Gain valuable marketing insights and make the most of your market research budget.
Primary market research can give your company a competitive edge and it does not have to be expensive. As a marketer, I enjoy talking to people and with each conversation, I gather deeper insights into why they do or what they do, and what’s important to them.
Because at the end of the day, that’s what matters. People buy a product because it’s important to them. To be good marketers and to grow profitable businesses, we need to understand why and how they buy and turn these insights into quality products and efficient marketing communication that creates loyalty and delivers value.
The most valuable insights are initially gained through personal conversations. I always encourage startup founders to talk to customers and prospects themselves, at least prior to proving a revenue growth model, instead of hiring agencies to gather and filter the data. Direct conversations (not focus groups, initially) can lead to a fuller understanding of who the customer is and how your product or service fits into their lives. Gaining these first-hand insights will set the company up for product and market success later.
To achieve the insights I need, I might have several iterative conversations with potential customers, and adjust the prototype or questions I’m asking in between each meetup. If I’m working with a consumer product (B2C) I don’t necessarily talk to the same person twice, since talking to a wide variety of customers can help me harness diversity of thought. However, for enterprise (B2B) products or services, it might be helpful to circle back to the same people and get deeper feedback on improvements.
To validate the market for a new product, I am trying to understand the following:
- What is the unmet need that my product fulfills?
- Is there existing competition or substitutes that I need to be concerned with? How is my product different?
- What is my “sweet spot” (who needs my product the most, which segment provides the best “product-market fit”)
- Is my user (who benefits from the product) different from my customer (who buys the product)?
- Does my product or market insight lead to an “unfair advantage” over existing offerings? Or is the “unfair advantage” going to have to come from operations, distribution, the management team, culture or another aspect of my business plan?
If you are proving out a new concept or providing an innovative spin on an existing product, try this sequence of 1–5 steps to validate your market and convey your product benefits in the most compelling way. You can also repeat and iterate on each step, or repeat all 5 steps in sequence — market research done in this way is an inexpensive way to explore product-market fit and dial in the right features, messaging and marketing strategy before making significant investments in product inventory, websites, and marketing collateral or advertising.
STEP 1 — Define your customer and demand profile
Develop hypotheses about who your target customer is (and more importantly, who is NOT your target customer). Develop “personas” for each segment (families with children, single millennials, etc) then think about who they are, how they behave, why they want your product for and how they will discover your product.
Download the “Find your V-Factor analysis worksheet” (posted in the Jumpstart Your Startup™ blog) to work through some of these questions (fill out a copy of the worksheet for each persona). By doing this exercise upfront, not only do you clarify who your customer is, you can gain more insights into a potential marketing strategy that will lead to a cost-effective marketing plan.
To directionally validate whether certain product positioning is in demand, I brainstorm the hi-intent phrases that might lead a customer to my product. This works especially well for problem/solution pairs. Just start typing out searches that each of the different personas might use to find my product or service.
Brainstorm categories of potential search terms:
- Detailed problems (I’m having trouble with low scores on tests)
- Solution seekers (I’m looking for a better way to remove red wine stains)
- Recommendations (best software for project management)
- Benefit keywords for your website descriptions (quality pet care, best study tool, organic home treatment, etc)
Then, I copy and paste my lists of keywords and phrases into Google Adwords Keyword Planner to see how much search volume exists and the competitiveness of the terms. The planner is free to use, although you have to set up an account first. Other free tools can be used for this purpose, on different platforms.
Some growth hack entrepreneurs may suggest setting up a test site and running an Adwords or social advertising campaign to see how many people respond to hypothetical messaging, but I recommend not going this route at this point unless you have money to burn. Wait at least until after you’ve completed STEP 5. Mock advertising is a potentially pricey approach that might work if your target is broad enough and you nail your product messaging on the first try. But if you don’t get any traffic there may be many explanations (sub-optimal creative, messaging, keywords, etc) that have nothing to do with the validity of your product-market fit. And without being able to talk to customers directly, you might not be able to iterate effective alternatives fast enough.
Once I have a hypothesis around target personas and the search phrases that might lead to my product, I also have an idea of relative demand for my keywords and who the competition might be. It’s time to get a ballpark sizing of my market, then get out and talk to some potential customers to confirm my hypotheses and refine my thinking.
STEP 2 — Size the market
Take the personas developed in STEP 1 and estimate how many of them might have the problem or need the solution that you’ve identified — your Total Potential Market (TPM). Then, filter out those who would not be a good fit for your specific product or those segments that are perhaps too expensive to capture as customers, and that becomes your Total Addressable Market (TAM). In an ideal world, the TAM would be as big as the TPM, but realistically that’s not always the case and in the early stages of a company, it’s best to focus. Once you start selling, you can also track Total Captured Market (TCM). You might also make a reasonable estimate for your market share if you’ve identified existing or emerging competitors and can estimate their Total Captured Market (TCM).
To get at these estimates, I search the internet, look at public sources (websites or databases) or perhaps think of a proxy that might get me into the right ballpark. Market sizing doesn’t have to be exact or meticulously validated at this point — a reasonable estimate will do.
