Market Research For Startups: Affordable Strategies

You have this brilliant idea for a product that you think can solve that problem everyone has, but you are not sure if it will work, what do you do? Market research is an indispensable part of a business. A thorough market research gives you insights into the viability of your product or service, helps you understand your target audience, and allows you to pivot and change your strategies before burning your resources. In this guide, we’ll demystify market research for startups and anyone who wishes to start a business but doesn’t know where to start to set you on the right track at the start of your business.

What is Market Research

Market Research is finding answers to the questions regarding your business. It is answering the if, what, why, and how. It gives you a clearer understanding of your customer demographics, habits, and preferences, and it helps you gain insights into your competitors and your customers.

Why is market research important?

Market research. You don’t want to play a game where you are destined to lose, nor do you want to play a game being disadvantaged, conducting market research helps you to be competent. Additionally, our intuitions are not always right, market research removes assumptions and biases and increases your chance of success. The consequences of neglecting market research can be detrimental to your business, many companies suffer a huge loss from a lack of market research.

Types of Market Research

Primary vs. secondary research

Primary research involves you conducting the research and collecting all the data yourself, or hiring someone to do it for you.

Secondary research entails gathering information that is already out there and predominantly can be sourced online.

Some common websites to source secondary data are government census data, Statista, Similarweb, IBISWorld, Forrester, Gartner, and Exploding Topics.

Qualitative and quantitative research.

Quantitative research deals with data, such as numbers and percentages, whereas qualitative research gives you deeper insights into public opinion.

Quantitative research – how many people in Australia use a flask bottle?

Qualitative research – What do your customers like about your service?

Both qualitative and quantitative research are crucial and together, they give you a full representation of the market.

How to conduct budget-friendly market research?

1. Start with Secondary Research

Secondary research is the most affordable way to do market research for startups and it provides a general sense of how well the market is doing and helps you discover pain points and opportunities.

Most of the resources mentioned in the post provide free data that gives you some directions. Additionally, social media serves as a good source for discovering emerging trends, pain points, and demands, which is what market research is commonly done in dropshipping.

2. Competitor Research

Once you identify opportunities in the market, delve deeper into competitor analysis to find market gaps. Competitor analysis involves analyzing your competitors, their products or services, who their customers are, what pain points they are solving, and what their weaknesses are so you can fill in the gaps in the market.

Identify both your direct and indirect competitors as they both influence the success of your business. Direct competitors are businesses that provide the same products or services as you, whereas indirect competitors offer products or services that target the same customer base.

For example, MacDonald’s direct competitor is Burger King (Hungry Jacks), whereas the Italian restaurant next to MacDonald’s is its indirect competitor.

Conduct a thorough competitive analysis, understand your competitors, uncover market gaps and opportunities, and define your USP so you have a competitive advantage to attract loyal customers.

Perform a SWOT analysis to have a clear picture.

SWOT stands for:

Strengths – what your company does well, your USP
Weaknesses – what your company lacks, things your competitors are doing better
Opportunities – emerging needs, trends
Threats – who your competitors are, economic factors that can influence your business

3. Define Buyer Personas

Before we conduct market research, we have to create detailed buyer personas. These are your ideal customers who you think might be interested in your product or service. They act as a guideline to who your target audience will be.

Some key characteristics to consider for your buyer personas:

Location
Age
Sex
Job Title
Pain points
Desires

Segment your market and develop various buyer personas so you can develop different strategies and advertisements for all of them individually.

4. Create a MVP

If you don’t have an MVP at this stage, create one.

MVP stands for a minimal viable product. As its name suggests, a minimal viable product is not the final product and it should not be perfect, it’s only to validate the demand in your ideal market. That being said, MVP should have all the basic features to convince your target audience that it can solve their problem.

An MVP allows you to receive feedback as quickly as possible to determine whether you should improve or abandon your product.

5. Perform Primary Research

Secondary research provides a fundamental understanding of the market, but it doesn’t offer specific information regarding your product, that’s why primary research is crucial

Interview

Conduct face-to-face interviews to obtain their opinions on your competitors, their needs, and your MVP. Go onto the street and interview people, ask them about your competitors, and what they love and hate about their products. Additionally, showcase your MVP and collect valuable feedback to enhance your MVP.

Surveys and Questionnaires

Conducting surveys and questionnaires online is an alternative to interviews. You can use platforms such as SurveyMonkey to create professional-looking surveys and questionnaires. Once the form is created, post it on social media platforms, and your website or send it to your customers in your email lists to receive insights. Unlike interviews, surveys and questionnaires can’t provide product or service use feedback to help improve your MVP.

Focus Groups

A focus group is a small group of carefully selected individuals who can test out your product or service and provide feedback. They possess the characteristics of your buyer personas who can provide more accurate feedback.

6. Pricing Research

Pricing research is necessary to maximize your profit. You need to price your product optimally by considering all the expenses, marketing costs, COGS(cost of goods), rents, etc. so you are not running the business at a loss.

Pricing for your product is not difficult, although it can be further influenced by other to factors such as consumer demand, competitor pricing, and trends. There are different research methods you can use to get a ballpark figure and further test the pricing.

Competitor Pricing

The quickest and easiest way to know how much you should price for your product or service is by analyzing competitor pricing. Your competitors have done all the research and considered all the factors they need to price their products and services, and you should leverage that to your advantage. Furthermore, competitor pricing is an essential factor to consider when deciding your pricing strategy.

Gabor Granger

Competitor pricing should not be the sole determinant to determine your pricing strategy. The USP, subtleties, or excellent customer service of your business can alter the pricing of your product or service, that’s why you need to find the optimal pricing for your product.

Gabor Granger is a pricing research method developed by Clive Granger and André Gabor in the 1960s. It involves showing different prices of a product and asking potential customers if they are likely to buy.

Example:

“Now you know what Product X can do, would you buy it for $60?” They say yes.
“Would you buy it for $70”? They say no.
“What about $65?” Probably.

The optimal price you can sell Product X for will be $65. After that, you repeat the same process with a small sample size and figure out the pricing that can give you the highest revenue.

A/B testing

Using the same concept, you can apply A/B testing on pricing strategy. A/B testing involves simultaneously testing two variants to determine which performs better, in this case, you test two prices and find out which gives you the highest return.

Example

Version A – Pricing your service at $60/month, 148 subscribes to your service, $60*148 = $8880/month
Version B – Pricing your service at $75/month, 135 subscribers to your service. $75*135 = $10125/month

Pricing your service at $75/month is the better option out of the two. However, you should keep testing $75/month with $70/month or $85/month to find the sweet spot.

Conclusion

Market research isn’t a one-and-done deal, it is an essential part of all stages of your business. Conducting market research allows you to confirm your assumptions and drive data-driven business decisions to avoid pitfalls throughout your entrepreneurial journey.

Want to start your own online business but don’t know where to begin? Check out our free guide on “How to Start An Online Business”. This guide gives you a step-by-step roadmap, guiding you from brainstorming ideas to choosing the right business model, all the way to launching your business.

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