How to do market research for a startup (with examples)
August 27, 2021
17 min read
Did you step out of the shower this morning with a truly great business idea? Did you read back the notes you scribbled on your notepad in the middle of the night, and did they finally make sense?
Did you step out of the shower this morning with a business idea to beat them all? Did you read back through late-night notes, and they finally made sense?
If you’ve come up with an amazing idea for a product or service, congratulations! This could be the start of a great adventure, and every adventure needs to start somewhere.
To set a business set up for success, don’t create that website or launch that prototype justyet.
Take the time for proper market research. We know it might not seem as exciting as elevator pitches and guerilla marketing campaigns. Still, it’s just as important for your business strategy and will be a firm contributor to your startup’s success.
To discover if your big shower idea is viable, you need to conduct market research.
Before understanding which market research method is best for you, let’s get on the same page.
What we’ll cover in this article:
What is Market Research?
What good market research looks like, and what it can deliver
Why market research for startups is so valuable
How to conduct market research for startups in a way that’ll give you actionable data
Some examples of how market research changed the course for startups that went on to become successful businesses
What is market research?
Market research is about analysing the market you are in or are about to enter. It involves closely examining market trends, industry trends, market dynamics, your target audience, and other potential customers. Market research includes competitor analysis to see how similar businesses are selling and identify any indirect competitors you can learn from.
Market research findings will influence and guide your go-to-market actions and strategies—they aren’t just for good-looking reports!
Market research has been around for decades, and companies have tweaked and updated it over time, but the term has always been used rather loosely. It shouldn’t be conducted to simply confirm that your idea is good.
When you conduct market research looking to affirm a hypothesis, you become susceptible to market research bias. You can end up walking away with specific data sets that affirm your theory, rather than actionable data that can dictate the direction your theory needs to take—which may be the opposite direction!
Why is market research important for entrepreneurs and startups?
It’s easy to be blinded by the potential of a big startup idea. Your product or service might seem great on paper—or even as a prototype—but without proper research, it could flop when you go to market.
Startup founders need to get as much detailed information on their potential market as soon as possible. Here are some reasons why:
Market research will help you test your ideas
There are several things you can and should find out about your product through research. The first question to answer: is there sufficient demand for your product?
It’s not true that if you make something and promote it hard enough, people will eventually start buying it.
It could be that the product you have in mind is not for the target group you would expect or that the timing is off. For example, selling wired headphones now that most cell phones don’t even have a headphone jack would not be the perfect timing to secure demand. This works both ways; your product could be behind the times or ahead of them—as you’ll see later in our examples!
That doesn’t mean you can’t produce anything that hasn’t been done before – you simply have to do it differently and better. When Slack entered the market, there were communication tools for businesses already on the market. They just did it better.
Aside from understanding what your core product and its features need to look like, you’ll also gather important information on pricing, payment plans, marketing strategies, product messaging, and more.
Conducting market research is important for attracting investors
If you want to impress potential investors, you’ll need more than a spicy prototype to whet their appetite. The main thing that investors care about is how likely they are to make money out of this product in the long run.
For that, they’ll need to see research that backs up your claims and proves there’s a viable market for you to enter and meet demand.
This research makes the decision-making process to invest that much easier.
Investors will need to conduct a due diligence check before they part with their cash. You’ll have a large chunk of the data they need embedded in your market research—making this investment process run that much smoother for every stakeholder.
Discover how market research can help your brand: from reaching the right customers to testing creative assets
It makes startups less likely to fail
Let’s look at why startups fail.
The top answers for this underline the importance of market research once again. At number 1 on the list of reasons why startups fail: ‘no market need.’ In42% of cases, there’s simply not sufficient demand for a shower thought—no matter how innovative it is.
Number 3 on that same list is being beaten by the competition. Ignoring your competitors accounts for20% of startup failure!
Of course, market research can’t predict the future entirely. However, when done properly, it’ll give your small business the tools needed to get a head start in the sink-or-swim world of startups.
Choose the right tools for market research
Attest is here to give you all the market insights you need, with tailored demographic filters and ready-to-go survey templates, you can measure everything from brand awareness to product demand in hours, not days or weeks.
