How to Do Market Research for a Startup?

When it comes to launching a brand new project, it can be extremely difficult for its owners to understand how relevant it will be among their target audience. The fact is that a startup is a project with an undefined business model. Essentially, it is a temporary form of the product, which becomes stable when its owners determine the processes of creating, delivering, and getting profit from the product. Market research, is an integral part of forming a startup business model, allowing its owners to define a category of consumers to which it will have the highest value. Let's talk about how to do market research for startups in detail below.

Why Does a Startup Need Market Research?

Market research is one of the ways to get feedback from people who are potential consumers of a particular product or service. In the context of creating a startup, they are usually held at the ideation stage, when development has not yet started.

Market research creates an information basis for developing a strategy and tactics of behavior in the market in a competitive environment. Thus, this procedure allows startup owners to find free market niches, choose the most attractive target market, and of course, better understand the target consumer of a product or service. 

To do this, market research is always focused on identifying the key needs of the target audience, building the most successful strategies of competitors, forming a user’s persona, as well as assessing the prospects for further development. As a result, market research becomes a working tool and a plan for further action for a startup team.

6 Steps to Perform

Now let's answer the question: “How to do market research for a startup?” and find out what six sequential steps you will have to follow to receive high-quality data.

Formulate hypotheses

As the first step of your market research startup process, you will need to decide on the hypotheses about your startup that you want to either confirm or disprove. It can be a set of features, design details, potential interest for certain segments of the target audience, etc. Note that the entire list of hypotheses should aim to reduce costs and the risks that the product will not be accepted by its consumers, so you will have to immediately reject the hypotheses that do not fall into these two categories.

Select the type of research

At this stage of startup market research, you will need to decide on the type of research. It can be primary and secondary or a combination of both.

The difference between primary and secondary market research for startups is that the former collects first-hand source data, while the latter involves the analysis and collection of information from the primary research data.

In fact, when conducting primary research, you must provide access to the source of information or field of study to collect information tailored to the requirements of the study. This is a very expensive data collection method because your market research startup experts will have to do field research, which can take weeks to months.

In turn, secondary research is a research method in which the researcher completely depends on previously published materials. That is, you will use previously published primary data, adapting it according to the purpose of the study. It is quite cheap to implement and does not need much time to collect information. At the same time, this method requires a very careful selection of materials since they do not initially pursue the same goal as you.

Identify target audience

Now, regardless of the chosen type of research, you will need to understand which of the people will be your focus group for data collection. To do this, you must determine what pain points and problems your startup can eliminate/solve and understand for which customers it will be most valuable. 

Specifically, in this step, you should describe their demographics, behavioral patterns, challenges they face, and goals they aspire to. In general, you should do everything to feel in the shoes of your target audience representatives and better understand how your project can bring real value to them.

Conduct the research

So, let’s move closer to the answer to the question: “How to do market research before starting a business?" Above, we have already written that, depending on the type of research chosen, you will have to use different methods for its implementation. If this is primary research, you can conduct online questionnaires, make phone calls, or perform live surveys with real people. It all depends on what time and financial resources you have for collecting high-quality data.

If we talk about secondary startup research, you should understand that the materials that you will use will be too general to be taken as the ultimate truth. Therefore, you will need to think about how to provide correct conclusions based on this data. In particular, in addition to statistics, you can analyze competitive solutions to understand which business strategies have already proven effective. The hardest issue, however, you will face if your project has no competitors. In this case, you will have to rely a lot on your intuition and the opinion of your research startup team members, who may already have had some experience in implementing innovative projects.

Gather feedback

After the data is received, you will need to sort it according to the individual segments of your target audience. The fact is that some of them may be relevant only for certain groups, which means that you will have to develop several business models at once and then choose the most viable one from them.

Analyze and work on the received feedback

Finally, you will need to analyze all the answers to the market research questions for startups. Of course, in many ways, you will have to rely on quantitative data, that is, if the majority of those surveyed approved of one or another of your hypotheses, most likely, it would turn out to be viable. At the same time, you should also not discount the opinions of individual research participants (if you decide to conduct a primary one), as some focus group participants may be more observant than others and, despite their minority, provide better feedback.

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How Much It May Cost?

As for the cost of market research, it can vary greatly, whether it is a primary or secondary one. As you have already understood, primary research involves interacting with real people, and the more types of surveys will be implemented, the higher the cost will be. Usually, it starts from ten thousand dollars and can grow in direct proportion to the number and complexity of surveys, as well as the people involved in them. 

As for the secondary research, it is carried out on the basis of already existing data – often it is statistics performed by independent agencies, which can be requested from a specific supplier or found on the Internet. At the same time, it is important to draw the right conclusions based on this general data since it will not be tailored to your specific product or service. As the practice shows, the implementation of secondary research usually does not exceed 5-7 thousand US dollars, however, it can differ according to the complexity of a project.

Conclusion

Now you know how to conduct market research for a startup and, in particular, which steps have to be performed to do it right. At the same time, market research is not the only phase of startup development where you can do something wrong. If you want to minimize the possible risks associated with your lack of experience in startup development, you can contact us. 

We will select for you the most effective scenario for the development of your project and, if necessary, provide you with our best specialists who will take responsibility for building its technical part. We have already devoted more than 240 hours to consulting startups and successfully launched more than a hundred projects, and now are happy to take on the implementation of your business idea.