- Trade Associations
- Government Websites
- Company Press Releases or SEC Filings
- US Census
- Global Import/Export Data
- Research databases available online through your public library
I always start by entering my market sizing questions directly into a search engine. “How many nursing students in the US” or “how many craft chocolate makers in the world” and I’ll find resources to get me started. To test whether the numbers I’m finding are reasonable, ask both broad and detailed questions and make sure all numbers seem reasonable relative to each other.
If you have gotten through this step and think your market is too small (or perhaps you have investors that are telling you your market is too small), go back through STEP 1, and iterate until you have a customer and demand profile that represents a market that seems worth your while.
STEP 3 — Conduct in-person field research
Find groups of your target market to talk to. You can find them in your neighborhood, at a public park, your book club or another gathering place. This is a critical step to test your hypotheses about each persona developed in STEP 1.
In-person field research allows potential customers to see the utility, evaluate the quality, and for me to see their reactions to my pitch first hand. It’s also an opportunity to let them use the product, and to observe and listen to what they say to each other. I speak as little as possible, listen actively and prompt only if needed. I try to turn the experience into a real-life unboxing.
I recommend that this initial insight-building be done in a natural environment for your customer (not an artificial focus group-type environment), and ideally, where they might use my product. This allows me to test several things:
- Words to describe product need and benefits (customer-facing language)
- How passionate they are about my solution to their problem
- Reactions to my answers (body language is very telling!)
And if other people see what I have and step forward to ask about it, this will be an indicator of how likely viral conversations will happen when the product is in use. Such situations can lead to cost-effective marketing plans and become a source of unfair advantage!
As described in “Getting Customers to Sell for You”, the most efficient marketing will happen when prospects see the product in use, and prospects ask your customers what it is and how they can get it. If you can figure out where and how this can happen for your product, you’ll have a built-in “network effect” as you launch the product (your V-FACTOR).
If you’re not at the prototype stage you can still gain a lot from an in-person meeting, to share a drawing or describe a service, to hear peoples’ reactions firsthand and probe their responses. Many of the benefits of in-person field research can still be gained without a physical prototype.
Here are the questions I try to answer in STEP 3 after I’ve talked to potential customers. (To gain these insights you will need to push beyond yes/no questions and really get to the “why”)
- What are the highest priority needs that my product/service solves? (Impacts: product positioning)
- What are the features/benefits that will compel a non-customer to say “where did you get that” or “how does that work?” or “Can I try it?” (Impacts: messaging and marketing strategy)
- How does my product fit into a customer’s day? Is there an optimal time/place to experience the product? (Impacts: finding efficient channels that create V-FACTOR)
- Would someone pay more/less for my product than they would pay for their _____ (Impacts: pricing and perception of value)
Now, if the conversation is going well, potential customers might start to ask me questions. As much as possible, I reflect these questions back to them (I’ll learn more). Here’s how I do it:
If they ask
- How much does it cost?
- Will it be a different color?
- Will it have a ______ (feature)?
- How much do you think it would cost? Would you buy it if it cost more than ____?
- What color would you expect it to be? Like it to be? Would you pay more to have a choice of colors?
- How important is that to you? Would you pay more if it had a ______ (feature)?
Some researchers suggest recruiting through social media platforms using their available demographic targeting tools. While it is possible to do this, budget permitting, there are several downsides to going this route before doing in-person field research.
- People can’t experience your product (it’s all hypothetical). You might just have people telling you what you want to hear to be nice or to claim the incentive you are offering.
- Unless you engage people in a phone conversation, it may be hard to read their reactions properly (the same words can come across very differently when they are typed vs spoken)
- It may be difficult to probe their responses (“why do you feel that way”) or elaborate on an answer (“tell me more about that”)
- You can’t test the virality of the product (unless it is the type of product that can sell itself through social media shares)
If social media can be used to validate a particular market concept (because the target audience engages regularly on a specific platform), I get the hands-on feedback first, then refine my approach and if I have the budget I use social media platforms to create a mock-sales experience in STEP 4.
STEP 4 — Create a mock-sales experience
At this point I have enough market input to write up a name and description of my product in language that I think will resonate with customers, in a word doc with a drawing or a photo, and turn the doc into a PDF or a set of web pages. The content should be similar to what someone might see when making a buying decision. I focus on the benefits of features, not just features alone. I might even add in quotes I heard from conversations in STEP 3.
I can develop different product descriptions and test product names, different “why to buys” (taglines) or colors/shapes/packaging sizes and get reactions to each. I can create an “AB test”. Or show both versions and ask for preferences or ranking.
If you are targeting multiple personas, segment this step by persona. Each persona might require a different set of marketing materials to elicit the appropriate responses. You will also want to segment comments and reactions by persona/target segment.
Ask customers to provide their own words if the words they see do not resonate. Always probe deeper on the “why” (this is the benefit of qualitative research!). Creating a mock -sales experience is an inexpensive way to refine ideas before making significant financial investments in branding, collateral and website design/copy, or production.
