Why Market Research Is So Crucial to Your Startup

Oh, startups. If you don’t work at one, you probably know someone who does. Though it feels like a new entrepreneur has struck gold every week, the reality is that only a fraction of such ventures even manage to launch; and of that fraction, about 90% of them fail. That’s a sobering statistic. And the top reason for failure? Not understanding the market.

There are plenty of reasons startups often skimp on the market research. Many believe utilizing a research partner is beyond their fledgling budgets, while some give in to ego—or fear—and evade any potentially negative feedback about their business. And others are simply eager beavers, too impatient to waste time on something as boring as market research.

But taking the time to listen to your audience and validate all assumptions are necessities to success, and online market research makes it an affordable possibility. To help drive our point home, here are three critical areas in which effective market research can make or break your business.

1. Sizing Your Market and Proving Your Worth

Before you can start selling your product or service, you need to figure out your potential market: the consumers whose needs your business addresses. Since you want to invest your resources in the right people, identifying your potential customers from the get-go is key. Once you know which consumers fall under the scope of your business, you can measure the potential revenue from their future action—in other words, you can size your market.

Accurately sizing your market is crucial to proving to investors that your business venture is worth their contribution. For example, we partnered with a careful venture capitalist who asked us to validate the viability of startups he was interested in before he made an investment in their future. The results of our agile research helped him examine the purchase intent, believability, and uniqueness of the startup in question, ensuring the startup had accurately sized their market in order to earn our client’s support. So if you want to convince the panel of Shark Tank to back you up, you better be able to correctly prove the worth of your future business.

2. Understanding and Reaching Your Customers

It’s not enough to simply identify who you want to buy your product or service; you have to actually get them to do it. In order to understand why your target audience would buy what you’re selling, there’s really no substitute for just asking them. Qualitative research that examines consumers’ triggers to buy, what they’re willing to pay, where they shop, and what value your product adds to their lives will develop a far more intimate—and ultimately more fruitful—relationship with your potential customers.

But sometimes having a new, unfamiliar idea means your consumers’ needs may not be obvious to them, and your restless, innovative team may be tempted to carry on without them. But a capable researcher and well-trained moderator will find a way to convey your ideas in a relatable manner, and the resulting consumer insights will prove invaluable to developing brand messaging and advertising for your exciting new business in an accessible, engaging way.

3. Reducing Risk and Analyzing the Competition

The best way to understand what makes your product different from, better than, or unique in comparison to a competitor’s product is to understand how your potential customers feel about those competitors. Never assume that what your team thinks of the competition reflects what your consumers think; asking them may even reveal challengers you never knew existed. Think of consumer insights as a form of insurance in an uncertain market, reducing the risk of making decisions based on assumptions or hunches that lack the whole story.

This was demonstrated to us when a client of ours, looking to release a music app that allows people to share playlists and control playback from multiple devices, wanted to see what features consumers would want. We suggested running two simultaneous Instant Research Groups* with different audiences to assess what would make his app valuable to various consumers. The client ended up not only understanding what people desire from a music sharing app before starting product development, but also discovering what his competing apps were doing right and doing wrong.

Online market research in its many forms makes both qualitative and quantitative research an economical reality for any startup. Making it a part of your decision-making process centers your budding business on your consumers from the beginning. And with the help of an agile market research partner, you can get the consumer feedback and understanding of the market that will help your startup not only survive, but thrive.

*An Instant Research Group is an online qualitative research method where respondents interact with each other while answering open-ended questions and follow-ups posted by a trained moderator.