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Starting a business with a new product can be scary because you aren’t even sure if people really want what you’re about to make. In that case, market research is your best friend. Think of it like your business GPS – guiding you down the road to success, while helping you to avoid mistakes that could cost you tens of thousands of dollars and eventually put an end to your startup before it ever really gets started.
Market research for new product ideas is about systematically collecting information about your potential customers, competitors, and the state of the market in order to understand if you have a viable commercial concept. Research has shown that companies that conduct rigorous market research are 70% more likely to be successful than those that do not.
This might sound complicated, but the key is to break it down into smaller components and suddenly it feels much more manageable. Whether you are developing a mobile app, a physical product, or a service offering, all of these techniques will enable you to make informed decisions based on evidence rather than guesswork.
Why Market Research Matters for New Products
Before getting into the steps on how to do it, let’s dive into why this process is crucial to entrepreneurs and product developers. Market research provides an early warning system for you to identify possible problems before they lead to costly failures.
Think about it: 90% of startups fail, inadequate market research is among the top reasons why. When you understand the needs, wants, and behaviors of your target market for your product, you are creating a map that takes you to customer satisfaction and ultimately profits in business.
Market research can also help you identify opportunities that you may have not seen at first. Sometimes the market shows you that your original idea needs to be adjusted, or you may discover an entirely different problem that your solution could potentially solve better.
Step 1: Define Your Product Concept and Research Goals
All successful market research projects start with clearly defined objectives. You can’t hit a target that you haven’t defined, so this first step is all about figuring out exactly what you want to know about your product idea.
Clarify Product Vision
Write a one paragraph description of your product in a way that anyone can understand. Include what problem it solves, who would use it, and what makes it different from other solutions that currently exist. This will become your north star through the research.
Ask yourself the following core questions:
- What specific customer pain point does your product solve?
- There are many alternatives available; how does your solution work differently than the alternatives?
- What would success look like for this product in the marketplace?
- Who is most likely to become your first customer?
Define Specific Research Objectives
Done. Turn your “good idea” into “research objectives” that are measurable. Rather than setting fuzzy goals like “determine whether people are interested in my idea,” you will set objectives like:
- Validate that a minimum of forty percent of target customers have the problem you are attempting to solve
- Establish the top three features customers rate as most important
- Identify the price point band relative to perceived value
- Understand how the customer is currently behaving and making decisions
- Identify the competitors and the competitive landscape and map the opportunity for positioning.
Plan Your Research Timeline
Set realistic timeframes around each research phase. Most market research studies are time-intensive and often take 4-8 weeks depending on the scope of the study, including company complexity. Planning your timeline tends to keep your attention between research phases and avoids paralysis analysis – which is the habit of endlessly researching without implementing anything!
Step 2: Conduct Secondary Market Research
Secondary research is gathering publicly available data or information on your market, industry, and competitors. It is inexpensive and often helps provide economic, social, and competitive context before you start gathering primary data.
Examine Industry Trends and Market Size
Begin thinking about the big picture. Use some of the great data available online, such as Google Trends, industry reports, government databases and more to study market behavior.
Market Growth Trends: Is your target market increasing, stable or declining? The larger the growing market, the more potential and opportunity there would be, but there can also be more competition.
Technology Adoption Trends: How fast will your target customer adopt solutions? This component also impacts your “go to market” timeline and approach.
Economic Trends: Change in the general economy will have an impact on how your customers allocate spending to your category. For example, a luxuary item compared to a business purchase will respond differently.
Regulatory Environment: Research government regulations, laws and industry standards that impact your approach, product development or marketing.
Research Your Competition with Purpose
Competitive analysis can highlight gaps in the marketplace as well as show you what customers currently view as acceptable solutions. Build a comprehensive competitor matrix that identifies:
Direct Competitors: Companies selling the same products to the same customers.
Indirect Competitors: Companies solving the same problem for customers but going about it differently.
Potential Future Competitors: Companies that could easily pivot into your marketplace.
For each competitor, record their pricing, messaging, customer feedback, and identified weakness(es). In particular, pay attention to consistent customer complaints. These typically reveal the process by which your product will differentiate itself.
Use Multiple Information Sources
When searching for secondary data, go broad. Here are some potential information sources:
- Industry and trade publications
- Government statistics and economic data
- Academic research studies
- Market research reports from IBISWorld or Statista
- Social media conversations and online discussions
- Competitor websites, social media, and review sites
- Professional associations reports and surveys
If you’re making critical business decisions, it’s especially important to verify the information from multiple sources.
