive decisions. To gather accurate and thorough information about your industry, customers, and competition, you need to conduct effective market research. This information will help you to identify the best path forward and determine the viability of your business concept.
There are different methods you can use when conducting market research. These methods can give you insight into the strategies and tactics to use when introducing your brand to your audience. For instance, you can use online surveys, focus groups, and competitor analysis to gather data.
To conduct market research like a pro, you need to start by defining what it is and why it’s important. Market research involves gathering consumer feedback on your product or service and collecting pertinent information on the marketplace. It includes identifying your target customers and how your products or services can benefit them.
What Is a Market Research?
Market Research is a process where you gather data about your potential customers and then analyze it to gain insights into their needs, preferences, and opinions. This information then helps you make informed decisions about your business strategies, operations, and target market.
The process of market research may take some time and effort but is an indispensable tool for the research and development (R&D) of a new product or service. It can provide valuable brand insights into industry shifts, changing consumer needs, and legislative trends. With this information, you can shape your business’s focus and resource allocation, and ultimately improve your chances of success. Market research is not a silver bullet, but it can help answer questions about the state of an industry and shape a company’s brand perception.
How to Conduct Market Research for a Startup
According to the Bureau of Labor Statistics, the employment of market research analysts is expected to grow at a rate of 19 percent from 2021 to 2031, which is much faster than the average for all occupations. It is projected that there will be approximately 99,800 job openings for market research analysts each year on average over the next decade. Even with the advent of AI tools.
1. Define the Research Hypotheses
To get started, you need to define the questions you want to answer and develop hypotheses to guide your research approach. For example, you might want to identify the consumer’s biggest pain point or determine whether your product meets their needs.
It’s essential to test multiple hypotheses, but focus on no more than a few per test to keep your research concise. Defining hypotheses upfront can help guide your approach to selecting subjects, researching questions, and testing designs. For instance, if you run a startup that sells athletic shoes, you might hypothesize that “customers are more likely to buy shoes in neutral colors like black or white, rather than more muted tones like beige or lime”.
Here are some things you should keep in mind to define the research hypotheses:
- Be specific. The more specific your hypotheses are, the easier they will be to test. For example, instead of saying “people who drink coffee are more likely to be creative,” you could say “people who drink coffee are more likely to come up with new ideas.”
- Be testable. There should be some way to measure whether or not they are true. For example, you could test the hypothesis that people who drink coffee are more likely to come up with new ideas by giving a group of people coffee and then asking them to come up with new ideas.
- Be realistic. Your hypotheses should be possible to achieve. For example, you could not hypothesize that people who drink coffee will become immortal.
2. Choose the Right Market Research Method
Market research can be classified into various types based on the methodology used, the purpose, or the scope of the research. Here are some common types of market research:
A. Primary & Secondary Research
Primary research is one way to get valuable data directly from your target audience. This data is divided into two types: qualitative and quantitative research.
- Qualitative Research helps you get in the heads of your customers, discovering their thoughts, feelings, and motivations. It involves methods such as interviews, focus groups, and observation.
- Quantitative Research, on the other hand, involves numerical data and statistical analysis, using methods such as surveys, questionnaires, and experiments.
When conducting secondary research, you analyze data and information that has already been collected from other sources. This can include market statistics, publications, competitor analysis, and government reports.
B. Competitive Analysis
You want to crush the competition, don’t you? This type of research allows you to identify the strengths, weaknesses, opportunities, and threats of your competitors. With this information, you can develop a strategy that will help your business stay ahead of the market. 90% of Fortune 500 companies practice competitive intelligence.
Keep an eye on social media for insights into your competitors’ marketing strategies, customer engagement, and potential weaknesses that may not be obvious from their websites or other marketing materials.
Benchmarking against industry best practices is another crucial aspect of competitive analysis. Learn from the failures and missteps of your competitors to avoid making similar mistakes and capitalize on opportunities that they may have missed. Anticipating your competitors’ future moves by analyzing trends, potential acquisitions, and upcoming product launches is also a way to go.
