Nearly half of startups that fail, fail because the market doesn’t want their product or service. Half. Next to cash flow (which can be a related issue in some instances), poor product-market fit is a leading cause of death among new businesses and startups.
You might already be shaking your head. You can feel it in your bones that your product or service is different, that what you have is special. You might believe everyone is going to want a piece of what you’re selling. And at Bunker Labs, we believe in you, too. Unfortunately, the market doesn’t care about our feelings, and a lot of entrepreneurs that feel just like you get very surprised when they go to market and things don’t take off like they hoped.
So, what can you do to prevent that? How can you check, confirm, and re-confirm that what you’re selling has an interested market? How can you ensure your thoughts about what customers want, need, and what they’re willing to spend to get it? How can you validate your beliefs on your product-market fit?
What Is Market Research?
Market research is a suite of data collection techniques and analysis of that data that enables companies to answer questions and gain insights about a target market, typically to inform decision-making. The specific questions market research might answer can range wildly, but generally boil down to discovering consumer behavior, market conditions, and/or emerging trends. This is accomplished by selecting a specific question, and then collecting and analyzing data, often in overlapping fashion, until you arrive at an answer to drive informed decisions.
The data collection and analysis can involve myriad techniques, which we’ll explore in more detail in a follow-up piece.
Special Thanks to Fetch Rewards
To learn more about market research, Bunker Labs went to our new partners at Fetch Rewards to seek some hard-won expertise on the subject. Fetch Rewards Chief of Staff and Air Force veteran Philip Rosen answered the call, spending time to contribute to this piece. Philip has been involved in finance, and worked as a strategy consultant and in corporate strategy for over a decade with companies like Accenture and Fetch Rewards. His various roles have necessitated conducting, analyzing, and digesting market research from a variety of perspectives, lending him unique expertise.
What Questions can Market Research Answer?
Market research can answer all sorts of questions with the right technique and phrasing. Not sure which city to expand into next? Not sure which of two products to add to your catalogue first? Not sure what to name your product or even your company? Finding which answer is likely to lead to the best outcomes for your business lies in doing effective market research. These questions can get as specific and narrow as you like, but below we’ve outlined four of the biggest questions entrepreneurs should have market research-backed answers to.
When you’re making decisions based on inaccurate beliefs, ideas, or feelings about market conditions that don’t accurately reflect market conditions, that’s when you put your organization at risk. Market research is all about arming you with data about the real conditions on the ground so you can adapt your business to best thrive in the current environment.
What Are the Market Conditions for your Industry?
Market conditions encompass a lot of elements that are outside the scope of market research, which is focused more on competition, customers, and buying habits. However, market research can help you learn what trends are rising or falling in your industry, who the major players are in your industry and what their market share looks like. It can also reveal if spending in your industry is up or down, and expectations for the future. It can even explore these questions at varying geographic and virtual scales, and provide information about foot traffic or web traffic.
What is the Market for your Product?
Market research can help you determine the total available market (TAM), total serviceable market (TSM or SAM), and total obtainable market (TOM or SOM). The total available market is the total market that has the problem your product fixes. The total serviceable market is the portion of the TAM that is also your ideal customer, and that you are targeting with marketing or sales efforts. The total obtainable market is the amount of the TSM research suggests you can capture. These numbers are often expected in pitches to investors and banks. Having the most accurate data possible can go a long way toward putting your most professional foot forward.
How Do Consumers Feel About Your Product?
Market research is an opportunity to interact with consumers, and learn how they feel about your product, or even a competitor’s product, what they want from those products, and what pain points they have buying and using them. Market research can help you improve your value proposition and customer experience.
Who Are Your Customers?
Market research helps you learn who your ideal customer is, and how they are presently solving the pain point your product alleviates. It also teaches you how to effectively communicate the value to your customers. This is incredibly important because when it comes to capturing market share as a new business, its common to want to tailor your product to a lucrative underserved segment of the market. Market research lets your ideal customer tell you how to get your product and messaging there.
When Should I do Market Research?
While you should always have your finger on the pulse of your industry, it’s not feasible for most businesses to conduct endless market research at scale. The most basic answer is, if you have an important decision to make that hinges on assumptions about the market, it’s probably a good idea to do some formal market research ahead of making that decision.
