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 industry well enough to disrupt it?

It’s exhilarating to start a new entrepreneurial endeavor. However, it’s easy to get caught up in the tangible elements of establishing and advertising your business: designing a website, getting the message out, and building your brand.

While these factors play an essential role in building a modern company, a startup will likely flounder without competent market research. Learning how to conduct market research for a startup will help you better understand the industry you’re planning to compete in and create a solid business plan that investors will take seriously.

After all, market research is a vital aspect of maintaining your brand, satisfying client expectations, recognizing opportunities, increasing profit margins and being competitive in general. It’s hard to verify that your products and services are addressing actual pain points of your target demographic without data collected directly from consumers and your market.

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 startups? 

In short, market research is a business technique used at the outset of developing a company idea and involves extensively understanding the core demographic, its dynamics, potential consumers’ attitudes, focus group buying behavior, and other elements.

Market research data is utilized to make business-oriented decisions and organize the launch accordingly. Understanding how to do market research, small business enterprises can leverage their success when faced with a volatile marketplace.

In fact, the demand for sound market research has made it one of the world’s fastest-growing sectors, with revenue of $74.3 billion in 2019. 

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 launching a startup since it assures a successful launch.

 

Why is startup market research important?

Small business market research can help you learn about your industry and your competitors, and inform how you market your business to the customers and clients you wish to reach. It may also help you figure out how to engage with them, help you benchmark how you compare to the competition, and guide your future moves.

Understanding how to do market research for a startup can help you establish a fact-based framework for projecting sales and profitability. In fact, it may be the difference between making good decisions that help your business grow and making bad decisions that cause it to fold.

Through extensive market research, startup companies can tweak the development of their products and services, their introduction to the market, and marketing to customers. Here are a few examples of how market research might aid in the development of your business strategy:

• Provide you with an accurate picture of your company and the market: You can check how your brand is viewed compared to your competitors and assess what they’re doing to entice clients.
• Assist you in determining who your customers are: Market research helps determine where they are and which consumers are most likely to conduct business with you.
• Uncover how clients and prospects perceive your current business and goods: If you aren’t already aware of if you are fulfilling or failing to satisfy customer/client demands, market research will clue you in. It’s also likely that you’ll unearth previously unseen comments regarding your company and services.
• Assess how a new business or product concept will be received: Based on how similar products and services have performed in the marketplace, it can help you assess whether a new business or product concept will be enticing.
• Package and market your product: Market research can help you make informed decisions about product packaging, advertising and crafting a successful marketing message.

The startup climate in which you operate is becoming increasingly competitive. It’s more important than ever to leverage market research to stay in the know so you know when you’re on the right track, and when it might be time to pivot.

 

How to do market research for a startup 

Market research is a time-consuming task for everyone. However, with limited funding and finite runway, small startups oftentimes don’t have millions to sink into a comprehensive industry analysis. 

While a research deep-dive is definitely worth investing in at some point, relevant and applicable insights can often be gathered from high-level, initial research as a starting point. 

Here’s a quick seven-step guide that will lead you through the basics of how to do market research for a startup:

 

1. Establish your overall goal

First and foremost, be sure to 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 inside or something you’ll do externally?

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

 

2. Choose a research approach

The two most common approaches for market research are secondary and primary.

• Secondary research

In secondary research, answers to research questions are generally already accessible online—through news sources, published books, journals and other places—the job is in sifting through the available material and locating data that corresponds to the specific research topic.

At the start of the secondary research process, the amount of material accessible on a certain topic may seem daunting. The ideal source for answering a certain research topic might vary greatly, and a single project will almost certainly require many sources. It’s important to leverage the overall research goal to narrow the focus of this approach to enable researchers to uncover relevant insights.

• Primary research

Primary research focuses on collecting net-new data and answers to questions that have not been asked before. Because primary research is often more time-consuming and expensive, it is in an organization’s best interest to perform primary research only when gaps in existing secondary research have been found.

You should only carry out primary research after thorough secondary research is complete. Primary research necessitates utilizing greater resources than secondary research, given the research team is responsible for everything in primary research from determining the best means to reach a target audience to figuring out which metrics should be assessed. It’s always a good idea to perform secondary research ahead of time to establish what information is not already available and avoid wasting time and money on unnecessary primary research.

