During the exciting early days of building your startup, taking time to do market research might feel a bit like slowing down too much. Starting a new business or startup means perpetually staring down a never-ending list of things that need to be done—there’s so much to do, and it feels like all of it needs to be accomplished immediately. But market research is the method that gives purpose to the madness. It’s the slow-and-steady work that unearths everything you absolutely need to know in order to tackle the rest of your to-do list with true strategic direction. It’s worth slowing down for.
That’s because market research explores all the factors that dictate how a given company exists in the world. Your market research will build a body of information that gives context to whatever your new business is trying to do. Market research is the most consequential exercise a small business or startup can undertake. If you don’t understand your market, you cannot approach your business plan with any functional clarity.
So we’re all on the same page: Market research is super important. Now let’s talk about what it is and how to do it.
What is market research?
At a high level, market research is the practice of gathering and analyzing all the pertinent information about a business’s target customers and the market where it’s operating. Tactically, market research can be executed through a wide range of activities, which we will run through later.
Why you should do market research
Market research will tell you if there’s a need for your business. Doing market research will answer questions like the following.
What is the market you’re targeting?
Before you can build a business, products, services, and messaging, you have to define the market space where you’re going to operate. Everything else tracks back to this.
Who are your customers?
Understanding your prospective customers is arguably the most meaningful endeavor you can undertake to achieve product-market fit. This is especially true early in your business, when planning to launch a new product or when scoping out areas of growth. Creating personas that outline the needs, pain points, interests, and triggers of your key audiences by segment will help you build every part of your business.
Who are your competitors?
Market research is about gaining a detailed understanding of three things: whom you’re trying to sell to, who else is trying to sell them something similar, and what your audience actually wants. Figuring out your position in the market means carving out a differentiated position in that market, compared to your competitors. It’s possible to build a brand and a unique offering only if you know who is already out there in your space.
What are your target customers currently using?
Which products or services are your target customers favoring currently and why? Are different brands more popular with certain audience segments? What distinguishes these brands? The more detail you know, the more clearly you can start to piece together a comprehensive model of what’s happening in your market space.
Where are the opportunity areas in your market?
Market research isn’t just about seeing what is happening in your market—it’s about noticing gaps. Which needs or pain points in your target audience’s lives aren’t fully being catered to or could be addressed better?
How to do market research for your startup
Knowing how important it is to do market research is one thing—but how do you actually tackle it?
Figure out your budget
There are countless ways to approach and scale market research. Some research routes are low effort and low cost but still produce massively valuable insights; others require considerable time and cost to execute but might be worthwhile, depending on the goals of your particular business.
You’re probably very familiar with making budgetary trade-offs within your business—this is just another one. Look at your goals, research the outcomes of different types of market research, see what budget is available, and go forward.
Identify research goals
Beyond the basic research goal of determining whether there is a market need for your products or services, it’s good to single out any additional, specific research goals that could provide information of value to your team. For example, maybe you know that a certain competitor’s product is selling like crazy with a particular audience segment, and you want to figure out why through your market research.
Make a plan
There are two main categories of market research: primary research and secondary research. Each of these can be broken down further into different research methods. What you decide to do depends on your budget and timeline, since some of these methods take longer to conduct and require more investment.
Primary research
Primary research involves gaining original insights directly from customers, people in your key audience segments, or other primary sources. This type of research also falls into two categories: qualitative research and quantitative research.
Qualitative research:
Qualitative research focuses on individual feedback that’s looked at in depth. It’s amazing for getting a huge amount of insight, even if it doesn’t result in statistical data about your market or business. Methods include:
- Individual interviews
- Focus groups
- Reviews from existing customers
- Ethnography studies
Quantitative research:
Quantitative research is all about collecting and analyzing numerical data. This method is aimed at generating insights that are statistically significant, as opposed to anecdotal. Examples of quantitative research include:
- Surveys
- Questionnaires
Secondary research
Secondary market research involves analyzing previous studies that your team hasn’t created or conducted itself. Examples include:
- Public databases
- Published studies
- Institutional research
Use what you learn
Whatever approach you use to conduct your market research, you should be sure to act on your findings. This means making sure that it’s available to everyone in the company, and that it’s actively employed as a framework for developing marketing, sales, and product strategies.
Why market research matters for a startup
The earlier you conduct market research for your startup, the better. If you can get your head wrapped around everything that’s happening (and not happening) in your area of the market early on in your startup’s life, you will give yourself a number of powerful advantages.
Aligning your roadmap to market opportunities
You will be able to lay out a roadmap for developing products and services that addresses known market opportunities.
Avoiding wasting time and resources
Without adequate market research, you might develop products that will fall flat because they don’t answer a real need or are too similar to what dominant competitors are offering. Doing market research ahead of time will diminish the chance of this happening.
Impressing investors with your market knowledge
Investors will love how much you know about the market. Early-stage startup founders are primarily asking investors for funding based on their acute understanding of market conditions and opportunities, since their startups do not yet have demonstrated performance and growth. The more you know about the field you’re playing in, the more likely it is that investors will want to back you.