Of course, some degree of market research should be ongoing. Often, these year-round measures for newer businesses are less robust, and are just a way of keeping your ear to the ground. Setting up and keeping tabs on email surveys, website polls, comments and reviews, customer service complaints, reading relevant trade magazines, and more things you probably already do count as market research.
That said, there are four common business milestones it’s best to approach with organized, specific market research already in hand, informing and guiding key decisions.
Launching a business is expensive. Market research ensures you’re spending seed money wisely and giving your business the best chance for a successful launch. Market research helps refine your product or service, your customer experience, your sales, and marketing messaging with ideal customers, and it even helps decide the optimal time of year to go to market. Market research empowers you to work smart and make good choices about where you put those critical early resources to do the most good.
Before Launching New Products
Thinking of adding to your catalogue? Market research can help determine if your current customers are interested in it, or if you’d have to treat the product launch as if you were also entering a new market. Just like market research for launching, it can help you refine your product and ensure it solves your ideal customer’s problems in a way their current solution doesn’t.
Before Entering New Markets
Thinking about opening a second location, or getting on a webstore? Adding a new conference to your annual schedule? Or maybe you’re thinking about rebranding your flagship product for a new demographic. It’s a great time to do some market research to learn about consumers in the new market, who your ideal customer is in that market, and how many there are.
Follow-up Market Research
Every so often, it’s a good idea to use market research to check-in and make sure the landscape hasn’t shifted under your feet since you entered the market. After a major milestone, it’s a good idea to do some follow-up market research every 6-12 months afterward to see if you can gain insights to increase your market share.
Market Research Terms
There are a few terms used in market research you should be familiar with.
- Primary Market Research: Research your company is conducting (Learn more about early-stage market research here)
- Secondary Market Research: Research another organization has done that you are using for analysis
- Qualitative Data: categories of data where each answer is unique, like long-form answers in reviews, interviews, or focus groups. A single piece of qualitative data can have a lot of value and insight on its own. Derived from the word “quality”
- Quantitative Data: categories of data where each answer is generally a number, easily sorted, segmented, and understood best in the context of lots of other quantitative data. Derived from the word “quantity”
Step 1: Ask a Specific Question
With all the background information out the way, it’s time to actually do some market research! The first thing to do, is craft a specific question or questions you want market research to answer. An early-stage company looking to refine their minimum viable product might have questions like:
- What do customers think of my new product?
- How much money would consumers spend to solve [insert specific problem]?
- Are customers using my product as intended?
- Who has the problem my product solves?
- Is expendable income among newlyweds going up or down?
There are thousands of questions you might ask. What’s important is to narrow it down to the questions that directly inform decisions you have to make in the months ahead.
Step 2: Select Your Market Research Techniques
The next step is to decide which market research technique(s) are best suited to deliver the most accurate answer to your question within the scope of your resources. Sometimes it might just be one technique, other times it might be several. Exploring a question through multiple rounds and techniques might give a better answer, but the cost and time might not always fit your situation. Techniques include:
- Buyer Personas
- Company Reports
- Focus Groups
- Government Agency Data
- Industry Statistics
- Interviews & Panels
- Market Segmentation
- Observation-Based Research
- Ratings & Reviews
- White Papers
Early-Stage Company Tools
Buyer Personas, Company reports, Government Agency Data, Observation-Based Research, Ratings & Reviews, and White Papers specifically are all great for early-stage companies. They are largely free, and can yield insights even if you’re conducting the research alone. More mature organizations lean heavier on the other techniques, as they can afford third parties to conduct the research well.
Step 3: Conduct and Analyze Some Market Research
Once you know which techniques you’re using, it’s time to both conduct and analyze your market research. You might intuitively want to conduct all the market research first, and then analyze it all. You’d be wrong.
It’s generally best to allot some time to analyze and draw insights from research as you conduct it. Did you just finished speaking with or observing a focus group? Take a few moments to do analysis before you bring the next group in. This gives you a chance to change the wording or order of questions, add or remove questions or parameters, and more. This helps eliminate unintentional biases from the market research and allows you to pursue new avenues as they come up in your research.
