Learn How To Do Market Research Before Starting A Business
- Anpar Research
- Aug 13, 2020
- 12 min read
Updated: Oct 16, 2024
Starting a new business is an exciting time but stressful as there is a whole array of things to think about such as finance, the actual product or service, distribution and advertising. However, during this busy time one important aspect that will help your venture become a success often gets overlooked is market research. Otherwise, this may have not been neglected but if you don’t know how to do market research before starting a business then you have come to the right place to help you get started and guide you through the research process.
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What is market research?
Market research is a structured approach to collecting, analysing, and interpreting data related to a specific market. This includes information about the product or service being offered, the target customers, and the competition.
By conducting market research, businesses gain valuable insights into the preferences, behaviours, and needs of their target audience. This information can then be used to make informed decisions and guide the business towards success.
Two types of market research to use
There are quite a few market research methods available from using census data to doing an online survey. This could be telephone interviews, face to face interviews or self-completion (online or paper) and information found in internal or external sources like Google. Whilst in other cases a mix of methodologies can be applied. All this comes down to is basically two types of market research: primary and secondary research.
1. Secondary market research methods
Secondary market research also known as desk research, are sources of information that have been previously completed separately by other parties for another purpose and is made available through paid or free sources. This could be reports carried out by a researcher or financial data made available by companies. Examples of this are through online search (Google trends), government databases (census data), paid research reports, corporate databases (www.sec.gov and Hoovers), trade and business press.
Another example is using social listening tools like Awario, you can identify topics of interest and analyse the related posts such as examining the number of brand mentions and what people are saying about the product online. Social media analytics can also track the number of likes, shares, impressions and link clicks.
If you want to learn how to get started with social listening download this free E-book.
2. Primary market research methods
As secondary research is likely to cover only part of the information you want, primary research will be required. Primary research focuses on key objectives that you have set for your business.
This could be through development of research material such as questionnaires, interviewing or observations of your target audience, data analysis and interpretation of results for conclusions and recommendations to be made.
Although, you can use bought or old market research through secondary research, this won’t entirely be relevant to the issue at hand and most likely be out of date. Whereas, primary research will have a key set focus on the objectives for those moments in time. Primary research is split into two forms of research - quantitative and qualitative research.
Quantitative research
Quantitative research is where results can be measured by numbers, which is straight forward to understand and pick up in making decisions. These quantified results are collected by interviewing a large group of people (from 50 running into the 1000s) that is a reflection of the whole population. Therefore, with a larger sample size, statistical analysis can be applied to provide better insights such as key drivers of buyers’ decisions, predicted behaviour and optimal price levels.
These surveys can be flexible because of the wide range of question formats and can be a mix of mainly closed questions with a couple of open-ended questions (in their own words reasons why). Closed ended questions can be multiple choice, yes or no answers, checkbox, rating scales and a matrix of options. Some demographic questions will also be included in these surveys. Online surveys are the fastest and least expensive method to use especially if doing the research yourself rather paying a research agency using a quick and inexpensive DIY research platform like PickFu.
Qualitative research
Qualitative research is exploring the in-depth behaviour, attitudes and opinions of a small group of individuals in a more open manner instead of strictly following a set of questions. These tend to be face to face in-depth interviews or focus groups, where people can discuss the subject at hand openly with guidance from the interviewer. Also, observational techniques like mystery shopping can be used as well.
Qualitative research is normally applied at the initial stage for exploratory purposes and build understanding of the subject from the key target audience that tends to lead to further research, where the insights gained from the initial phase can feed into.
For more in-depth information of the research methods available then read this great post :
Why is market research important for entrepreneurs and start-ups?
Market research plays a vital role for entrepreneurs and start-ups due to various reasons:
It provides an understanding of the market landscape
First and foremost, it provides a comprehensive understanding of the market landscape. This enables businesses to gain valuable insights into their potential customers, their preferences, behaviours, and needs. Such information is priceless when it comes to designing a product or service that effectively caters to those specific needs and preferences.
Helps to facilitate competitor analysis
Secondly, market research facilitates competitor analysis. By studying the competition, start-ups can identify gaps in the market and discover opportunities for differentiation. This allows them to position themselves uniquely and competitively, offering products or services that truly stand out.