C. Market Segmentation Research
Market Segmentation Research, often referred to as just segmentation research is done by dividing your market into smaller subsets based on demographics, needs, priorities, common interests, and other psychographic or behavioral criteria. You can better understand your target audience and increase your overall efficiency by focusing your resources on efforts that yield the best return on investment.
There are five common types of market segmentation that you can use to categorize your customers:
- Demographic segmentation divides the market based on factors like age, education, income, and occupation.
- Geographic segmentation is based on geographical boundaries.
- Behavioral segmentation divides markets by behaviors and decision-making patterns, such as purchase, consumption, lifestyle, and usage.
- Psychographic segmentation focuses on psychological aspects, dividing markets based on lifestyle, personality traits, values, opinions, and interests.
- Firmographic segmentation focuses on organizations rather than individuals, considering factors like company size and the number of employees.
D. Product and Pricing Research
Pricing is the tricky one. It’s the one metric that will have a huge impact with only the slightest changes. The ideal price point can drive revenue, maximize profits, and preserve the quality of a product or service. A pricing research’s goal is to gauge customers’ willingness to pay for a given value.
- Conjoint analysis: This model is used to determine how different factors, such as price, quality, and features, affect customer choice. It involves asking customers to choose between different combinations of these factors and then analyzing the results to see which combinations are most popular.
- Van Westendorp pricing: This model is used to determine the optimal price for a product. It involves asking customers at different price points whether they would buy the product and then plotting the results to see where the demand curve meets the price axis.
- Gabor-Granger: This model is similar to Van Westendorp pricing, but it uses a different method of collecting data. Customers are asked to rate their likelihood of purchasing a product at different price points, and the results are then analyzed to see where the demand curve meets the price axis.
- Discrete choice modeling: This model is a more advanced version of conjoint analysis. It uses a statistical model to predict how customers will choose between different products or services.
67% of US online shoppers say they will buy from different e-commerce websites to get the best deals. Pricing your products correctly can make or break your success as an unfair price can drive them away and hurt your bottom line. But how do you properly price your products?
First, you need to understand your costs. Knowing the cost of materials, labor, and overhead is crucial in determining the price of your product. Secondly, When pricing your product, it’s essential to consider the prices of similar products offered by your competitors as well. Setting your price too high could deter customers from choosing your product over theirs while setting it too low could undercut your profits and undermine the quality of your brand. Stay flexible and adjust your prices based on the changes in costs or demand.
3. Identify Your Ideal Market and Recruit Subjects
If you’re just starting out and don’t have any customers yet, don’t sweat it. There are a few things you can do to attract them. Make sure your online presence is top-notch. Keep your website updated and user-friendly, and be active on social media to show off your brand personality. Highlight what makes your business unique. What sets you apart from the competition? Make sure you emphasize your unique selling proposition. Look for opportunities to collaborate with other businesses in your area. Partnering up can help you reach a wider audience and build valuable relationships.
Now if you already started gaining some trickling customer base, start from there. Who’s already using your products or services? You can start to identify potential new customers who are similar to them by looking at demographics, psychographics, and purchasing behavior. Make sure to spend 80% of your time on the 20% of prospects that have been thoroughly screened and qualified. This approach is far more effective than trying to manufacture a consumer need through advertising and messaging.
There are many ways to recruit market research participants, including crowdsourcing, broadcast emails, word of mouth/snowball sampling, standard media, internet media, search engine marketing, social media, online panels, and Craigslist. You may use tools like Respondent or User Interviews, to scale this part of the Market Research process.
To entice people to participate in your study, consider offering incentives such as cash or gift cards. However, it’s important to clearly communicate the study’s requirements and ensure that you recruit qualified participants. Additionally, respecting people’s time and avoiding making the study excessively lengthy or demanding will help you get better results.
4. Know Who Your Competitors Are
competitors are like your annoying sibling that you can’t help but love. They push you to your limits, make you work harder, and sometimes even inspire you to come up with the next big thing. But, If you want to get ahead of the game and beat out your competitors, you need to start by identifying them.