There are plenty of tools, resources, and best practices to conduct solid market research, but it can be difficult to pick the right direction to head in. Worry not! Here are six steps to get the most out of your market research.
1. Find the right market research methods for your needs
Before diving into your market, target audience, and competitors, it’s good to freshen up on the types of market research methods there are: primary research and secondary research.
Primary market research
The internet only knows so much. You’ll have to get some data straight from the source: your target audience. That’s where primary data enters the picture. This is research you do yourself, gathering information directly from the people you want to use your product or service.
A great way to do this is by using online surveys or working with focus groups to get a comprehensive understanding of what your future buyers and loyal customers need.
If you use existing research and data, you’re doing secondary market research and finding secondary data. This can be great for exploring market dynamics and spotting trends. You can find more tools to help you conduct this research method in our blog:six great market research tools.
Secondary data has its place, but because it’s external research that hasn’t been conducted with your business in mind, you’ll need to be aware of citation bias.
What’s citation bias? Citation bias occurs when your data uses the results of other research. The results of which may have been looking to prove something slightly different to what you’re looking to prove. Plus, if the research is not conducted by you, then the data may already have fallen victim to one or more other types of survey bias you haven’t been able to account for.
2. Find out what you need to focus on
You might have a general sense of what you want to learn from your market research: whether or not you should launch your startup idea. However, you’ll need to specify some research goals to get actionable data.
After your first exploratory primary research or secondary research, you’ll be able to identify where you have knowledge gaps. What isn’t clear about the market? What assumptions about your potential customers need to be verified?
You can split up your market research goals into different categories—helping you better assign the right team to the right tasks.
For example, let your best marketers and sales reps help you in researching buyer behaviours. Let your finance team guide payment habits and payment methods for your market research.
Talk to experts who’ve been working in that target market for years and ask them about what they think the future will look like. These might just be speculations, but it’s better to hear them and address them than pretend they don’t exist.
You can also pay attention to what’s happening in online communities revolving around your product idea. For example, places like Facebook Groups, Reddit, Twitter, Twitch, ProductHunt, G2, Capterra, and other platforms can be a great eye opener about your potential future customers and market.
Read the latest trend reports
Another great way to get a clear view of trends in your market is to keep track of relevant blogs and news. There are plenty of target market reports and public market data available to find out the latest trends and where the market is going, like G2, Deloitte, Gartner, McKinsey, and more—make the most of these datasets.
Use target market research tools
With Google Alerts and Trends, you always have comprehensive, up-to-date data on trends and can spot changes in popularity for certain brands and products by focusing on specific keywords.
To understand your target market, you need to look at more than numbers. It’s great to see some people spending a lot on certain products, but you’ll need to learn why they do that. Get the powerful insights you need to create a strong positioning and ensure your marketing efforts hit the spot.
This is where primary research is most important. You can choose in-depth interviews, online surveys, focus groups, or a mix of those things, depending on what answers you’re looking for.
We recommend you go beyond the standardconsumer profiling demographics and build buyer personas with layers. By adding behavioural and attitudinal data to the mix, you will create much more effective marketing campaigns and digital marketing strategies that land with the people most likely to use your product.
5. Analyse your key competitors—direct and indirect
Next up: your competition. You don’t need to infiltrate their business to get to know them inside-out, but it sure helps to look at their strategy, messaging, tactics, and, most importantly, what your target audience thinks of them.
Your target market probably knows who your competitors are better than anyone else. Find out what products they consider as alternatives to yours, and you may find out you have significantly more competition than you initially thought.
Take things a step further and look beyond your obvious direct competitors; focus on other companies that could be catching up with you in a few years or are in your niche but currently offering something else. Chances are you’re not the only one working on a new business idea each morning in the shower!
6. Be prepared to make big, but well-informed decisions
Once your market research is done, and all questions answered, it’s time to create a plan of action. Hopefully, you found out that your product or service is a lucrative idea and that there’s a real market for it—even if you need to tweak your idea a bit.
Market research will be the guide for any future business decision you take. How you approach product development, branding, and marketing, will all depend on the results of this research.