Helps to mitigate risk
Moreover, market research assists in mitigating risks. It helps identify potential challenges and risks in the market, allowing businesses to plan for or avoid them. This reduces the chances of unexpected setbacks and increases the likelihood of achieving success.
Examine the viability of a business concept
Additionally, market research can help determine the feasibility of a business idea. Preliminary research can reveal whether there is a demand for the proposed product or service, if the target audience is large enough to sustain the business, and if the idea is financially viable.
Provides guidance in developing business and marketing strategies
Lastly, market research guides business strategy, including marketing and sales strategies. By understanding the market, start-ups can tailor their advertising and sales approaches to directly appeal to their target demographic, thus increasing sales efficiency.
Overall, market research is an essential tool for entrepreneurs and start-ups, providing valuable insights and guidance for their business endeavours.
10 steps in how to do market research for a start-up
In getting the most out of your research budget when starting a business, you will need to follow the 10 steps below in how to do market research for a start-up to ensure the money is spent wisely and achieve your goals:
Step 1: Set the objectives for conducting the research
There are a number of questions that you will need answers to, in order for your new business to be successful and sustainable like:
What is my target audience?
Who are my competitors both locally and further afield?
What are the strengths and weaknesses of my competitors?
What price are customers willing to pay?
What is the likely frequency of purchase of the product or service?
Whether or not you will be able to make money from this business enterprise?
To help manage all these questions you need to approach this research by being more focused through setting objectives then you will get more value out of it. So rather than trying to research everything, it's best to focus on the information that will benefit you the most.
Step 2. Determine your target audience
Determine who your customers are with a description of their age, income, job, lifestyle, level of education and so on. Find out what they are currently buying with an explanation of their buying habits of relevant services or products. This can include popular features, the quantity of purchase, their preferred suppliers and the main price points.
Look for reasons behind the purchase of these products or services, which require more in-depth investigation into the minds of consumers and see what the triggers are. This could be a price promotion, the colours available, quality, better fit for purpose and many other things.
Also understand, what would drive your target audience to buy from you.
Step 3: Establish the market research methods to use
Both primary and secondary research are crucial for gaining a comprehensive understanding of your market. Plus, there are various tools available for conducting market research, including social media analytics tools, and market research databases. These tools can assist you in gathering, analysing, and interpreting data effectively.
This could be through secondary research (information already published by an independent party) such as trade associations or business libraries. You can develop and run your own surveys with the assistance from bodies that represent small businesses. Alternatively, you can use a freelance researcher or a research agency agency if your budget allows for it.
With the internet you are able to do research without breaking the bank. It comes down to the what you need, the level of expertise required to get it and the budget available before deciding whether to use a researcher or not.
Step 4. Conduct a thorough analysis of your competition
The information you are likely to want to know about your competition, could be:
Competitors of a similar size.
Companies that may be serving the same locations or regions. So, if you’re a web-based business, this is likely to be worldwide.
Businesses with a similar structure of ownership, that could be a partnership or a limited company then it’s best to research those companies with the same composition.
Look for competitors who are relatively new as much older competitors maybe successful due to their long-term history and reputation.
Utilise the information you collect not only for how much business you could make but also find out how your business could fit and adjust to the marketplace.
After you have gathered all the answers to these questions, you will be able to do SWOT analysis of your competition by establishing what their strengths and weaknesses are. You can also check out the customer experience of your competitors by visiting their shop or website. By analysing the results, you may be able to establish an opportunity that you can exploit to meet the needs of customers or there is a niche that needs to be filled. Plus see any possible barriers to entry to the market.
Step 5. Determine market size and trends
It's important to gauge the potential customer base for your product or service and understand the demand. Additionally, keep an eye on industry trends to anticipate where the market is heading. Industry reports, trade associations, and market research firms can provide valuable information in this regard.
Step 6. Assess the viability of the product or service
Conducting a feasibility study is crucial to determine if your product or service can be profitable. This involves analysing production costs, market pricing, potential sales, and estimated revenue. If the numbers don't add up, it may be wise to reconsider your approach.
Step 7. Evaluate your pricing strategy
Pricing plays a significant role in perceived value and market demand. To find the optimal price for your offering, research what your target customers are willing to pay and what your competitors charge. Your pricing strategy should cover costs, generate profit, and resonate with your customers.