To identify your competitors, there are several types you should be aware of:
- Direct Competitors. These are brands in your sector or neighborhood that offer products and services that do the same job as yours. Your target audience is the same as theirs.
- Indirect Competitors. These are trickier to spot. They address the same customer needs as your business but in a different way, so your target audience overlaps with theirs but is not an exact match.
- Substitute Competitors. They don’t offer the same products but compete for consumer spending.
- New Entrants. These are new competitors who enter the market and can be either of the 3 above.
Ok, but how do you find them?
There are several tactics and tools to identify your competitors, including:
- Ask your customers. They have evaluated other brands before choosing yours. Ask potential customers who are weighing your brand up against others.
- Google search. Google the keywords you’re most interested in, and see who’s on the first results page and what they offer.
- Social Mention. Scour over 100 social media sites for mentions of your competitors or any keywords you input.
- Google Trends. This shows how frequently your competitors’ names are entered into Google compared with the site’s total search volume over a specific period of time.
- SpyFu. Search for any competitor domain name and see every place it has shown up in Google over the last fourteen years.
- SimilarWeb. Let’s you see some of your own website insights for free – including your top competitors’ analytics and online strategy.
- Searchmetrics. Gives an overview of your business’s current online presence as well as those of your competitors, so that you can see any gaps in your content marketing strategies.
- Advanced Web Rankings (AWR). Links with Google Analytics, Google Search, and social media channels to monitor your competitive landscape and glean details about rivals’ URLs and target keywords.
- SEMrush. Gives you information about your current performance online, including traffic, ranking positions, as well as organic competitors.
After you found your competitors, look out for their products or services, prices, distribution channels, customer loyalty schemes, branding and design, innovation, staff, and use of technology Check whether they have any long-standing or new customers. With a clear understanding of your competitors, you can take proactive steps to strengthen your own brand.
5. Conduct the Research
A net 19% of small business owners in the US who were questioned in January 2023 said they were optimistic about the future of their company. Choose the type of research that best suits your hypothesis. Whether it be customer discovery or surveys. When conducting interviews or focus groups, it’s important to appoint someone with no vested interest in the project planning to lead the conversation and reduce bias. To avoid leading subjects in a particular direction, use neutral language when crafting research questions. Furthermore, varying the order of options in multiple-choice questions to eliminate primacy bias and recency bias.
Additionally, If you aim to test existing customers’ purchase motivations, ask questions about the challenges they faced when they first bought your product. Conversely, if you’re examining brand perception, compare your brand against competitors by asking potential customers to rank the brands by perceived reliability.
Once you collect data, organize it efficiently and securely to protect the subjects’ identities. Verify that the data you collect is accurate and relevant to your objectives by carefully planning and executing your research.
6. Analyze Your Findings
When it comes to evaluating market research data, you need to be meticulous in your approach. After all, collecting the data is only the first step; evaluating it properly is crucial to making the research useful.
Start by organizing your research into sections that make sense to you, keeping your purpose, target market, and competition in mind.
Next, determine whether your data is quantitative or qualitative in nature. For quantitative data, statistical techniques like descriptive and inferential statistics are your go-to tools for evaluation. Descriptive statistics will help you focus on the variables present and determine their mean, median, mode, and variance. Inferential statistics, on the other hand, allow for in-depth evaluation and include methods like multiple regression analysis, discriminant analysis, factor analysis, clustering, conjoint analysis, and multidimensional scaling.
If your data is qualitative, however, your approach will differ. You’ll need to examine and compare the data, establish patterns, and use methods such as content analysis, narrative analysis, conversation analysis, grounded theory, and discourse analysis. AI can also be used to condense textual information into numerical data that can be statistically manipulated.
You can analyze your market research findings using one of six modes of analysis:
- Multiple Regression. Finds the equation that best explains how the changes of an independent variable affect dependent variables.
- Factor analysis. Determines the factors that have the strongest correlation to identify the factors that determine your revenue.
- Discriminant Analysis. Organizes data into two or more categories to determine best practices for any aspect of your business.