Step 4: Consolidate and Repeat
After doing a round of market research (be that an hour, a full day, or a longer cycle) it’s a good idea to spend some time consolidating any insights. This might be as informal as journaling them, holding a quick meeting to discuss them, or as formal as writing a report and making changes to your pitch deck or business plan.
With insights gained, it’s time to think about making any permanent changes to the process of collecting or analyzing the data in preparation for the next round. The goal is always to get answers that can drive decision-making, so any refinements should be made with that in mind. That might mean ensuring the diversity of research subjects better reflects the diversity of the market you’re pursuing, trying a different technique, or scaling up use of an existing technique for better quantitative data.
How do I know When I’m Done?
There are generally two ways market research ends. First, you might hit a deadline that forces a decision on the subject, making further market research irrelevant at that time. Not an ideal situation, but it can happen.
Otherwise, when you feel you’ve gained enough insights to real and current market conditions to make an informed decision, you’re done. This is a little subjective. To have actual 100% market insight, you’d have to be able to read the mind of every single individual in your total available market. While online social media and shopping behavior is getting us ever closer to that sort of data, it’s rare you’ll get to make decisions with absolute market insight.
So, when will you feel you know enough to make a decision? That’s a personal choice, and it’s going to look different person to person, or even decision to decision. A good rule of thumb is to give the market research a chance to prove your assumptions wrong. That means making sure you have a good sample size to get a sense of the market reality.
Pitfalls with Market Research
You want to avoid confirmation bias. So, don’t stop doing market research just because the very first round happened to tell you exactly what you wanted to hear. Similarly, don’t disregard the first four rounds of market research that proved you wrong because the fifth round proved you right. If you’re only hunting for what you want to see, the market research loses its ability to ground your decision-making process in reality.
That doesn’t mean you need to obey market research in every situation. This is a process to inform your decisions, not make them for you. This is especially true when you’re solving an existing problem with a new kind of product or service. Market research might reveal it will be an uphill climb to capture market share from the current solutions customers use. This doesn’t mean you should give up on your company. Even if you “go against” the market research, it should help you wisely allocate resources to face the uphill battle.
Does Your Company Need a Free Expert Advisor?
Join our Veterans in Residence (ViR) program. Veterans in Residence is a six-month cohort-based program to help veteran and military spouse entrepreneurs launch and grow their businesses. A few select entrepreneurs whose businesses are most ready to reap the benefits can receive a special advisor from one of our partners like Fetch Rewards! Advisors can give valuable, specific insight you can put into practice immediately, and can also open the door to a wealth of opportunity and key contacts for your business!
Learn more about the Veterans in Residence program on our website today, and fill out an interest form so you don’t miss your chance to reap the benefits!
Our New Partners
Fetch Rewards has partnered with Bunker Labs to participate in our new Advisor program for our flagship Veterans in Residence (ViR) program. Some entrepreneurs in our current ViR cohorts have already taken on an advisor from Fetch Rewards, benefitting from their specific, relevant experience and access to resources and key contacts, particularly in the consumer retail and restaurant industries.
Fetch Rewards is a mobile shopping app that rewards shoppers for buying the brands they already love by either buying online or scanning receipts with their phone. Fetch Rewards is involved in 135 billion dollars in annual transactions among over 17 million monthly active users, giving them unmatched insight into customer activity and buying trends. Their partnership with Bunker Labs is a boon to all Bunker Labs entrepreneurs selling consumer products.
Special Thanks to Philip Rosen of Fetch Rewards
This article was made possible by the gracious contributions and expertise of Philip Rosen, Chief of Staff at Fetch Rewards. Phil Rosen is the Chief of Staff at Fetch, America’s No. 1 rewards app and leading consumer-engagement platform. In his role, Phil leads major cross company initiatives and supports the overall strategic objectives of the organization. Phil is a US Air Force Veteran where he served as a Finance Officer, including overseas tours in the UK and Afghanistan. Prior to working at Fetch, Phil worked as a Strategy consultant at Accenture Strategy, as a leader in their high-tech practice. He earned his undergraduate degree in Finance from The University of Illinois Urbana-Champaign and holds an MBA from the Kellogg School of Management at Northwestern University.