Let’s imagine you have an idea for a business that seems bulletproof. You can’t find anyone who will tell you it’s not. With this confidence, you build a prototype, and by golly, it works. Your friends and colleagues love it, and it looks like there’s real potential here. The good life beckons. So you throw more of your own money, and maybe some more from other people, into the project and launch it. And it fails, miserably.
What went wrong?
Our budding entrepreneur put the cart before the horse and missed the parade. All the focus was on the product, with no attention paid whatsoever to building a knowledge base about potential customers, different price points, and the market more generally.
The lesson: Consumer and market analysis needs to be the keystone of your business plan before you take your product to market.
The central aim of consumer analysis is to illuminate and ultimately lead to an understanding of the interaction of products and consumers. It focuses on the purchase decision-making process, consumer motivations, shopping patterns, and consumption habits. Market analysis is concerned with the attractiveness and dynamics of a market. It looks at the size of the market regarding volume, value, competition and consumer segments.
A well-constructed consumer and market analysis also impacts product development and product lifecycle initiatives. A recent Forbes article states that 81% of enterprises leverage consumer analysis to understand their customers. Yet for many entrepreneurs without enterprise size budgets, the focus is on investing in product development while struggling to keep the office lights on. This too is a case of putting the cart before the horse.
At some point, you will most likely have to stand in front of investors and plead your case for funding, especially after burning your cash and maybe more. Investors are acutely curious as to the relationship between your product, its customer, and the market more widely. In the data-driven world of investing, you better have well-researched consumer and market analysis to present a strong case.
To present yourself in the best light to both potential investors and your target market, you first need to understand your future ecosystem. This means taking a deep dive into your customers: what they use, wish for, what they appreciate and criticize, issues they may face using existing products, etc. Then go to the competition: what they offer, how they price it, how they communicate, etc. when you have all of this info, defining your new product or service may not be easy, but it does become more focused.
Next, you need to be able to describe your product or service so that you can ask the key questions of your potential market. Minimum viable products (MVPs) and demos take time and cost money. In many situations, it’s beneficial to describe what you want to offer and list the key elements of your future value proposition. Try to make the proposition concise and differentiated so that you can clearly articulate why and how this product or service is different from other existing ones.
Finally, you will be ready to ask your potential market and customers about your idea, your competitors, pricing, naming,package design, advertising concepts, etc. Now you will need to find the right market research company; here are several steps start-up entrepreneurs can take to develop a high-quality, low- cost market research firm to reduce the risk of moving your product to market.
- Look for automation. A traditional market research agency works through a process that comes at substantial cost, and takes time. Next generation services leverage automation and AI technologies to deliver a quality analysis much faster and cheaper. This can be crucial to the ability of a start-up to even contemplate doing market research.
- Determine your priorities. For starters, you may need basic data on the size and characteristics of your potential buyers. With that data in hand, you can then focus research on product design, brand awareness and customer satisfaction tracking.
- Budget appropriately for regular market research check-ups. The digital economy moves quickly; your research should enable you to track growth trends and changes in consumer behavior.
- Make sure the market research firm provides you with easily understood results. Unless you’re an expert at crunching data and you have the time, you will need to ensure that the outputs from a research projects are clear, visually attractive and actionable for your business. There is a trade-off between full automation and the skills of an expert human analyst, but some emerging research technology platforms deliver the best of both worlds.
To sum up, startups that rely on market research to test their ideas not only leverage data to validate or improve their initial idea, but also to bring credibility to potential investors. Once you get off the ground, market research can help you monitor and increase consumer satisfaction, customer retention, brand loyalty – and ultimately your financial results!
Recommended Read: 3 Reasons Why Data Storytelling Will Be A Top Marketing Trend of 2018