- Cluster Analysis. Establishes clusters of things that have similarities to determine market segmentation.
- Multidimensional Scaling. Compares a company or product to its competitors by organizing them on a map to determine where you are in your market and what your strengths are compared to your competitors.
- Conjoint Analysis. Identifies the attributes of a product, then conducts research to determine which attributes influence the customer’s decision to buy and at what price point.
Once the data has been gathered, it may be categorized and examined to seek for Patterns. For this section of your research study, you can employ any of the analytical models mentioned above. This stage involves searching for any data that might aid in resolving your goal or main query.
7. Summarize Findings Into Actionable Insights
Use context to explain your numbers. Data only becomes valuable when you add context to the mix. Use the 5Ws of reporting (Who, What, Where, When, Why) to structure your data and create an interesting story about your performance. Drop data-centric tables for graphs and charts where applicable to make important information easy to digest for key stakeholders.
Use visuals to show your findings. Charts and graphics are a great way to help your readers follow and understand your data research. By integrating visual data, you can reduce the amount of time it takes to create a report, allowing you to focus on more important tasks to succeed in your business.
If you’re feeling overwhelmed by the notes you took, look for common themes that will help you tell a story and create a list of action items. To make the process easier, try using your favorite presentation software to make a report. Remember to focus on quality insights generated through slower research along with quicker, agile research for gathering robust insights for your business. Quickly making decisions and executing them, evades long discussions and empowers your frontline.
Develop a plan of action. What are you going to do with the insights you have gained? To ensure you stay on track, consider carefully how much time and resources are required for each task. Once you have a clear picture of what’s required, create a realistic timeline with achievable deadlines for each step. Tracking your progress is key to success, allowing you to monitor your achievements and adjust your plan if necessary. If you find you’re not making progress or your goal changes, adapt your plan accordingly to ensure you stay on course.
What Are the Best Practices for Conducting Market Research for Startups?
Tip N#1: Understand your customers by creating a customer profile that identifies demographics such as age, income, and interests, as well as needs that aren’t being met and how your audience may have changed over time. With this information in hand, you can conduct brand research to gain insight into how customers perceive your brand in comparison to competitors, what kind of reputation your brand has, and how customers feel about your website, social media presence, ads, content, and other touchpoints.
Tip N#2: Gather customer feedback and market data to determine trends and changes that may impact your business. Collect and analyze data, measure the effectiveness of your marketing campaigns, and use this analysis to drive future campaigns. However, don’t make inferences based on unverified assumptions without diving deeper to explore why certain trends are happening.
Tip N#3: Applying personalized problem-solving techniques per project is a great way to tailor your questions and send them to targeted people. Improving communication skills will help you gather the most useful data. Participants need to have a clear understanding of the questions they’re being asked.
Tip N#4: Determine what kind of data you require to conduct the necessary survey and how much this data will ultimately cost you. Evaluate your budget, timeline, and resources, and select the data that will be best for your research. Contact free or low-cost sources of assistance, including the SBDC and SCORE.
Tip N#5: Gathering product feature insights can also help you reveal design flaws, packaging issues, and other problems before the official launch. Transparency with participants is crucial, so be open and honest upfront to avoid skewing your data if participants are uneasy about giving their true opinions. Make market research part of your day-to-day business activities by using receipts, delivery orders, and invoices to track where customers come from. Monitor inventory trends to track which products sell best. Use Google alerts and Twitter searches to see what people are saying about your products as well.
Why Should I Bother With Market Research Anyway? Is It Really That Important?
To Make Sure You Have an Audience: To ensure your product will succeed, you need to determine if there is a market for it. You identify your target audience and their needs, then tailor your offering to meet their specific demands and ultimately turn them into loyal customers and brand advocates.
To Know How to Sell to Them: you uncover buying habits that will in turn demarcate the best platforms and channels to reach your audience and communicate with them effectively.
To Know Your Competition: identify your competitors and analyze their strengths, weaknesses, and strategies. This will allow you to position your brand in a unique light.