Step 8. Analyse your findings
Once you have gathered all the necessary information, it is essential to analyse and interpret your findings. Look for patterns, trends, and valuable insights that can guide your business strategies.
Step 9. Establish demand for your product or service by testing the market
Make sure to confirm the demand for your product or service by getting feedback from your target customers. You can do this by testing prototypes, conducting market tests, or accepting pre-orders. This step will allow you to make any needed changes before the official launch and reduce the chances of failure.
Step 10. Make informed decisions by acting upon the results gathered
Lastly, leverage the data and insights you have gathered from your research to make informed decisions about your business. This may involve refining your product or service, adjusting your marketing strategy, or identifying new opportunities for business growth.
3 common market research mistakes to avoid
The following are 3 common mistakes to avoid making, when carrying out market research:
1. Only interviewing family and friends
By relying on friends and family you are not getting the full picture of your potential customers, needs, wants, attitudes and buying behaviour as well as the competition. Those close to you are more likely to bias the information and data as they want to support you on your new venture. You need an independent view from customers or potential customers and peers from your sector.
2. Relying on one source of data
Using only one set of data like secondary research that maybe out of date and not specific to your business goals. In order to do market research well, you need both primary and secondary research through different resources to get a true unbiased opinion.
3. Understanding your own bias
Each person has their own views and opinions that could influence the way they interpret the results. Obviously, you want your business to work but you don’t want it to bias your opinion of the results. So be wary of this and make that extra step in finding another way to make sense of it.
5 real life examples of market research for start-ups
The following are 5 real life examples of market research of brands when they first started out:
1. FirstKey Homes
FirstKey Homes, a real estate start-up, utilised market research to pinpoint the most profitable markets for single-family rental homes. They collected data on various factors like housing prices, rental rates, job growth, and population growth in different regions across the country.
The valuable insights gained from this research guided their investment and operational strategies, allowing them to focus on areas with great potential for high returns.
2. Blue Apron
During their early stages, the meal-kit delivery start-up, Blue Apron, extensively conducted market research to gain a deep understanding of their potential customers' lifestyles, eating habits, and cooking preferences.
They employed surveys, focus groups, and online analytics to gather data and extract valuable insights. These insights played a crucial role in shaping their product offerings, pricing, and marketing strategies.
3. Mint
Mint, the financial management app, conducted research to identify the challenges people face when managing their finances. They utilised an online survey to gather data on people's financial planning habits, the difficulties they encounter, and the tools they use.
This research helped them design a user-friendly app that specifically addressed these pain points, ultimately contributing to the app's remarkable success.
4. Warby Parker
The online glasses retailer, Warby Parker, conducted market research to understand the common issues customers encounter when purchasing glasses. They discovered that high prices and inconvenience were significant pain points.
Armed with this knowledge, Warby Parker adopted a direct-to-consumer model, designing glasses in-house and selling them directly to consumers at a more affordable price point. They also introduced a home try-on program to alleviate any hesitations customers may have had when buying glasses.
5. Slack
Before launching their communication platform, the Slack team conducted thorough market research to gain a comprehensive understanding of the communication needs and challenges faced by businesses. This research helped them identify a gap in the market for a platform that centralises all business communication. By focusing on solving a real problem for businesses, Slack experienced rapid growth and achieved great success.
Conclusion
All the methods explained above are valid and valuable in getting you the information, you need but as your starting out there maybe budget constraints on what you can do. However, there are many free secondary sources of information that you can start off with along with trying your own DIY online survey through platforms which provide you with easy to use tools for a range of different purposes and will help you along the way.
A simple, inexpensive (starting at $15) option is to firstly test out your business idea or product is appealing by running a quick poll or survey with PickFu (50% off your first survey or poll with promo code: ANPAR). This platform allows you to ask questions to their 15 million+ panel across 9 countries such as the UK or US. You just have to define your target audience, run a poll and you will quickly receive your results. See video below.
Once your business is more established and profitable, you can use more traditional and in-depth methods of research such as ethnography to further increase your business chances of sustainable success.
By getting in the mind of customers will help give you an edge as a small business because market research tends to be further down the list of things to do for many of your competitors.
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