Low Cost Market Research Tips for Startups

Every year close to 700,000 small business close their doors.  There are lots of articles about the causes of small business failure, and when you look at all of them, the two big ones that stand out are:

  1. Not selling the right stuff
  2. Not selling to the right customer

In other words, small businesses struggle from the false idea that they have to sell everything to everybody.  The result is being ignored by customers and overwhelmed by the competition.  Doing a little bit of research would eliminate a lot of these problems, but the biggest obstacle to doing research is the preconceived notion that it’s just too complicated and too expensive.  Of course, there is the idea of going with your gut.  After all, Steve Jobs wasn’t a big fan of market research “I never rely on market research. Our task is to read things that are not yet on the page.” But let’s face it, most of us aren’t Steve Jobs and a little market research can assure that our business goes a long way.

Free or Nearly Free Exploratory Research

The first step for any startup is to do exploratory research.  Believe it or not, the biggest cost of most of this research is in your time and effort.  In fact, if you’re the founder of the startup or on the founding team of the startup, it’s critical that you are involved in this research because it will truly give you the flavor of your target customer and your market.

Exploratory research comes in both quantitative and qualitative flavors.  The idea behind exploratory research is to be broad and to help you select which areas you are going to focus in.  smallbizbakery

Start with secondary sources that include:

  • Academic journal articles
  • Industry association research
  • Government research
  • Books
  • Magazines

Now you can take what you’ve learned and do some primary exploratory research

  • Online surveys
  • Social media discussions
  • Forum discussions
  • In person surveys
  • In-depth interviews
  • Online focus groups – use Google Hangouts

Opportunity Analysis

Your exploratory research should have given you some firm impressions about where you should direct your focus.  If not, you can still proceed to this next step with the objective of walking away with a target market and an offer that appeals to that market.

This is the ideal time to start quantifying your market and the potential size and opportunity for your business.

  • What niche are you going after?  My favorite definition of a niche is “An audience that is looking for something”.  When you look at it that way, you can easily start quantifying this audience by simply using Google tools.Google Trends– Use keywords to see what the most popular trends are. You can compare different keywords that relate to your business to see what is on the rise and what is declining.

    Google Adword– With a small budget, you can make some test advertisements. Try to make them similar, but change a few key words, interests, and topics and see what your customers are searching for and what market they are a part of.

  • Where should you locate your business?  Where should you advertise?  Recently the SBA has launched a super tool called “SizeUp” .  This is an incredible tool that will not only tell you where your competition is, but will help you decide where to advertise as well as how much local consumers are spending on your product or service.

    sba3

  • Is there a demand?  For this, you can use your QuestionPro online survey tool to measure demand.  The great news is that you don’t have to have a lot of customers, you can share your survey via social media to get a large audience engaged in the process.

    One specific tip I would give when measuring demand, be careful about how you phrase your questions.  For example, it’s one thing to ask if someone would be interested in a specific product and quite another to ask if they plan on purchasing a product like that within the next 30 days.

Cool Research Tools

Try Meetups for Focus Groups : If you’re an entrepreneur, chances are that you’re already active in a variety of business communities.  But if you’re launching to a consumer audience, you just might find them at the local “Meetup”.  You can find meetups all over the world and it’s a fantastic way to get to know your audience.

Facebook’s Advertising Tool: When I think about how expensive or impossible it used to be to get a handle on what a specific consumer market size was in the past, I just about drool when I play with the Facebook Ads tool.

facebook

Using the tool is easy.  Simply click on “Create an ad” and go through the process of creating the add until you get to the page that allows you to designate who the audience is.  This is where the magic begins.

facebook audience

 

Check out the column on the right — there is your audience count!  Granted, it’s not perfect, but because Facebook audiences are so passionate and self revealing, so the psychographics and demographics are about as close you’re going to get for free as you can.

This is by no means a comprehensive article with tips and tools, but with an open mind and and a few of these tools, you are on your way to starting up a successful and thriving business.