Market research can also help you determine pricing strategies, improve the user experience, and provide investors with tangible proof that your product fulfills a market need.
How much should I set aside for market research?
Let’s be real, conducting market research can be costly, and the expenses can add up quickly. So, how can you conduct market research on a budget? There are some Factors you need to understand that Influence Market Research Costs. First, there is the Incidence Rate (IR), which is the percentage of people who meet the criteria for participation in a study. Surveying a large population will be more expensive than surveying a smaller one. The Number of Survey Completes/Groups/Interviews also has a higher cost. Think about how much data you really need.
I’ll point out that Custom research projects can be pricey as well, but they provide specific answers to your questions. If you need in-depth insights, it’s worth the investment. Different survey methods involve additional time and costs, such as survey programming and training calling staff. Plan accordingly. Market research doesn’t have to break the bank.
Tips for Conducting Market Research on a Budget:
- Prioritize Your Objectives. Identify your research objectives and prioritize them to avoid unnecessary expenses.
- DIY Market Research. If you have knowledge of market research, conducting online studies with guidance, reaching your target audience, and analyzing data can be more accessible than you expect. This method allows you to run similar research with a budget varying from $200-$4,000.
- Opt for Syndicated Research. Syndicated research is less expensive than custom research and can provide a good starting point for businesses with limited budgets.
- Reduce Sample Size. While larger sample sizes offer better accuracy, smaller samples are less expensive and can still offer valuable insights.
- Choose the Right Type of Research. Certain methods may be more cost-effective than others. For example, online surveys are cheaper than in-person interviews.
What Are Some Common Mistakes to Avoid When Conducting Market Research for Startups?
Market research can be an incalculable tool for you IF DONE RIGHT. The most common mistakes made when conducting market research and practical advice on how to avoid each of them include:
- Poor choice of reference materials: Your research is only as good as the sources you use. Be sure to vet your reference materials carefully, checking them for relevance and bias before incorporating them into your analysis.
- Researching the wrong group: Defining your target demographic is key to effective research. By understanding the needs and wants of your intended audience, you’ll be able to tailor your research to produce valuable insights. While it may be tempting to ask those closest to you for their opinion, the feedback you receive may be biased. For unbiased and objective insights, it’s best to avoid surveying family, friends, and acquaintances.
- Relying on one set of data: A single data set can be misleading. To ensure a well-rounded and accurate view, incorporate both primary and secondary data from multiple sources.
- Ambiguous questions: Craft questions that are precise and unambiguous to avoid confusion and bias.
- Heavy-handed moderation: Encourage open discussion and avoid invasive questioning that shuts down conversation.
- Neglecting the competition: Don’t overlook your competitors. Study their brand promises and strategies. You’ll be better equipped to differentiate your own business and appeal to your target audience.
- Being too close to the research: Objectivity is key. To ensure credible and authentic findings, maintain a healthy distance from your research.
What Are the Most Effective Ways to Collect Data for Market Research?
- Surveys and Questionnaires: Create surveys and questionnaires tailored to your research objectives. Use multiple channels such as email, social media, or your company website to distribute them.
- Interviews and Focus Groups: Conduct one-on-one interviews or small focus groups with potential customers, existing clients, or industry experts to gather in-depth insights. This method allows for more detailed responses and real-time feedback.
- Competitor Analysis: Assess your competitors’ marketing strategies, products, and services to identify strengths and weaknesses.
- Observation and Ethnography: Observe customers in their natural environment to understand their behavior, preferences, and motivations.
- Customer Feedback: Collect feedback from your existing customers through reviews, testimonials, or case studies.
- Data Analytics and Big Data: Leverage big data and advanced analytics tools to process large volumes of structured and unstructured data from various sources. Use machine learning algorithms and artificial intelligence to uncover hidden patterns, trends, and insights.
Free and Cost-Effective Ways to Do Market Analysis
If you’re on a tight budget you don’t need to spend a fortune on Market Research. For instance, you can use free online surveys tools like Google Forms or SurveyMonkey to create and distribute surveys to your target audience. It’s an easy and effective way to get the information you need.
