How to Conduct Market Research before starting your business
Who Will Your Business Serve and What Problem Will Your Business Solve?
When you start a new business, you will want to understand your target audience, define profiles – called personas – and determine whether there is a demand for the type of service or product for these people.
Defining your audience and determining whether there is a demand will help you:
Analyze whether the demand is strong enough to indicate that your product or service will be successful.
Understand how you will reach your audience in order to promote your new business
Get a sense for your potential customers’ problems or pain points and how to solve them
- How do they research possible solutions for their problem?
Determine whether your business idea will answer their need, or if you need to adjust your plan
How To Build a Customer Profile and Understand Your Target Audience
Personas
A buyer persona is a written narrative describing your target audience that is based on data and research.
The persona should describe the values, preferences, and behaviors of your potential customers and is meant to help you get a sense for the way you would connect with them during the research and buying process.
Data gathered to help you create a persona could include:
– Demographic questions or insights such as age, gender, occupation, income range, marital status, and level of education attained
– B2B insights such as type of businesses, company size, industry
– Competitor and industry — which brands come to mind, and what resources they might use for research
– Product-related questions
- What are their general needs for products and services?
- What additional information do they need about the product or service?
- How can your product help them?
- Are they familiar with your brand (if you have one already) or competitors?
- What is their general perception about this type of product or service?
Gathering this type of data can be accomplished through surveys, focus groups, or personal interviews.
With demographic information, you can also conduct additional research online to get a better understanding of their likes and dislikes for various topics such as social media, cellphone usage, etc.
All these pieces of information can help you get a better picture of your target audience and help you write a persona narrative to guide your messaging and marketing mix, among other things.
Determining Your Total Addressable Market
Now that you have more clarity about whom you are targeting and the pain point you are addressing, calculate whether there are sufficient prospective customers who would be willing to pay a high enough price to make your proposed company viable.
Total Addressable Market is a theoretical revenue figure derived from calculating the universe of potential users for a prospective product or service.
Know Your Competitors And The Trends
Once you have a sense of who your target audience is and whether your product can provide a solution, turn your attention to the competition and the trends associated with your product or service.
Have you discovered a new niche that has not been addressed by any other company or product? If other companies offer something similar enough to be considered a competitor and could potentially be a threat, this could warrant more research.
Evaluating your competition and the trends could help:
- Identify whether the space is too crowded
- How does your audience perceive your competition?
- If it’s crowded, is your idea or service model different enough to dethrone your competition?
- Determine whether your concept is different enough to attract the right audience or, if you are providing a service, whether there is a need for your specialty or niche
- Shape the price point and the promotional tactics you might need in order to stand out
- Inform if there are barriers to entry that might make starting your business more difficult
- Provide insights into your supply chain. If creating a product, will you be able to source materials needed, and given any new understanding about pricing and promotions, can your suppliers meet your needs to keep costs effective when producing your product.
Continue to research and understand the marketplace by performing a market analysis in order to identify risks and opportunities in your industry.
SWOT
A SWOT analysis is the exercise of taking an objective look at factors inside and outside your company that could influence your success.
SWOT stands for
- Strengths
- Weakness
- Opportunities
- Threats
Strengths and weaknesses should be focused on your internal operations and opportunities and threats will focus on external factors.
Often developed in the form of a grid, list each of the potential items that could influence how you start your business.
Items include things that you need to overcome or areas that could be strengthened to avoid certain risks.
Once your SWOT is documented, use it to determine whether it still makes sense to proceed with your current business plan or if you should consider a new approach before starting your business.
Once you have gathered your market research, present your findings to any newly recruited team members to help you flesh out your idea or review on your own.
Document action items and continue to develop these key insights until you have a good set of recommendations that can be summarized and utilized for a set of next steps or an action plan.
Some key insights that might surface include:
- Developing a complete business plan (we recommend this either way, as it can be helpful if you need to secure funding)
- Requesting funding from outside sources
- Researching additional information on a product or supply chain
- Hiring a consultant to craft a marketing plan or set up a website
Document your findings, your commitments, and your plan before launching your business and they will serve as guides to help you through decisions related to how your business is structured, how you “go to market” with your new business, and how you measure your success in accomplishing the goals you wish to attain.