Step 3: Identify and Profile Your Target Audience
Arguably, defining the who your potential buyer will be is the most important step in market research. In this phase, you will develop descriptive profiles of your ideal customers based on research, as opposed to assumptions.
Segregating your market properly
Clearly not everyone in your potential market is going to be a potential buyer, so you need to determine where your best segments are located. Explore how different groups of potential buyers can be segmented:
Demographics: Age, gender, income level, education, occupation and geographic location.
Behaviour: How people have approached the current resolution to your product’s problem, their buying behaviours and decision-making triggers.
Psychographics: Values, lifestyle choices, attitudes and motivations impacting buying decisions.
Needs: The particular ways people experience your product’s core problem.
Begin in broad segments but narrow your segments based on the closest fit to your product concept.
Create Detailed Customer Personas
Create detailed profiles for your best customer segments. To do this, create customer personas, which should intuitively become people you could have a conversation with.
Each persona should include:
Basic Information: Name, photo, age range, occupation title, and family status.
Background Context: Education, career trajectory, location, and other personally relevant information.
Goals and Orgranizational Priorities: For example, What does this person want to achieve in areas relevant to your product?
Pain Points and Frustrations (Job To Be Done): Examples could include specific issues this customer persona faces that your product could help
resolve?.
Current Solutions: Describe how this person currently manages the problems your product is trying to solve.
Communication Preferences: Where the persona receives their information, influencers, brand contact preferences.
Make sure that these personas are based on data, completed through research. Each customer segment should use the results of an interview process. The suggestion is to conduct 8-12 interviews per each customer segment to achieve credible conclusions rather than presuming data.
Verify Your Audience Assumptions
Validate your original customer assumptions with different types of research:
- Explore social engagement with posts in your product space
- Survey your potential customers about their behaviors and preferences
- Join the online communities of your target audience
- Observe the customers of your competitors and read reviews
- Experiment with audience targeting approaches in small test ads
This process of validation often uncovers unexpected surprises about who really has an interest in your product versus who you initially assumed would want it.
Step 4: Conduct Primary Market Research
Primary research is the process of collecting new information from your possible customer base. This allows you to generate specific knowledge based on your product concept that you cannot obtain from existing documents.
Design good customer surveys
Surveys allow you to get meaningful quantitative data from many possible customers in relatively short time and at relatively low cost. Use the following best practices to improve your results:
Organize the questions: Start with questions that ease people in to discussing the problem space. Be less specific about your product concept, and then get more precise with the details of your product concept.
Use language that is easy to understand and free from bias: Avoid leading questions which instruct respondents to answer a certain way. For example, get rid of “Don’t you think this product is amazing and will solve your problems?” and simply ask “How do you currently handle [a specific situation]?”.
Use a consistent response format: Use rating scales if you are using them, and assume that open-ended questions will be as valuable as the time you put into analyzing them.
Stay to the point: Only use 10-15 survey questions and keep your survey as short as possible in order to maintain the quality of your responses. The longer the survey, the more likely that the respondent has skipped or abandoned questions, producing poor quality responses.
Test Test Test: Before you launch, have a few people outside your team take the survey to see if there are any questions that are confusing for them or whether there are any technical issues.
Preparing to Conduct Customer Interviews that Go Deep
One-on-one interviews provide qualitative insights that point to the, “why” behind people’s actions and decision-making. It’s through these conversations that I often found surprising insights that no survey would have produced.
Securing the Right Participants: I like to do about 8-15 interviews per segment to build research and I am doing it by recruiting people that literally make up that target audience.
Ask Open Sentences Questions: Second, build open-ended questions that I encourage my participants to provide narratives about instead of yes/no answers. For example:
- “Can you talk me through the last time you experienced [problem your product solves]?”
- “What is the most frustrating part about how you deal with that situation currently?”
- “How do you typically go about researching solutions to problems like this?”
Listen More Than You Talk: The best interviews feel like a casual conversation with customers that are comfortable sharing, instead of an interview. That is the desired outcome.
Ask Follow-Up Questions for Interesting Responses: If someone mentions something interesting you should not be afraid to ask “Tell me more about that”, or “What did that look like?”.
Test Your Product Idea
Use some combination of the following methods to determine authentic customer interest in your product idea:
Concept testing: share your product idea using mockups, descriptions, or prototypes & collect qualitative data based on customer experiences.
