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Market Research for Startups – Types & Step-by-Step Guide
Yes, you read it right. Not administering market research about your focus groups and potential customers in advance is one of the five major reasons for the downfall of a startup in the business world.
We get the confidence to quote this from a recent study done by Bill Gross, a leading entrepreneur. Extensive market and marketing research grants the budding business the ability to know particular vital aspects like launch timing, unique features to include, and many others and align the launch accordingly.
So, before you dream of flying high for your business, learn the art and science of market research for startups and its significance. Well, we present this article to you with the same purpose.
In 2019, the failure rate of startups was around 90%. The research concludes 21.5% of startups fail in the first year, 30% in the second year, 50% in the fifth year, and 70% in their 10th year.
According to business owners, reasons for failure include money running out, being in the wrong market, a lack of research, bad partnerships, ineffective marketing, and not being an expert in the industry.
What Is Market Research for a Startup
In general, market research is a business strategy deployed at the beginning of business idea conceptualization that involves knowing the target market, its dynamics, the attitude of potential customers, buying behavior of focus groups, and other factors thoroughly.
The findings of market research are used to make business-focused decisions and business plan the launch accordingly. When done and implemented with desired diligence, market research holds power to leverage the success of a startup.
Market research is so widely used that it’s one of the fastest-growing global industries and has crossed the mark of $74.3 billion in 2019. While good market research is crucial for every business, it has a significant role in launching a startup as it ensures victorious take-off and doubles up the success odds.
What Types of Market Research Can Startups do?
Market research is one of the few most viable means allowing businesses to improve their decision-making ability and survive in today’s competitive world. It’s used for ensuring the best output from the efforts invested in product development, marketing, and service expansion.
While you plan to conduct market research, knowing the offered types is crucial. Here are the two most common market research types that startups can use.
Primary research is conducted either by the startup itself or by a hired resource and deal with approaching the data source directly to collect relevant information. The information collected is done by asking questions. It’s the most customary research type.
The primary market research is best suited when a startup:
- Want to know about the customers’ average spending capacity on a particular service or product;
- Has no idea about customers’ perception and attitude towards the brand;
- Need to figure out customers’ views of service improvement.
Based upon the requirements, startups can list up relative questions and interact directly with customers.
Besides the above, you can identify direct competitors and the latest trends among small businesses to gather trustworthy consumer insights.
Most startup owners gain insight information for their new business through survey data collection, online communities related to their target market, one to one interviews of some potential customers during the exploratory primary research phase.
Digital service-delivery surveys that you receive after availing of a service.
- More authentic digital marketing strategies
- The startup has the sole right to the data and findings
- It’s highly resourced, extensive, and time-consuming.
- As a startup will be bearing all the responsibilities, acquiring suitable resources and maintaining quality standards becomes a tough job.
Secondary research is done by a third party and has no direct involvement of startups and customers. Everything starts from research conduct to finding compilation if done by the third party. Basically, it’s used by startups with limited resources as it doesn’t involve any hefty direct investment.
Using secondary market research for startups, you can figure out:
- The total market value of a specific industry;
- The current market situation and future growth projection;
- The latest market trends and emerging technologies.
The government studies on a particular area/domain offered to everyone can be called secondary research studies for the market.
- Provides required data instantly
- Covers more fields and conducts research at a large scale. So, data accessed will be more useful.
You have to make peace with whatever data you have. Any custom fields or research on a particular domain can’t be obtained.
Brainstorming, feasibility analysis, and critical thinking can be your few cost-effective ways to derive success from market insights data.
The Step-by-Step Guide on Conducting Market Research for Startups
Conducting market research is a tedious job for everyone. Startups deal a bit more as they lack investment, resources, and talent. Still, they can ace the market research game if due diligence on the below-mentioned points is paid.
Step 1: Figure out the purpose of market research
Before you gear up yourself to invest in hardship demanded by market research, figure out the reason behind it. What problem did you want to resolve via research? Where the findings will be used? Will you conduct it internally or externally?
