importance of market research

CCarrying out market research for startups before you start a business is vital. If you don’t you will increase your chances of early business demise. It’s a vital step in the startup process to help check if there’s enough demand for your product or service.

OK, so it’s a bit tedious but the more research you do at the outset, the better your chances of long term success will be. Changing tack or approaching a different market segment once you are up and running can be a costly affair. You need to be confident that customers will buy your product before you spend a fortune on dead inventory.

Is research necessary for startups?

In a nutshell, market research is the process of seeking answers to key questions. Questions like:

  • How big is the market?
  • Who are your key competitors?
  • What are their USPs?
  • How to buyers behave and what are their preferences?

It’s all about understanding the customer. But it doesn't stop there. Market inquiry provides an understanding of the competition too. By carrying out effective research you can set prices competitively. Another plus is that you can borrow ideas and learn from competitors. Learning from their mistakes and successes is a far more cost effective than learning from your own errors.

Carrying out a robust  process is a great way of testing out products and ideas before you commit budget to buying stock or commit to advertising which doesn't deliver a return on investment.

Research is a good tool for product development or expanding your business. It helps you anticipate demand and test products our before your commit.

Market Research Questions for Startups

Before you delve into the details ask yourself some basic questions:

  • Is there really a market for my business idea?
  • What kind of demand is there?
  • How are market trends likely to affect my chances of success?
  • Who are my customers, or more specifically what age, income and social strata do my customers come from?
  • Who is the competition and what are their strengths and weaknesses?
  • Are there any potential business partners I could collaborate with?

What to cover when carrying out market research?

Don't research isn’t just for the sake of it. It will help convince investors that you know your stuff and allow you to hone in on a market segment that provides the best chance of still being in business a few years from now. Knowing what your competition is up to will enable you to develop strategies to compete.

Other considerations when conducting market research:

  • How big is your chosen market and how is it performing?
  • What share of the market do you intend to capture?
  • What trends are at play? Is the market growing or shrinking?
  • Are there cultural or social trends that might affect your market?

How does doing research help a company succeed?

It's all about your product, service or market segment you intend to compete in. The most obvious benefit to a small business is that ist enable you to understand your potential customer base more effectively. 

How do startups do market research?

There’s no easy way to answer this but the simple truth is that you can do a lot from the comfort of your desk. Take time to review the marketing collateral of established competitors. 

Take time to identify gaps in the market.

  • Are government laws or changes in legislation likely to affect your market?
  • Have you checked out industry press and reports?

Learn about your customers

Build a profile of your ideal customer. Try to climb inside their heads and see things from their perspective:

  • Why would people buy from you?
  • Where do your customers live, eat, shop and play?
  • What are their buying habits? How do they like to pay?

Competitor analysis

  • Who are they and how many are there?
  • Where are they based and how long have they been established for?
  • What do they do well and what do they suck at?
  • Who are their suppliers?
  • What market segment do they cater for?
  • What do their customers think of them or associate their image with?
  • What marketing strategies do they deploy?

Market research tasks

The internet is a great resource for carrying out research but don’t restrict your activity to online sleuthing. Ideally you need to get out there and talk to punters. Go to your local library and check out trade journals. Write down your findings they will come in handy when it comes to creating a marketing and business plan.

Hints and tips

Take your time and become an expert in your chosen market. Get it right now and you will avoid costly mistakes later in your startup journey. Remember that market research isn’t just something you do and then forget about- keep it up and constantly update your knowledge.

Try to keep it real. Don’t just pick out the information that reinforces your perceptions. Believing your own BS will only do you harm in the long-term!

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