Landing page tests: design an uncomplicated website that describes your product idea and track how many visitors sign up for updates or commit to purchase your offering.
Social media tests: share your concept in relevant social media communities & monitor engagement. Authentic excitement will generate feedback (as opposed to “likes” and shares) that matters to starting a conversation.
Pre-sales experiments: assess real market demand by asking for pre-orders or deposits on your offering before you developed it to the point of seeing it for sale. This is the most authentic validation because people are prepared to commit dollars to see it happen.
Set Up Focus Groups When Applicable
Focus groups are effective for testing messaging, getting reactions to an idea, and generally gauging how different customer types navigate each other’s opinions.
Groups should have a small number (6-8 participants) and be moderated by a professional who can control the natural discussion, while modifying /steering productive conversations. Recognize which chapter participants want consensus or which chapters they want to “argue” about.
Step 5: Analyze Market Demand and Validate Your Concept
This very important step requires you to combine all of the information you have accumulated to assess whether there is real demand in the market and whether your business concept is valid.
Estimate Your Market Opportunity
Using the data you have collected, you will need to make an estimate of the size of your target market:
Total Addressable Market (TAM): The total demand for your product category if all potential customers purchased your solution.
Serviceable Addressable Market (SAM): The part of the TAM that your specific products can realistically serve.
Serviceable Obtainable Market (SOM): The percentage of the SAM that you can realistically acquire given competition constraints and your resource constraints.
As you develop these estimates, use multiple data sources to corroborate your estimates (e.g. survey results on purchase intent, industry reports, competitive analysis).
Evaluate Customer Pain
Ensure the problems your product solves are important enough to compel actual purchase:
Pain Severity: Rate how severe the customers’ experience of the problem is based on interview and survey responses. Ask about emotional language that reflects genuine frustration.
Current Solution Costs: Understand what customers spend (time, money, effort) on solving the problem now. This gives you cost guidance for pricing your product, and validates market need.
Priority Order: Understand where solving this problem fits among the other priorities for customers. Problems that rank higher priorities will more likely result in urgent purchase decisions.
Identify Signals of Product-Market Fit.
When we see successful products, they tend to manifest these signals during research:
High Intent to Purchase: 40% or more of your target customers indicate “definitely” or “probably” they’ll purchase your product with the pricing you proposed.
Value is Recognizable: Customers can articulate how your product is valuable to them without any prodding.
Advantage Over Competitors: Potential customers can identify the value you bring in relation to existing solutions.
Emotional Charge: Customers give statements using words like “excited,” “frustrated with their current options,” or “I desperately need.”
Asses the Viability of Your Business
Now evaluate if your product concept can achieve sustainability profits:
Sales Projections: Identify financial districts for revenue for year-one, year-two and year-three based on your research of the target market size and pricing analysis.
Cost Estimates: Determine development costs, manufacturing costs, marketing costs and ongoing operating costs.
Payback period: Determine how long it is going to take to return your initial investment (even determine a break-even period).
Funding requirements: Determine how much capital is going to be required to develop, bring the product to market, and operate until your business can sustain itself.
Establish specific measures of success and use them as indecators as to a go/no-go. For example, you’re going to move forward if at least 35% of the surveyed customers unequivocally intend to buy the product, and you’re going to move forward if your break-even is lessthan 18 months.
Step 6: Test Your Minimum Viable Product (MVP) Approach
The last study of viability is to build and test a basic version of your product to validate your assumptions with real-market feedback.
Choose Your MVP Strategy
Choose the right MVP strategy depending on the type of product and available resources:
Digital Product MVP: Build a basic version with only the core features that you want to test with actual users. This can help you discover the most useful functionality and see what happens differently.
Landing Page MVP: Build a simple website that explains your product and lets you track visitor’s behaviour. It’s important to see whether people sign up, pre-order, or request to be contacted to see whether there’s real interest in your idea.
Service MVP: You can also build your service in a manual way for a small number of customers to validate whether your core value proposition is valid before launching the automated version.
Prototype MVP: If you can, build a functional version to test hands-on, it is often feasible to run an MVP prototype for a physical product, or complex software solutions.
Construct Meaningful Tests
Arrange your MVP testing to yield actionable analytics:
User Experience Testing: View users as they navigate your MVP and engage it. Identify ways in which users may become confused and/or have workflow interruptions. With only 5-8 testing sessions, you will often realize significant usability patterns.
