Do you have a great business or product idea? Are you entertaining the idea of launching a startup? Perhaps there is no more exciting time than the spot you are in right now.
How do I know? I’ve been there. My startup idea just happened to be a market research firm, so I am very excited to share my expertise on both of these topics.
Startup market research can answer the common questions racing through your mind.
Combatting the excitement and potential of your startup idea are likely some seeds of doubt.
Will this work? Will customers buy my idea? What do I need to charge? How do I need to market it? How do I solve the cash flow issues? Is it worth my time?
The good news is market research can help a new business by solving some of your most challenging questions. Market research for startups can also help remove your doubt and give you confidence in making informed decisions based on facts and evidence.
Very simply, market research is a process of collecting information on a product, service, business, market, or topic to apply that knowledge to help with data-driven decision-making (DDM).
Market research comes in many shapes and sizes. The two highest-level paths include qualitative research and quantitative research.
Qualitative research is not scientific and aims to explore topics and ideas. This would include a focus group with 6 participants or individual in-depth phone interviews with 10 potential customers.
Talking to 6-10 participants would be extremely insightful and provide you with a wealth of information to consider, but it will not be statistically reliable.
In no world will 6 people you chat with represent a pool of millions of potential customers.
If you use qualitative research, it’s essential to understand that it’s exploratory, which means you can dive deep, but the findings should not be broadly applied to large audiences.
Quantitative research is the opposite of qualitative. It involves statistics and numbers to create reliable and statistically significant information.
There are many common forms of quantitative research including online surveys of 400 respondents, phone surveys, in-person intercept surveys, etc.
This is critical if you are trying to test the viability of your startup.
When it comes to market research, control and relevance are paramount. Primary research allows you to tailor your data collection to your specific needs, providing fresh, proprietary insights. Conversely, secondary research offers a wealth of readily available information.
Is one better than the other?
Not necessarily. But both primary and secondary research carry specific roles. Below, we’ll list a few key differences and benefits of both methods.
Primary research is data you are collecting on your own/custom. It is many of the methodologies we discussed above: online surveys, focus groups, intercept surveys, etc.
The top benefits of primary research include:
Beyond primary research, there is also secondary research.
Secondary research uses data that has already been collected to help with decision-making.
This might include Census data, customer database information, paid subscription services that give you access to data, online searches on Google to pull up past reports and information on a topic, etc.
The top benefits of secondary research include:
| Primary Market Research | Secondary Market Research |
|---|---|
| Conducted by you (or the research firm you hire) | Conducted by someone else |
| Sources: Online surveys, focus groups, etc. | Sources: Internet, Census data, etc. |
| Specific to your unique needs and goals | Cost-effective and quick to complete |
| You control the quality |
You may not only be wondering how to do market research for a startup, but you may also be curious if market research is necessary for testing a new product, business concept, or service.
Spoiler alert: it is.
There are many benefits that can be leveraged from a market research project. The key theme with these benefits is the ability to repurpose the data across various departments, assets, and uses.
Do you have a general idea of your product or service but are unsure of the details?
Market research can help a startup with a variety of things around your concept:
And testing is relevant even past these beginning stages. Take a look at our ultimate guide to ad concept testing surveys, which can be used down the road to help market your startup’s campaigns.
You can also watch this brief video on the same topic:
Do you need to know more about what messaging to use in your marketing, or find out what is most important to your potential customers when they are considering buying your product or service?
Market research can help you formulate a marketing plan, including what source(s) to advertise to capture the attention of your target audience.
Maybe you are developing your website and want to test your homepage layout. Perhaps you are looking at running social media ads. Or maybe you are looking to run an ad in a publication.
You can use portions of your market research project design to test these to ensure you are on the right path and featuring messaging and imagery that resonates with your customer.
One of the most common product concept development survey questions is asking about how important factors are when purchasing.
You can ask about the importance of price, customer service, shipping time, expertise, hours, variety, or any other feature or benefit of your startup idea.
If you learned through the survey that your customers only care about shopping time, customer service, and online payment, you now have the 3 items you need to feature in your marketing. They become your lead messages.
This is a broader benefit, but market research will allow you to make higher-level decisions about your startup. Understanding how to do market research also means understanding the core principles of your business strategies.
These are all more strategic questions where market research can guide you.
