Why Startups Need Market Research
You don’t need to be a big player in the business market to take advantage of big market data. Market research is invaluable to startup businesses, and should be considered as one of the first steps in establishing a new project.
Market research is the action of surveying a group of consumers about their needs and preferences. Before a startup can daydream about its initial public offering or being acquired, they must first determine whether the product or service they’re offering is what the public actually wants and needs.
Financial frugality is the most common deterrent to startups pursuing market research. This is not a myth. When done right, market research can get expensive. But it also helps startups make potential mistakes in theory before they make them in real life.
According to entrepreneur, John Rampton, the greatest mistake a new entrepreneur can make is to assume they already have the answer to all the questions. “Asking questions often means you are interested in learning more and that you are interested in what others have to say,” Rampton writes in Forbes. “These contacts take questions as actual interest and engagement in them and in the subject matter, rather than a sign of weakness.”
Here’s a test. Can you answer “yes” to the following statements about your startup?
- I know where my customers are geographically, their age, and the things they like;
- I have received both positive and negative feedback from an unbiased segment of this demographic and have re-examined my startup using that input;
- I know my customers’ past, current, and future buying habits;
- I have mapped my competition and know how those businesses could affect the outcome of my startup;
- I know my niche market and how to take advantage of it.
This is just scratching the surface. Effective market research will answer all these questions and more using primary and secondary research that has been gathered and gleaned. Startups can start conducting this research on their own by reviewing U.S. Census Bureau Data, speaking with the local chamber of commerce, and creating a qualitative survey for customers (not family and friends). Though, for more specific data and a more pointed sample, it’s probably best to consult market research experts.
Once complete, that research won’t just sit on the shelf — it will work for you. Those surveys, focus groups, and passive digital tracking results can be used to underpin an existing business plan, giving you a better foundation to prove to investors why they should support your project.
Rampton, the entrepreneur quoted earlier, has now gone on to become an investor. He said if he had asked more questions he may have gotten funding faster. It comes down to this: Investors are more likely to back a project financially if they can see an entrepreneur has done the research and knows how to mitigate and navigate potential risks.
In addition to providing concrete evidence as to why your startup could be a success, market research helps you focus on what it is your offering and who it is that may benefit.
Focusing and pitching your startup to an audience during the market research stage will help generate name recognition and interest among potential customers. This will also help determine how to best market a product or service to those people when the time comes.
So, if you haven’t considered it already or are on the fence, add market research to your startup to-do list. It’s an investment in information, which means an investment in the long-term success of your project.