Market Research 101
A Quick Rundown of the Basics
Market research is like being a detective. It’s a process of critical thinking to uncover what’s happening below the surface in a business or industry. Through analysis and synthesis, information is turned into relevant insights to drive decision making. It is not a linear process, but one that starts messy and evolves over time to paint a picture of the environment you will be operating within.
Whether you’re launching a new venture, deciding whether you should invest in one, or are an established business looking to adjust current offerings, I always recommend starting with market research first. By properly assessing the market, entrepreneurs gain the knowledge needed to formulate and implement the right go-to-market strategies that reflect industry trends and actual user needs, and investors know whether the latest product they are considering to invest in will actually be worth it.
There are three main areas to cover in understanding the macro environment:
Let’s break these down.
When analyzing the industry, it’s important to describe how the industry operates, the trends within that environment, where the industry is headed as well as the size of your potential market. How fast is it growing? Is it expanding or contracting?
Don’t forget to look at adjacent industries. For example, if you are creating a new gaming app, you’ll want to look at trends in the app game industry as well as other gaming industries that consumers would spend their time and resources on such as video games, online games, AR/VR games and even board games.
In the competitive landscape, the goals are to understand:
How companies compete in the market
How your product will add value by filling gaps missed by existing solutions
To begin, create a simple spreadsheet or list that describes how competition takes place in the market. Here’s an example of things to include:
Product or service features and how they differentiate
Technology behind offerings
Social media strategies
Reviews and ratings
Make sure you can define how your solution will address needs better than what is currently available, i.e. how to differentiate. Are you faster, cheaper, better? In what ways are current solutions inadequate? What advantages do you have over them?
You’ll want to look at primary competitors – those that target the same audience or have a similar product, as well as secondary competitors – those that offer high- or low-end versions of the product or offer a completely different product to the same target audience.
Last, but certainly not least, companies must have a deep understanding of their customer. Who exactly is your customer? What is their actual problem? How big is this problem and why does it exist? You have to be able to demonstrate how well you know your customers, including their latent needs, pain points, hopes and ambitions.
The best way to do this is by getting out from behind your desk and talking to real end users. Of course you can utilize online surveys or sites like AYTM later on, but you first need to understand their problem and make sure your solution actually addresses it through one-on-one conversations. Set up a phone or Skype call, or schedule a face-to-face meeting with your target customer segment. Use your network and social media for warm introductions but don’t be afraid to cold call either.
Remember, knowledge is power. You wouldn’t take a roadtrip without a map and you shouldn’t start or invest in a business without assessing the market first. If you approach market research through these three lenses – industry, competition and customers – you’ll be sure to get a deeper, more holistic picture of what’s actually happening in your target market before you spend unnecessary time and resources.