For more ideas to consider, read our blog Factors to Consider Before a Product or Service Launch.
So, what is a customer persona?
A simple survey can provide you with a ton of data on your target customer. You may find out through the survey that the profile of the buyer to target is female, aged 30-40, with children in the household, earning a household income of $100,000 or more.
This data benefits your advertising budget and marketing campaigns and prevents you from wasting money marketing to less fruitful audiences.
The profiling data points on your customers are endless:
If your startup is a brick-and-mortar location (restaurant, bookstore, etc.), you are probably wondering where the best place to set up shop is.
Market research can help you define what area in your region offers the most potential for purchases. This could be accomplished with a simple survey that divides responses across 6 counties.
By asking a simple appeal of your concept or likelihood to purchase, you may find that 1 of those 6 counties is significantly greater to purchase your startup idea than all others combined
Asking yourself, “how much does market research cost?” It depends.
Understanding price points is one of the most common reasons for commissioning market research.
It is true not only for startup research brands but also for Fortune 50 companies. How much is someone willing to pay for the product or service?
There are several ways to approach pricing in market research through systematic methods.
Unfortunately, the easy way of asking a respondent how much they are willing to pay open-ended does not work. Survey respondents are savvy and often view it as a negotiation session to lowball the value.
A market research company like Drive Research can help guide you on the best approach, whether the Gabor-Granger model or the Van Westendorp process. Each has a scientific way of reaching an optimal price point for your startup idea.
Before a venture capitalist provides you funding to fuel your startup, they often want to see data to ensure the money they give you will make it back to them. It usually requires third-party validation through market research.
Although this is not often a standard driver of commissioning market research, it is something to keep in mind for your startup.
Market research can be a powerful tool as you gear up and need additional investment funding to scale.
Suppose you plan on going the more formal route by taking out a loan from a bank.
In that case, they will almost certainly require a feasibility study or some objective market research to help validate the potential success of your idea.
Banks are businesses too, and they want to invest in ideas where the lessee can pay back the amount borrowed in complete confidence.
In essence, market research is all about reducing risk. Could you launch your startup without any market research and be successful?
Sure. If you found your start-up using market research and the valuable insights you collected, do you stand a better chance of success? Yes.
Take for instance these product failures from the last decade and how market research could have helped.
When it comes to options for startup market research, you are never short of them.
Understanding the pros and cons of different market research methodologies is essential. What you are trying to learn will help guide you in which approach to take, qualitative or quantitative.
We’re only listing the best here, but we go into detail in our blog post Types of Market Research to Consider This Year.
Or, watch our video for a short synopsis of market research examples to fuel your business growth.
Running a concept test using an online survey (in my opinion) offers the best bang for your buck as a startup.
With online surveys, you can acquire a lot of responses and a statistically reliable sample for your decisions around your business model, marketing, and strategy.
The extensive data set will also allow you to slice and dice the data by demographics to truly understand what’s driving concept appeal and purchase intent.
We rely on only the highest quality online survey respondents, so you can be sure the data is top-notch.
Online surveys are affordable, timely, and can be run quickly, all of which are vital for a startup. One of the most basic types of startup marketing research, new product demand surveys are also versatile and can be used in any industry.
This multi-pronged project is typically best suited for a development project or brick-and-mortar idea.
The key components to a market research feasibility study include a market analysis using Census data and 5-year estimates to help you understand where the market is going (is your target audience growing or shrinking).
Additionally, a competitive assessment of other businesses/products in your category is included, along with a survey of your audience. Feasibility study firms have a patented process they follow to help you understand the feasibility of your new idea.
A market analysis uses all secondary research or desk research to generate information for you.
This is one of the components of a full feasibility study.
It focuses on Census data and publicly available information/articles on the topic. Again, with secondary research, like a market analysis, you are not collecting anything new. It’s information that exists online.
The tradeoff is that this can often be quick and inexpensive but may not be as relevant to your startup idea as a customized survey with relevant and very specific questions.
This is another piece of the full feasibility study mentioned above.
It takes a deep dive into your core competitors to understand key differentiators, pricing, product availability, and other data points to help you understand gaps where you may be able to stand out with your concept.
For more information, check out our Ultimate Guide to Conducting a Competitor Analysis.
These are longer in-depth conversations you have with participants.
The participants might include potential customers, subject matter experts in your field, or other stakeholders. These are often 30-60 minute conversations held over the phone or through Zoom.
