Researching the market that you want to enter is highly important when you are developing an idea for a startup. Market research is similar to researching a topic as a student in school. Fortunately, the Internet and the most advanced search algorithms that Google and others have developed make it easier for you than ever to conduct online market research.
By doing market research in the ideation phase, you can potentially avoid wasting time and resources. Market research can give you a much-needed reality-check to test your idea. If it passes the test, then you can be more confident to move forward.
Once you have an idea that you believe is worth exploring, you need to be able to answer the following three questions as a starting point, supported by independently information that you can find on websites. (More questions come later.)
Has another company (or multiple companies) already done or attempted to do what your idea is?
- You may think your idea is the most innovative idea ever and no one has ever thought of it. But then you do market research and find out that there are a half dozen companies actively working on a similar solution.
- Of course, this does not mean you should not continue building your idea. At least, since other companies are pursuing something similar (even if not exactly as you would), you know that a market exists. You can shift your focus on differentiating your idea from what others are doing.
- You can learn from other companies that have tried or are trying to do something similar to your idea.
- If you find that no company is doing anything remotely similar to your idea, you may still have to do market research to find out “why not?” Perhaps the number of people who care about such a solution is very small and not worth building up a company.
What are the trends and unmet needs of the customers in the market you want to target?
- You need to align your idea with the market trends and the unmet needs of customers in a particular market that you find interesting or attractive.
- This may sound too basic but you are doing market research to understand the market. A market is simply a community of buyers loosely united around common needs. You need to understand their characteristics and what “pain points” (or needs) they have that you can address with the implementation and fulfillment of your idea.
- You should also find out how motivated customers would be to pay money to solve the problem using whatever tool or service you plan to develop. Do enough people care enough about meeting the unmet need to pay for a new tool or new service?
- Market trends reveal the direction that the market is going, such as a market going through a digital transformation or a shift from one-time purchases to recurring purchases (and potential recurring revenue for your startup).
What can you learn from all the market research information you have gathered?
- So you’ve gathered a lot of information. Now what? You need to analyze all the information. What that means is that you need to find common denominators, highlight significant points, and come up with conclusions about what the information (i.e. data) is showing you about the market. Don’t just sit on the information and be satisfied that you have collected it.
- The whole point of market research is to learn from the findings, so you can make better decisions for the future..
To use an analogy, if you were to go out on a date with someone, you’d do a little “research” to find out what the person likes to do, what the person dislikes, whether the person has already seen a certain movie that you may want to see together, what annoys the person (or their “pet peeves”), what they would like to do but aren’t doing yet, what kind of food the person likes, and the person’s availability. By doing so, you can align your decisions in such a way to please the person and create a nice experience on the date.
But imagine if you did not do any research. Let’s say it was a “blind date” and you had no information at all. You bring the person to a restaurant where they dined the previous night. You order appetizers for the table, but the person hates the food you ordered and is, in fact, allergic to it. You tell stories about sports, but the person hates sports. You try to tell your date how “great” you are (self-marketing as a potential mate), but your date finds you oblivious to what they really care about. Right in the middle of the blind date, your date, who doesn’t want to waste any more of their time, leaving you out in the cold. You didn’t do your research.
For a startup, you don’t want to be on your “first date” with a market – extending this analogy – and find out that people in the market do not care about what you have to offer and definitely will not pay anything for it. You missed meeting a critical need or requirement. The market may conclude that you just want their money. The market will leave you out in the cold. You are not offering value that they want. This is not a recipe for startup success.
Good thing market research analysis is a standard part of the process to develop an idea for a startup. It can save you heartache, and believe us, founding a startup on poor market research (or a lack of it) can cause heartache.
Here is a video that discusses how you can perform market research analysis for your startup idea: