The 3-step guide to conducting effective market research
Jeff Schiebe
In my 30 years of experience from startups to large companies, I have found that thorough market research is essential to the success of new products or services. In an entrepreneurial environment, it's even more crucial as resources are scarce and time to market is critical.
Building the wrong product for the wrong market could be very costly. That's why market research is critical. What are some of its key elements? When do we use them, and how do we get started?
Here's a three-step approach:
Getting started: secondary research
Doing a Google search is the easiest place to start. Explore your intended market: What products or services are available? What companies are in this space? Who is buying the products? Which products are successful?
As you dig deeper, you can discover potential market size, market trends and customer preferences. These can be very useful to ensure that you're focused on the right market. Search the industry associations that are relevant to your product or service. For example, if you're creating a new pet food, you could start with the American Pet Products Association. From this site, you can obtain market-size information, pet owners' survey summaries, and links to other industry websites that are more specific to your target market.
Or, say you have an idea for a new financial service for recent immigrants and need to determine market alternatives to traditional banks. If you were to then determine that credit unions might work, then start with the Credit Union National Association (www.cuna.org). If your target is New England or just Massachusetts, you could start with the Cooperative Credit Union Association (http://ccuassociation.org). Both sites would give you data on potential market size, trends, services offered, and potential customers and partners.
Critical areas to look at in doing market research fall into three categories: industry, market and the competition. All are equally important to understand trends, major players (supplier, customers and competitors) and what you're prospective users or customers want and are buying today, along with what they might need or want.
The next step: primary research
Secondary research only gets you so far. In most cases, it's important for you to get in front of real or prospective customers, talk to them and show them your product to determine if what you're offering will sell in your target market.
How do you do this if you don't have a real product? Begin with a prototype, mock-up or model. Often, this is called a “minimum viable product” and can be used to gain important information about the customers and market you're trying to sell into. In some cases, a drawing or sketch is sufficient to do initial research as you work toward a real prototype. If you wait until a product is complete, you may have created something that doesn't fit the market and costs you precious time and money.
How do you conduct primary research? Use online surveys, personal questionnaires, focus groups and interviews.
Using the data
Both primary and secondary research will provide quantitative and qualitative data. Here are a few typical examples of information you can gather in your research that are crucial in the early stages of a startup to help focus on the right product or service offering:
Quantitative input:
• Product size, color, speed and weight
• Price, warranty, terms and conditions
• Delivery and service
Qualitative input:
• How and why the product or service was purchased
• Where it was purchased
• A product's look, feel, design and packaging
• Preferences of sales and marketing material
Early in the entrepreneurial process, one typically develops a feasibility analysis to ensure that all functional areas (product, marketing, manufacturing, operations and finance) are reviewed and evaluated for their thoroughness and viability.
Market research helps you estimate overall market size, establish typical customer/buyer personas, and, best of all, it costs essentially nothing but your time.
Jeff Schiebe is an international advisor and educator in entrepreneurship. He's associated with Clark University, Babson College and Hult International Business School. Contact him at jeff.schiebe@verizon.net.
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