Feature Validation: Keep track of the features that users engage with the largest amount to help outline your future development priorities.
Pricing Sensitivity: Test various prices and/or payment models, to find out what customers find acceptable as fair value.
Customer Acquisition: Use various channels to determine the most economical means of reaching your audience.
Gather Systematic Feedback
Use several paths to gather quantitative and qualitative feedback:
In-product Feedback: Enable users to provide their own suggestions/feedback and report problems within your MVP.
Follow-up Interviews: Conduct brief conversations with users of your MVP to understand their experience and gather ideas for improvements.
Behavioral Analytics: Track users and their engagement with your MVP (we will discuss tools to do this in future chapters) to compare how people actually use your MVP versus what they say they do.
Performance Metrics: Monitor key metrics to make sure goals are being achieved (engagement rate, completion rate, customer satisfaction, etc.).
Make Data-Informed Decisions
Whether to proceed with full product development depends on MVP testing results:
Validation of Success: Examine what really happened against the criteria you wrote in Step 5. Strong MVP performance includes high user engagement, strong positive feedback, and clear willingness to pay.
Opportunities for Iteration: Use feedback and iterate on the product concept through quick testing cycles. Most successful MVPs have gone through many iterations, based on user feedback.
Pivoting Possibilities: If the MVP testing shows there are serious flaws/issue with the original concept look at whether you need to completely redevelop the product
Scaling Options: For successful MVPs begin planning options on how to scale testing with larger user pool and eventually launching to the larger target market.
Common Market Research Mistakes to Avoid
Even altruistic entrepreneurs make predictable mistakes when conducting market research. Knowledge of predictable mistakes will help you do better research.
Confirmation Bias: Creating research that is to only confirm what you want to hear rather than finding the truth. You can mitigate this in your research by including unbiased third parties in your research process.
Sample Size: Making conclusions based on small sample sizes of data. When conducting quantitative research, sample sizes should be at least 30-50 responses per customer segment.
Leading Questions: Asking questions that lead respondents to the answer you want to hear. Use neutral language that allows the respondent to provide honest responses to the questions.
Skipping Validation: If you believe that your research is completed, don’t assume that it is done just because you think it is completed without having tested the concepts with real customers. Always validate assumptions with real customers (market) feedback.
Analysis Paralysis: Continuing to research and never taking action. Assign clear deadlines and decision make criteria to help you to not get stuck in research.
Tools and Resources for Effective Market Research
Explore all of these resources to conclude your investigations faster and have a more holistic view of your research intent.
Survey Tools – Google Forms, SurveyMonkey, or Typeform for quantitative data only.
Interview Tools – Zoom, Google Meet, or Calendly for scheduling/calling customers for interviews.
Analytics Tools – Google Analytics, social platforms’ insights, and keyword research tools for online behavior.
Research Databases – IBISWorld, Statista, or government databases for industry referrals.
Competitor Analysis Tools – SEMrush, Ahrefs or SimilarWeb for competitor strategy analysis.
Prototyping Tools – Figma, InVision or landing-page builders for creating concepts that could be tested.
Moving Forward with Confidence
Being able to conduct market research for a new product idea will provide you a distinct competitive advantage to succeed in today’s fast-paced business. Doing market research may seem time-consuming [[at first]], but the time and money saved from the knowledge you will gain on how to build something that people want to buy is invaluable.
Market research is not a one-time effort | activity camouflage. While [[You]] will continue to find out [[customer feedback]] during the product development | launch | and growth phases, in the rapidly changing market, you will need to maintain contact with customers to better adapt to their needs | meaning customer knowledge, development, and improvement will never stop, just become more active at different stages of the product (how ironic!).
Entrepreneurs that are successful will evaluate the importance of balancing the speed in which they achieve these actions. Moving fast enough to take advantage of timing, to have plenty of time to answer careful questions on their market frost, then apply that learning. By systematically thinking through these 6 steps to question, you will assure you are ready, establish perspective, and to not act rashly so that you are ready to make a decision on whether or not your product will fit the market established need or growth. The whole point is to have general solutions that actually look to solve their needs for their customers.
You can get started on step one today, and remember that every successful product development started with someone asking themselves the right questions about their market. You never know, your next big idea could be just one conversation away from being discovered.
Are you ready to test your product idea? First, define your research goals clearly, then work through each step, methodically. Investing in understanding your market will pay off at every stage in the process of building your business.
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