Once researchers understand what is and isn’t already accessible via secondary research, conducting primary research can help bridge the gap in knowledge and answer critical product- and client-specific questions. Given the need to create net-new questions and approaches to data collection, primary research often takes much longer to conduct than secondary research.

A few examples of primary research approaches include:

• Interviews
• Focus groups
• Surveys 
• Observations

 

3. Acquire data on your target audience

Once you’ve determined your guiding research goal and your desired approach to gathering data, it’s time to 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. 

Think through where your target audience is, what they’re interacting with—or where you can find information about them—and where you reach them. It’s recommended to enlist the aid of industry professionals, read relevant market data, and keep an eye on market trends to acquire the necessary knowledge of the target market. Once you grasp the type of 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. The right questions can help inform your overall strategy, but the wrong questions could derail your research and reduce its overall value.  

Here are a few initial questions to ask your internal team that can help you start thinking through how to formulate research questions for your target audience: 

• Who is your competition?
• What are your direct and indirect rivals’ market values?
• What distinguishes your service from the competition?
• In the target market, what is the scope of your service/product?
• What are the current market trends?
• What are the buying habits of your target market?

These basic questions can help inform the creation of your formal research questions. For example, even if you know what distinguishes your service from the competition, do you know if your target audience is also aware of how you differ? Do you know why your target audience tends to choose you over a competitor (or vice versa)? Start by asking yourself these basic questions and use them to inform the questions you aim to answer in your research.  

 

5. Choose the right tools for the job

Data analysis is a time-consuming task. But gathering information is just the first step; effectively evaluating it is just as important. Both data collection and evaluation are critical to the success of any research, so ensuring you have the right tools on hand is imperative. Here are a few tools that can help you conduct both secondary and primary research:

Secondary research tool

• Crunchbase: Crunchbase’s live company database is updated constantly, helping you identify upcoming market trends before your competitors. With Crunchbase, you can find complete industry-specific landscape analysis with live information on company funding rounds, acquisitions, location and industry.

Primary research tool

• Qualtrics: Qualtrics is a platform that helps businesses formulate and conduct research via surveys and a variety of other methods to inform business strategies.

 

6. Analyze the data

Once you’ve collected your primary and/or secondary data, it’s time to slice and dice your research findings to distill relevant and applicable business insights. The good news is, there are a variety of data collection and analysis tools (like those listed above) that can help you collect and analyze data. That said, there’s no way this part of the process is going to be simple. 

Oftentimes 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, it’s important 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. It’s often helpful to start by noting common themes and trends, and determining how those trends can help you better sort through the data.  

 

7. Act on the data

Once you’ve sifted through the 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, key findings, etc. This will help organize your findings in a succinct and clear way, enabling other team members to reference and apply findings to inform the overall company direction and specific strategy decisions.

 

How much does it cost to do market research?

Small business 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 can suit every organization or project, determining an accurate pricing estimate for market research may be tricky. Some approaches are less complicated and less expensive than others, but they may not give you as much benefit.

In general, a thoroughly customized market research project could cost between $20,000 and $50,000. Expect to pay more at the higher end of that range for market research assignments conducted by a specialist business in your industry area. This high price is due to their team’s overall value-add, which includes correct data interpretation, the capacity to save you time up front, and increased design based on previous industry experiences.

There are less expensive alternatives, but the analysis you receive will likely not match what a dedicated research firm can provide you. 

Short, quantitative internet surveys can cost anywhere from $15,000 to $30,000 and are more likely to support a theory than to identify innovative strategies of approaching a topic from the customer’s perspective. 

You can even turn to cheaper research startup solutions, but they sometimes lack analytical experience and advanced question logic, and may result in low participant quality when used with a smaller or less-developed database of respondents.

 

Get ahead of the competition with Crunchbase

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

Crunchbase can help you conduct market research, and enable your team to better market and sell your product with an all-in-one prospecting solution. If you want to learn more about how to leverage Crunchbase for sales prospecting and how to gather extensive competitor insights before and after you launch, check out our solutions or connect with our team directly.

• Tags:
• market research
• Startups

• Originally published February 19, 2022