Social media is another goldmine of information. By tracking trends, sentiments, and conversations on platforms like Twitter, and LinkedIn, you can gain valuable insights into customer preferences and market trends. Take advantage of your competitors’ websites too.
Industry forums, blogs, and online communities can provide you with valuable market research data. You can get insights into customer pain points, preferences, and opinions. Accessing publicly available data and reports from government agencies, trade associations, and industry groups is another option.
Customer feedback is also an essential aspect of market research. You can collect feedback from existing customers through reviews or testimonials on your website or third-party platforms.
Finally, attending local meetups, seminars, and workshops related to your industry can help you network with professionals and gain further insights into the market.
What Are Some Useful Tools and Resources for Conducting Market Research for Startups?
1. Google Trends
Google Trends is a site that assesses the popularity of top search queries in Google Search across various regions and languages. The site uses graphs to compare the search volume of different queries over time. Track the popularity of trends and Identify regional differences.
2. Census Bureau
The Census Bureau is part of the U.S. Department of Commerce with a primary mission of conducting the U.S. census every ten years but is also a leading source of statistical information about the nation’s people and economy.
Latana is an AI-powered brand tracking tool that offers scalable insights for businesses to make informed decisions. It uses machine learning to analyze data collected from various sources, including social media, search engines, and online surveys.
Latana’s features include brand tracking, which measures brand awareness, sentiment, and market share over time. Market research is also available, allowing businesses to conduct surveys and interviews to collect customer feedback. Additionally, Latana can conduct a competitive analysis to compare a brand’s performance with its competitors.
SurveyMonkey is an online survey development cloud-based software as a service company. It was founded in 1999 by Ryan Finley and Chris Finley. SurveyMonkey offers a free version of its software and also sells a suite of paid back-end programs that include data analysis, sample selection, bias elimination, and data representation tools.
Hootsuite is a social media management platform that helps you manage your social media presence across multiple platforms. You can do: Social media scheduling to schedule posts in advance, so you can save time. Social media analytics so you can see how they are performing and what is working well. Social media engagement and so much more.
Market Research FAQs
How Do I Conduct Market Research for a Startup
- Define objectives: Determine your research goals and target audience.
- Gather secondary data: Access existing reports, articles, and industry data.
- Conduct primary research: Use surveys, interviews, and focus groups.
- Analyze competitors: Study their strategies, products, and market positioning.
- Analyze data: Identify trends, opportunities, and threats.
- Implement findings: Apply insights to your business strategy and make data-driven decisions.
How Can I Ensure That My Market Research for My Startup Is Accurate and Reliable?
To ensure accurate and reliable market research for your startup, follow these steps:
- Set clear objectives: Define specific research goals.
- Use multiple sources: Combine primary and secondary data.
- Validate data: Cross-check information for consistency.
- Diversify methods: Combine quantitative and qualitative approaches.
- Analyze objectively: Avoid biases and interpret findings impartially.
- Update regularly: Keep research current to maintain relevancy.
What Are Some Common Misconceptions About Market Research for Startups?
- Market research is only for big companies. Not true! Market research can be a valuable tool for startups of all sizes. It can help you to understand your target market, identify potential customers, and develop a marketing plan.
- It is expensive. Not necessarily! There are many ways to conduct market research without breaking the bank as we saw above. You can use online surveys, focus groups, and interviews to get valuable insights from your target market.
- Market research is time-consuming. Not always! There are many quick and easy ways to conduct market research. You can use online tools to get feedback from your target market, or you can simply talk to people in your target market to get their insights.
- It is not necessary for startups. Wrong! Market research is essential for startups. It can help you to avoid making costly mistakes, and it can help you to develop the KPIs of your business plan.
- Market research is only for large companies: Regardless of size, all businesses can benefit from market research to develop effective strategies and identify opportunities.
- Once is enough: Market research should be an ongoing process, as market conditions, customer preferences, and competition evolve over time.
- Market research guarantees success: While market research can inform decisions and reduce risks, it does not guarantee success, as other factors such as execution and external conditions play a role.