How to Do Market Research for a Startup: Tips for Success

So, you have plans to create an industry-disrupting startup. Before you get started, ask yourself this: Do I know the market well enough to disrupt it?

No matter how informed you are about your industry, you’ll need to conduct market research for your startup if you want to succeed. This will help you better understand the industry you’re planning to compete in — and emerge with a well-thought-out business plan that investors take seriously. 

Here’s everything you need to know about how to do market research for a startup so you can back your idea with relevant insights before you hit the ground running.

 

What is market research for a startup? 

Market research is a business technique that involves deeply understanding your core demographic, its dynamics, consumer attitudes and buying behavior. This type of research is a vital step in building a brand, satisfying client expectations, recognizing opportunities, increasing profit margins and beating the competition.

If you’re building a startup, market research will help you make smart business decisions and organize a successful launch. By understanding how to do market research, you can protect your startup even in a volatile marketplace.

The demand for market research has made it one of the world’s fastest-growing sectors; from $46 billion in global revenue in 2014 to almost $84 billion in 2023.

While effective market research is important for every company — and should be done on an ongoing basis throughout many stages of company development — it is imperative when developing a new business idea.

 

Why is startup market research important?

Small-business market research can help you learn about your industry and market your startup to potential customers. It will also help you figure out how to best engage with customers, benchmark yourself against your competitors, make predictions about profitability, and guide your future moves. Market research may be the difference between making good decisions that help your new business grow and making bad decisions that cause it to fold. 

Here are a few more examples of how startup market research might aid in the development of your business strategy:

• Gives you an accurate picture of the market: Compare yourself to competitors and assess what they’re doing to attract and retain clients. Likewise, you can assess competitor gaps and determine how you can create a more successful, differentiated product.

• Provides insight into your target audience: Determine which customers are most likely to buy your product, what they’re interested in, and how you can best communicate with them.

• Uncovers how customers and prospects perceive your business idea: Learn whether your startup idea fulfills or falls short of specific customer demands. This will help you develop a product that addresses your audience’s needs and a brand that resonates with them.

• Assesses how a new business or product concept will perform in the market: Look at how similar products and services have performed in the market to help you assess the viability of your startup idea.

• Effectively markets your product: Startup market research can help you make informed decisions about product packaging and branding, advertising, and crafting a successful marketing message.

 

Types of market research for startups

Now that you know about the benefits of market research for a startup, let’s talk about the different types of market research you can conduct. 

There are two main types of market research: primary and secondary. You’ll want to use a mix of both to develop a holistic understanding of your target audience. 

• Primary market research involves gathering market data straight from the source by communicating directly with members of your target audience. The advantage of primary research is that you gain clear, up-to-date insights into your potential customers’ needs. Since you’re conducting the research yourself, you may also gain new insights your competitors don’t have. Examples of primary market research include interviews, surveys and focus groups. 

• Secondary market research involves looking at information compiled by third parties. The advantage of secondary research is that it consolidates huge swaths of data from a variety of sources and helps you understand important market trends. Examples of secondary data sources include public and private company databases, news sites, academic journals and industry publications. Crunchbase is known as an important tool for uncovering private company data and conducting targeted searches for the industries you’re interested in.

Methods of market research for startups

In addition to there being two different types of market research for your startup, there are also a couple different ways you can conduct it. These methods are known as quantitative and qualitative market research.

• Quantitative research means collecting and analyzing large numerical datasets. You might conduct this type of research by sending out polls, questionnaires or surveys to large numbers of people within your target market. The data you collect will give you insight into big-picture industry trends, consumer needs and challenges in the market.

• Qualitative research requires an in-depth exploration of customer mindsets. You might do this by conducting a focus group or interview to assess customer feelings and extract insights from the conversation. 

While quantitative data is about cold, hard facts, qualitative data is exploratory in nature. It’s often worth using a mix of both, but most companies prioritize quantitative research because it is scientific, measurable and easily replicated across different experiments.

How to do market research for a startup

At this point, you’ve learned that there are two main types of startup market research: primary and secondary. You’ve also learned that you can carry out this research in two different ways: either by conducting quantitative research and gathering data, or by conducting qualitative research and holding exploratory conversations. 

Now we’ll dive into how to do market research for a startup, step by step. Here’s a quick seven-step guide:

1. Establish your overall goal
2. Choose a research approach
3. Acquire data on your target audience
4. Formulate your research questions
5. Choose the right tools for the job
6. Analyze the data
7. Act on the data

 

1. Establish your overall goal

First and foremost, take the time to clearly articulate the rationale behind the research you’re planning. Think through the most critical information you’re searching for and how you’ll apply your findings. What issue did you want to tackle via research? What will be done with the findings? Is it something you’ll do internally or externally?

These questions will help you formulate your overall research objective. This goal should serve as the North Star that guides the research process and keeps everyone aligned as you build and execute your market research plan. 

 

2. Choose a research approach

Based on the goal you’ve identified, determine how you’re going to conduct your primary and secondary research. With secondary research, answers to research questions are generally already accessible online — through news sources, published books, journals and databases — so you can get started on this right away. 

