Why are so little entrepreneurs conducting market research for startups before spending a lot of money on different ideas?
A vast amount of startups fail in the first year due to not conducting any market research before they invest a lot of money in their idea and business.
Commonly known as The ResearchGeek, my aim is to make market research for startups, businesses and also marketers easy to understand. Translating the market research geek-speak into easy to understand nerd free takeaways.
This article is going to help you create a winning research formula for your business and answers the following questions!
1. Why you should be conducting market research for startups
2. What research would you conduct in the 1st 6 months?
3. What tools would you recommend start-up businesses should be using?
4. Should start-ups outsource market research?
5. My final top-tip for when you are conducting market research for startups
Why market research for startups is so important when starting a business
Startups including small to medium sized businesses live closer to the break-even mark than larger companies. Their margin of error is often much smaller, and these are the companies that need to be most sure they are making the correct decisions.
These choices could be simply where in the world to put their store?
Or it could be to understand the pricing model their closest competitors use?
Smaller teams normally have smaller marketing budgets so it is even more important to make sure you know what your customers want and also what your competitors are doing. You have to know what others are doing well and poor at to gain a competitive advantage in some way.
What startup market research should you conduct in the 1st 6 months?
There are two types of market research for startups to conduct.
Primary research is where you go directly to your customers or target market and ask them questions that gathers valuable data and information for you to use. You might ask customers:
1. How was your experience today?
2. What could we do to improve your experience?
3. From the service you received, do you think you would recommend us to a friend or colleague?
4. Are you likely to return and purchase something else?
It all depends on the market you are working in and what your product/service is. At the very least you should gather feedback after each sale. This way you can test reactions to your marketing messages. By looking at visuals, social media posts and giving feedback on its relevance, engagement, and interest.
However, not everything is rosy when asking customers questions. If you asked the 4 questions I just mentioned in a survey, how do you know if they are telling the truth?
How do you know if they are just answering the questions very quickly to get a coupon or voucher in return?
This is an argument between stated vs actual behaviour. Customer might say they will come back to purchase something, but never do. Or they might say, they will never return, and end up returning when there is a new offering that catches their eye.
Secondary research involves collecting information or data from secondary sources such as the local council, government data, local data and anything you can find from a Google search.
The main difference between primary and secondary research is that ‘primary’ is traditionally in the field, talking to your customers or potential ones, whilst secondary research could be conducted on your sofa or at a desk.
The best ways to conduct market research for your business plan
In this situation start-ups have to think about the budget they have and how much research they would like to conduct. At the end of the day, a small amount of research is better than none at all. Many small to medium sized businesses use Google Forms, you even get question logic for free unlike a lot of other competitors.
On the other hand, if you are a business which has a physical space; think about a pop up satisfaction monitor. Those things which you see in airports and hospitals. Instant, in-the-moment feedback.
If a start-up has budget then other survey tools can enable to you do a lot of other cool things such as SurveyMonkey.
You might also be thinking that your business idea needs to start quickly if it has any legs. Then I would recommend a tool like Fastuna. Who specialise in real-time consumer feedback from all around the world using their fully automated market research tool. There are no special gimmicks and you don’t need any previous market research skills. It is simple as creating an account and you are off.
Then, once you have started your business then think about creating a customer advisory board and host a fun 60 minute event once a quarter where you hear about opportunities for improvement. Think of it as a mini-focus group.
Should you pay for market research?
I think it all depends on what type of business you are and also what industry you are in. Obviously outsourcing market research does cost money, sometimes a lot of money if you are wanting to look at a complex project.
However, like I have mentioned, many start-ups or small businesses don’t actually have the funds to conduct market research like a F100 company.
When conducting market research for your business, you obviously have to take in to account bias and any previous judgements you might have about your business and customers for that matter. Also, it can be difficult to read honest feedback when reading a report or results that you are deeply interested in.
What are the reasons for marketing research?
It is really important to remember that market research for your business will not tell you whether 1,000 people will purchase your products/services. It will however, tell you if there Is a market for it and who your competitors are (if any!). Market research for startups won’t tell you if in the next year you will be making £1 million, but it will provide some ideas that will help you define your approach for the next 6-12 months.
Market research for startups is something that I would recommend conducting before you invest too much time and money. Things like Google are your best friend so most research doesn’t have to be complex or costly.