These are some of the questions whose answers should be beside you when you of conducting market research. Having these questions solved give direct to the market research and increases its credibility.
Step 2: Pick the proper research methodology
We have already explained the two standard methods to perform market research. You need to select one. So, take some time out, weigh down the perks and downside of both the procedures and make a decision as without concluding at this front, you can’t move ahead.
Step 3: Know the target market well
Once the purpose of conducting market research is figured out, the next step is to know the market very well. There are plenty of reliable research methods for this.
To gain the required acquaintances on the target market, we would suggest taking the help of industry experts, reading relevant reports on the target market, and keeping an eye on market trends. Once you know the market well, you’re all set to devise your research strategy.
Step 4: Ask, ‘what is crucial?’
One can make most of the efforts invested in market research if the right questions are asked. With specific fundamental questions, you’re able to gather relevant data and aim in the right direction.
Some of the key questions to include in an impressive market research plan are:
- Who all are your direct and indirect competitors, and what’s their market worth?
- What particular feature can make my service stand out?
- What’s the scope of my service/product in the target market?
- What are current trends in the market?
- How is the buying behavior of the customers in your target market?
Including all these questions will make your research worthy. However, don’t get limited to these questions.
If you have decided to take the primary research path, then you have the freedom of the whole world to create 100% question templates. Just take a deep dig to figure out what all information you need and develop questions accordingly.
Step 5: Chose the right kind of tool
Collecting data is one thing and analyzing it accurately is another. In fact, the success of your market research depends on the perfection achieved in the latter section. Data analysis is a tedious job demanding attention on every front.
Gladly, there is no dearth of analytics tools. There are market explore tools, data analytics tools, and reporting tools to assist in the research. All you need to do is make a wise choice. We can make the job easier for you by providing specific dependable options.
Step 6: Analyze the data and use the findings
Using the tools, analyze the data. Let’s make one thing clear. It’s not going to be easy. To sort out the process, decide different KPIs and analyze your results based on those KPIs. Present the gathered and analyzed data in a report and use as you please or time demanded.
How to Analyze The Results And Who Should Participate In The Analysis?
Market research result analysis is a tough task. There are multiple ways to get this done, and we provide you with a crisp overview of them.
Descriptive statistic methods for quantitative data
To viably do market research for startups and utilize its full potential, the focus is on variables and their median, mode, mean, and variance to understand the data.
The inferential statistical process to quantitative data
For a detailed evaluation of summarized data, the inferential statistical method is helpful. It includes processes like factor analysis, regression analysis, discriminant analysis, and clustering. This technique is used for data generalization.
Speaking of the professionals involved in this job, the vice president, target market analysis team, CEO, and marketing team head should be included in the process. However, there are no stringent rules over this. Startups can involve the professionals in the procedures as per the need of the hour.
Real-world Examples of Success Happening Because of Accurate Market Research
We know market research is exhaustive. Yet, it’s worthy of your time and efforts as, when done right, it ignites success for sure. We have come up with a list of a few startups that experienced commendable in the beginning stage only. All thanks to market research.
Big Potato Games
It managed to grab the attention of more and more gamers with professionally done consumer and target market research.
Odeo to Twitter
Odeo, a platform for podcasts, struggled hard initially. Yet, they didn’t lose hope and re-examined the target market. They made decisions based on the market research findings and came back with Twitter. Rest is history.
Dating App to Youtube
Tune In, Hook Up was launched as a video dating site and didn’t experience excepted success. They did market research and reinvented it a bit. Now converted into YouTube and owned by Google, the product needs no introduction.
While launching a startup is on your list, we suggest you not move forward without conducting reliable market research. With its help, you get to know tons of business-critical factors like compotators, market trends, consumers’ buying behavior, and future scope.
Prior understanding of all these allows a startup to make wise decisions and seal the startup’s success. This is why no hard this job seems, don’t skip market research. You can take the experts’ help and valuable tools to trim down the efforts demanded by market research.
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