A research firm can help recruit and schedule these participants and even moderate the conversations as a third party.
Additionally, IDIs can often be a great starting point if you are dipping your toes into the startup waters and looking to go deep into conversations.
Although the steps differ somewhat depending on your chosen methodology, most market research projects follow a similar flow.
Whether it be ongoing research through pre or post-product development, the steps showcased below are what it would look like to work with a startup research firm to assist you.
However, if you are interested in DIY research, several of these steps would not be applicable. This process below primarily focuses on primary/custom research (qualitative or quantitative).
It is critical to determine this before you start the marketing research process.
Those 3 questions are a great starting point for requesting a proposal from a firm or thinking about launching the market research in-house. Design the study with the end in mind.
Once you choose on a market research partner, they will host a 30-60 minute kickoff work session to explore those questions, walk you through the process, discuss the next steps, and answer any questions you might have.
An agenda is typically prepared for this meeting to help stay on task.
This is one of the first deliverables for your project.
It will outline key tasks, dates, and deliverables for both parties (you, the client, and the research firm). This document evolves and is updated throughout the study, so you know where everything stands.
This is likely the most critical component of startup research–and the key element of all our market research tools: garbage in, garbage out. Below is some survey writing 101 for you.
The design component involves hashing out the actual questions you want to include in the survey or interview guide.
This ties back to your objectives and what you are trying to learn from the research. It’s crucial to consider many perspectives when drafting your instrument for your startup.
It is one area of the process where a market research expert can provide the best guidance.
If you do not design the survey well, it will ultimately reflect on your results, where you may misinterpret findings or wish you could have asked different/other questions.
If you are conducting an online survey, you will need to find a survey platform to program your survey and a market research company with vetted/qualified respondents to receive responses.
There are online panel companies you can reach out to or full-service market research firms that can program the survey on your behalf in its software and field it to respondents. Very critical that you test the survey to ensure there are no typos, errors, routing mistakes, piping, etc.
We suggest running a soft launch to start the project by collecting about 3-5% of your total sample. Examine these results closely before moving to the full launch.
This is the process of fully fielding the research to your audience.
Many firms will offer live, 24/7 accessible data portals so you can check on the data and responses at any time.
These portals often tabulate the data into charts and graphs in real-time for you. Many allow you to export the data into Excel, PowerPoint, Word, or PDF.
Here is an example of a live client dashboard by Drive Research.
This is another step in the process where a research expert can add value. Several checks are likely built into your survey to help with data quality (ReCAPTCHA, red herrings, etc).
However, there should also be data quality checks on the back-end around duplicate submissions for IP addresses, speedy completion times, etc.– some of our most basic tips to quality check a data file in market research.
A quality market research company will have a checklist they’ll run through for you.
Data quality is a real issue in market research. Some respondents try to game the system to earn extra rewards or entries into a raffle but create bots, automated submissions, or try to take the survey more than once.
Several safeguards are put in place to avoid this.
Learn more about spotting poor survey respondents.
Once data collection is complete, you will want to dive in.
The analysis includes reviewing the tabulations and thinking through themes you’re seeing, reading open-ended comments to identify commonalities, and trying to understand the story the market research is telling for your startup.
With the analysis, try to cut and segment the data as much as possible. Take all your audience profiling questions and see how the likelihood of considering your concept differs by demographics, behaviors, attitudes, and geographies.
Once your analysis is complete, it’s time to draft the findings. These should be created as themes based on your insights. It is an excellent time to revisit your market research objectives and follow that roadmap for your report.
For example, if the market research you commissioned for your startup focused on the following:
You now have an outline for your report with headings centered around your key takeaways. Again, design your survey with the end in mind. If these are the answers you need for your startup, address them in your survey design.
Now that you have the market research findings, it is time to consider the implications.
You have the what (your analysis), the so what (your results), and now you need to apply the now what (recommendations).
A trusted market research company can offer their expert recommendations to help answer questions such as:
A market research firm will schedule a 30-60 minute debrief to walk you through the report and recommendations as a final step.
Even if you completed the startup research by yourself, it is still helpful to sit with another stakeholder or friend with some tie to your idea and get their thoughts.
Additional perspective can always be helpful, as it can bring other interpretations to your research.
You won’t like this answer, but it depends.