Primary market research, on the other hand, tends to be more time-consuming and expensive. For a startup, it may be in your best interest to perform primary research only after conducting secondary research. This way, you avoid wasting time and money from the get-go, and instead can develop well-planned research questions that bridge any knowledge gaps.

 

3. Acquire data on your target audience

Once you’ve determined your guiding research goal and your approach to gathering data, take a closer look at your target audience. Understanding your target audience can help you devise the best way to approach both secondary and primary research. 

Investigate your audience demographics and characteristics, the types of products they’re interacting with, where you can find information about them, and where you might be able to contact them. Read relevant market data, keep an eye on customer trends, and consider enlisting the help of an industry professional. Once you grasp the type of market research you’re going to conduct and the audience you’re targeting, it’s time to start crafting your research questions. 

 

4. Formulate your research questions 

Asking the right questions can make or break the value of your research. Well-thought-out questions can help inform your overall strategy, but the wrong questions could derail your research and reduce its overall value.  

Some examples of market research questions are:

• How old are you? 
• Where do you live?
• What is your job title?
• How big is your company?
• What is your use case for our product?
• Did you consider any of our competitors? Who and why?
• What do you wish our product could do?
• How much money do you usually spend on X products?
• What’s the maximum you’d pay for X products?
• How likely are you to recommend us to a friend?
• How would you rate your most recent experience with us?
• How long have you been our customer?

Keep in mind that these are just examples, and not all of them will apply to your startup. You should develop your questions based on a number of factors, including whether your company is B2B or B2C, whether your startup is brand new or has existing customers, and whether you’re aiming for quantitative or qualitative data. As you formulate your set of questions, make sure they touch back to your main market research goal.

 

5. Choose the right tools for the job

Data analysis is a time-consuming task, but it’s the cornerstone of conducting market research for a startup. Data collection, competitive analysis and the identification of customer preferences and trends are critical to your success, so it’s imperative that you have the right tools on hand. Ideally, these tools will not only provide a rich dataset you can use to gather information about your target audience, but they’ll also speed up your workflow during the market research process.

Here are a couple of examples of market research tools you can use:

Secondary research tool: Crunchbase offers a best-in-class dataset of companies and contacts that is updated constantly, helping you identify upcoming market trends and monitor your competitors. With Crunchbase, you can conduct granular, filtered searches based on your target market, set real-time alerts for changes in company activity, and find industry-specific landscape analysis with live information on company firmographics, funding rounds and acquisitions. Learn more about market research on Crunchbase.

Primary research tool: Qualtrics is a platform that helps you conduct research via surveys and a variety of other methods to answer critical market analysis questions for your startup.

 

6. Analyze the data

Once you’ve collected data using your research questions and tools, you’ll need to analyze it to distill relevant and applicable business insights. 

Often, data analysis is a manual process that includes compiling and sifting through the data you’ve gathered, annotating videos, taking notes, dissecting survey responses and more. Again, you’ll want to reference the overarching goal of your research, especially in this stage, to ensure you’re paying attention to the most applicable information that will best serve you. Start by noting common themes and trends, and then use those trends to efficiently sort through the data.

There are a variety of data collection and market analysis tools (like those listed above) that can help you evaluate the data by automating part of the process. You may also want to partner with an analyst who can gather insights from your data using statistical models and advanced market analysis techniques.

 

7. Act on the data

After you’ve drawn conclusions from your data, it’s a good idea to create a research brief or report that includes both a high-level findings summary and a deep dive into your methodology, data and key findings. This will help organize your results in a clear and succinct way, enabling other team members to reference and apply findings to inform the overall direction and strategy for your startup. You can also leverage this data when pitching your business idea to investors.

 

How much does it cost to do market research for a startup?

Startup market research costs vary depending on several aspects, including what you want to achieve, who will be engaged, the time it takes to collect data, and the approach or technology you use. Because there is no one-size-fits-all approach that suits every organization or project, determining an accurate pricing estimate for market analysis may be tricky. Some approaches are less complicated and less expensive than others, but they may not give you as much benefit.

With the help of an agency or consultant, a thoroughly customized market research project could cost between $20,000 and $50,000. Expect to pay more for market research assignments conducted by a specialist in your industry. This high price is due to industry experience, professional project management and planning, and advanced data interpretation.

There are less expensive alternatives, but the analysis you receive will likely not match what a dedicated research firm can provide. Short, quantitative internet surveys can cost anywhere from $15,000 to $30,000 and are more likely to support an existing theory than to identify new, innovative approaches for your business.

 

Get ahead of the competition

Learning how to do market research for a startup is only the beginning of formulating a strong business plan that will impress investors and lead your startup to success. 

With Crunchbase, you can conduct affordable market research on an ongoing basis by empowering your team to dig deep into industry data and evaluate market trends. Check out our solutions or connect with our team directly.

• Tags:
• market research
• Startups

• Originally published February 19, 2022, updated October 26, 2023