“The golden rule for every businessman is this: Put yourself in your customer’s place.” – Orison Swett Marden, Founder, SUCCESS Magazine, Author
You have probably done a fair amount of secondary market research on your idea. It’s one thing to collect data on your market by doing some secondary research, but you must really “know” your target customers by doing primary research. The only way to do that is to get face-to-face with them and LET THEM DO MOST OF THE TALKING. You should learn everything about your market — your customers and your competition — that can possibly be learned.
Hopefully, YOU are part of the target market. You would love the product, buy the product, and tell everyone you know about it even if it was not yours! With a little luck, the fact you understand the market so well has given you a unique insight into why your idea can be transformed into a money-making machine.
The goal of primary market research is to discover the answers to, and craft a crystal-clear description of, the five W’s:
Who is the paying customer, exactly? What motivates them to purchase your product? Where are they likely to purchase your product? When are they likely to purchase your product? Why would they purchase your product over other solutions? And perhaps most importantly, WOULD THEY buy the product right NOW if it was available at a price they thought was a good value? (Then proceed to drill down on what that value range is in their minds.)
As a bonus, you should also be able to address the How’s: How are they likely to find out about it and how much will they pay for it? Too many entrepreneurs make the mistake of creating a product that no one will buy at any price, or at a price that does not have sufficient margins to make a profit.
Simple questions, yes, but super hard to answer without digging deeply into the needs, wants, and pain points of the customer.
Things to Think About and Decide
First, decide what segment of the market you should serve first. Your product likely has multiple applications and features for multiple markets. You must make hard choices about which one to pursue first. Find the segment ripe for disruption (the opportunity) and identify the customer’s sweet spot (the burning need) within that segment. Ask the customer, “Why would YOU buy it?” and “What specific problem does it solve for you?”
Second, determine the size of the addressable market. Is it big enough? Is it growing or shrinking?
Fourth, identify the competitors – or the solutions customers currently use to solve the problem your product proposes to solve. What share of the market do these solutions have? Can you grab some of this share, or do you plan to grab new share as the market grows?
Fifth, specifically define your special insight into the needs, behaviors, or trends of the market that others do not have. Is this market really where you want to spend the next five to ten years of your life?
Things to Do and Avoid
Do, read the book Nail It then Scale It: The Entrepreneur’s Guide to Creating and Managing Breakthrough Innovation. Use it to create a process and plan for conducting primary market research.
Do, produce one “top down” revenue figure by finding key market research and produce a second “bottom up” revenue figure by estimating the number of users or buyers, the average price, and the average amount spent on purchases per year.
Do, find (and If necessary, purchase) a recent research report on your market by a reputable research vendor.
Do, summarize your market: (1) How long has this market existed (is it relatively new and growing or mature and stagnant)? (2) How many companies (or consumers) are in the market? (3) How many people work in the field? (4) How large is the market in terms of annual revenues and number of units sold? (5) Who are the chief competitors and which ones have gone public or sold in the last three years?
Do, list the top two or three conferences for the industry and try to watch videos of the events, attend a webinar, or attend a conference in person.
Do, create a User Persona that describes the wants/needs of your typical customer; how this customer learns about your product, and how this customer goes about buying and using your product.
Do, run a mini ad campaign on Google AdWords, Facebook, and/or Linkedin using keywords that describe your target market, to collect click-thru data. Find out what other companies are paying to dominate those keywords.
Do not, rely solely on secondary market research and survey responses. You must talk to potential customers in your target market face-to-face or via video chat.
Recommended Readings & Resources
Performing Critical #Startup Research on the Cheap Video by Dan Shapiro
Customer Development is Not a Focus Group by Steve Blank
Startup Metrics by Dave McClure
Free database of technology companies, people, and investors. Good place to see if a company is already doing what you are thinking of doing. Good place to learn where investors are placing their bets and which ones might be interested in your deal. See who has invested in your competitors.
Industry and market research reports.
Miscellaneous Market Research Sources:
|Gartner Group||Klue||Internet Archive|
|Forrester Group||Quantcast.com||Labor Statistics|
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