Why? There are a lot of factors to consider. However, we can provide high-level guidance regarding what you would need to invest in market research if you are a startup with presumably limited funds.
That’s why it’s helpful to share your project budget. Doing so can save the back and forth of a third party creating a proposal, just for it to be thousands of dollars outside your budget.
Some more of my thoughts are below.
Market research is complex and takes years of expertise to master to do it correctly. Finding respondents for a study (that are high quality) can also be a challenge.
There are a lot of sites and panel companies out there that can provide you with an email list of respondents for a few hundred dollars.
They don’t tell you they won’t do your survey for free. Raffles can help, but they often want a reward per response (e.g., a $5 coffee gift card for their time).
What usually happens is startups buy these email lists because the price is attractive, send the invites to their survey through their platform, and receive no responses.
So, in the beginning, the price seemed cheap, but now you are stuck in a situation where you paid $250 for an email list to generate 1 response. That’s $250 per response.
Panel companies with vetted participants will also sell you samples of respondents for $0.50 or $1 per complete, but you have to be very careful with the quality of those responses.
Usually, if someone is willing to complete a survey for that low of a reward, they are taking hundreds of surveys a day, are sneaky good about knowing what will qualify them (thus lying on screeners), and will speed through your survey to end it as quickly as possible to move to the next one.
To do it right, you have to invest a little more.
A good ballpark investment for startup research is about $3,000. $3,000 is good, $8,000 is better. A budget of $10,000 to $15,000 is best.
With $3,000 in your budget, you will likely be able to commission a market research firm or consultant to help you…
The cost structure for market research goes up from there where $8,000 would include additional responses to your survey and likely some form of reporting and interpretation of the results with full consultation and management of the study.
The $10,000 to $15,000 is ideal for a single-component project.
With a consumer audience that will help you obtain n1000 in your sample to increase validity, allow the research team to prepare a comprehensive report, and experience a full-service project with the kickoff, debrief, and all of the bells and whistles.
If you begin adding components (e.g., I want to do a focus group and a survey) or you are looking to conduct a full feasibility study for a development project (includes market analysis, competitive assessment, and market survey), the cost would be beyond the $15,000 range.
Although that amount may seem like a lot to get started for some, it’s better than launching a much larger investment into your startup idea and having it fail miserably.
That’s an investment of more than just money but also your time wasted over months or years. If you are going to do market research and are serious about your startup idea, do it right and hire an expert.
At Drive Research, we have helped many startup brands create data-driven strategies based on the information collected from our studies.
Here are a few mini-examples of clients we have helped over the years.
The Drive Research team loves working with new businesses and startup organizations.
Based on their years of experience, I asked commonly asked questions they receive from these entrepreneurs. Here are their answers.
In my opinion, one of the best types of market research for a startup company is in-depth interviews.
Regardless of a company’s product, service, or target audience, conducting qualitative exploratory research (via interviews) will help inform business strategy and future direction. For start-ups, there are two primary audiences to consider for in-depth interviews.
Oftentimes, the feedback you receive from even a single interview can make the entire project worthwhile.
Chris Coville, Director of Research
Before entering the market, a startup business should consider conducting market research.
Market research can answer critical business strategy questions like usage habits, perception of key competitors, satisfaction levels, measuring the appeal of a new concept/service, and more.
In addition to gathering information about competitors, market research can identify target markets, answer how to best reach target consumers, and test ads/messaging before entering the market.
Fine-tuning business strategies before entering the market can make your startup successful.
Emily Taylor, Director of Operations
It can, but it’s too difficult to anticipate an ROI of the research. Research should be considered more of an insurance policy or risk mitigation plan.
Going into market research with the idea that research results will lead to an economic guarantee or revenue gain is not advised. It really should be considered more of an operational cost of doing business.
Typically the ROI of research isn’t realized until after an organization observes the longer-term impact of a decision based on research results.
Here are a few examples…
Professionally executed research will help you make better decisions and/or help make you feel better about your decisions.
Zach Adams, VP of Strategy
Are you a startup looking for market research assistance? The first step is to reach out to Drive Research with more information on your needs and some of the objectives you are trying to answer through a project. Drive Research is a market research company based in New York. Our team will show you all how to conduct market research for a startup, and can help you choose the best option.
Would you like to learn about our market research services? Contact us today.