3 Examples of market research for startups
The success of any startup heavily depends on whether they’re willing to listen to their target market or not.
Let’s look at real-life examples that paved the way for tons of startups and set an example in market research best practices to transform a business in its earliest stages of growth.
Example 1: the board game maker that won big with market research
Before coming across Attest, Big Potato Games was cobbling together insights from social media and Google Analytics—not ideal when you want a comprehensive picture of your market.
The team needed to establish exactly who their customers were, and learn the behaviours and attitudes of their potential customers to more effectively target the right people in the right places with the right messaging.
Using market research to explore consumers’ attitudes towards board games and what motivates them to play helped them define key customer personas. The research uncovered seven key customer types, all the way from casual, occasional players to hardcore gamers.
An example of what they uncovered through market research was that mums view board games as a way of getting the family together, while young adults saw it more as a way to socialise with friends.
They also found out the size and importance of each customer segment. While the hardcore gamers are a super important and dedicated segment, it’s still quite a small buyer group. It turned out that the mums group was a much bigger purchase decision-maker and demographic to go for.
Market research allowed them to better understand the segments where they sought to build awareness, who was using their product, and who was actually buying it.
Example 2: admit when you can’t beat the competition
Ever heard of Odeo? It probably doesn’t ring a bell. It was created by Evan Williams and Biz Stone in 2005 as a platform for podcasts. They placed their bets on podcasts. However, as we now know, their timing was off.
Instead of sitting around and waiting for podcasts to hit, they re-examined the market. They looked at user adoption rates, technology, and customer acquisition costs. At the time, Apple was their main competitor, and they knew they wouldn’t win. So, based on their market research, they pivoted.
They looked at other popular platforms where content was shared, such as Facebook. Their market research looked at what people didn’t like about those platforms. What tools were they missing? What annoyed people?
Not long after, Twitter was born. The Facebook News Feed was too cluttered for many people, so they cleaned things up. As we know today, it was a huge success.
Example 3: The dating site that turned into a video platform
Over the years, a lot of dating sites and apps have come and gone. Tune In Hook Up is one of those that has gone rather quickly. Its creators saw that the website, which was a video dating site, didn’t get enough traffic to make the right matches.
They had this technology that made posting videos online easier than ever, but not enough people were jumping on it.
They did market research and found it was hard to find specific videos online, and websites that did offer them didn’t work very well. Sharing videos with others was a pain for users.
Based on their research, they broke up with the online dating market and focused on the video part of their business that already existed. They changed the name, the platform, and their lives. You might have heard of it. They called it: YouTube.
Market research made simple
The right market insights can make or break your business, which is why market research is one of the most important things you can invest in. Don’t leave your market research up to chance – choose the best tools that set your startup on the path to success and match it with talent that knows what to go for. Now get back in the shower; you’ve got ideas to create!
Make market research easy with Attest
With our cutting-edge tech and on-demand research expertise, your startup can rest easy. Measure brand awareness and gain vital insights from our built-in audience of 110+ million people.
To do market research for a startup, you should follow these six steps: 1. Pick the right market research methods 2. Identify what you need to know 3. Find your ideal market 4. Get to know your target audience 5. Analyse your key competitors – direct and indirect 6. Be prepared to make big, but well-informed decisions
Once you complete them, you’ll have all the information you need to create a business strategy that will lead to your startup’s success.
2. What is the best form of market research for a new business startup?
The best form of market research you can do for a new business is primary market research. This is gathering information directly from the people you want to use your product or service by using online surveys or working with focus groups.
3. What is the main focus of market research for small startup businesses?
The main focus of the market research for small startup businesses is to validate their business idea. It doesn’t matter how good your idea or prototype looks; if there isn’t a market for it, no marketing budget will suffice.
By researching what the market thinks about your idea and what needs they have, you’ll know if your product will have demand or not.
Senior Customer Research Manager
Nick joined Attest in 2021, with more than 10 years' experience in market research and consumer insights on both agency and brand sides. As part of the Customer Research Team team, Nick takes a hands-on role supporting customers uncover insights and opportunities for growth.