At this point, I should explain the difference between qualitative and quantitative research. Up to this point, I have been doing qualitative research, where I’m getting the reactions of dozens (not hundreds) via in-depth interviews. With qualitative research, I have the opportunity to understand the range of potential reactions and why people feel the way they do. However, after having a dozen conversations with a specific target persona, I may start to hear similar themes. To understand which % of my target falls in line with each theme, I’ll conduct a quantitative survey with a randomly selected cross-section of my target segment in STEP 5.
The reason why I do qualitative before quantitative is to avoid having to redo work. If I conduct a survey then find out in my interviews that I was asking the wrong questions (or giving the wrong set of choices to a question, that “other” didn’t adequately flush out), I’ll have to repeat the quantitative step after the interviews anyway. To avoid throwing away work, talk to your audience to make sure you know the range of responses they will respond with for each question, then create and conduct a survey to give you the hard numbers.
A mock-sales experience can be done 1:1, in a focus group, online (with a quickly constructed website) or via a social media platform.
Focus Groups vs 1:1 Interviews. Sometimes one or the other is preferable — it depends on the product and the length of the discussion guide. A focus group is preferred if there is a benefit to having people build on each others’ ideas, or if you want to hear what they might say to each other. If you feel people will respond more truthfully by answering questions individually vs in a group, or if there is a danger of “groupthink” the 1:1 interviews might be a better choice. Either approach can be done informally and low cost, or more formally with an agency in a facility. By following a strict guideline of sticking to the questions and avoiding interjection of my own opinions, I’ve often done the moderating and interviews myself without hiring a facilitator. But if you would prefer to listen and observe the participants without the fear of bias, hiring a professional moderator is an option if you have the budget.
Here are the types of questions I like to ask —
- Does this look like a product that would interest you? Why or why not?
- Do you have any questions about this product? What would you like to know more about?
- Does this seem like something you would buy, why or why not?
- Does this seem like something you already have or use? What do you currently have that provides the same solution as this product?
- Does this seem unnecessary to you, why or why not?
- When might you use this product?
- Would you pay more for this product than ____? Less than ___?
- Where would you expect to buy this product?
The purpose of STEP 4 is to gain insights into potential answers to questions and why. Don’t worry too much about quantifying the results at this stage, since the sample size will be too small to conclude anything quantitatively. Ask lots of open-ended questions and capture language that feels relevant and compelling to the customer. You are confirming your hypotheses on positioning and language gathered in STEP 3, but you are also looking for better ideas if they surface before you move to STEP 5.
Although you might be thinking that it is cheaper to cover STEP 4 with a survey (and just jump directly to STEP 5), here’s why you don’t want to skip STEP 4. A focus group or interview is going to allow you to ask “why”, and by letting a participant talk freely, you may gain new insights you never thought to ask about. These insights will ensure that your survey in STEP 5 is asking the right questions and getting hard numbers that reflect how potential customers really feel about your product.
Once I’ve talked to 10+ people who share the same “persona” I usually start to hear familiar themes repeatedly. This is when I’ll know it’s time to wrap up STEP 4 and move on to STEP 5, the Quantitative Survey.
STEP 5 — Field a Quantitative Survey
Usually, I can get to this step without spending much money — just my time and transportation costs to get to places where I can find my target audience. However, in STEP 5, I will spend a little money to get my survey out to a representative audience that will provide a statistically significant set of responses.
In STEP 5, I’m trying to validate everything I have learned in STEPs 1–4 with a larger sample size — hopefully, a truly representative cross-section of my target audience segment(s). Sample sizes need to be large enough to enable answers to be statistically significant, and this number will depend on how finely I want to slice and dice the data afterward.
I have used SurveyMonkey Audience pretty extensively for quantitative surveys. There are free survey tools available, but the important service you need is access to a panel of respondents that is broadly representative of your target market.
In my experience, SurveyMonkey’s online panel tends to be a good cross-section of US households. Just keep in mind that since a computer or smart device with internet access is required for access, the audience is skewed toward an educated, slightly higher income demographic than the average population. However, since many new products target this audience, this bias is often welcome. You will want to make sure that you find a survey panel that provides a good cross-section of your target audience (that’s what you are paying for).
SurveyMonkey will provide basic demographic data for respondents (such as age, gender, income, education, and country) but if you want any other demographic data you will need to ask it as a question. To narrow the audience, add screening criteria (e.g. families with children ages 8–14). The cost to reach at least 100 individuals with minimal screening criteria and a basic set of questions can be kept below $500.
Once I define my screening criteria, I enter the survey prompt. Most of the time I do unbranded surveys (to avoid brand bias), so I make sure that the prompt inspires confidence that their honest responses will help shape the development and launch a new product for a reputable brand.
Questions for my survey include a refined version of the questions I used in STEP 4, except that instead of open-ended “why or why not” questions, I add in multiple-choice answers (single choice or “check all that apply”), as well as an “other” category just in case the respondent does not see their choice in the list. At this point, I have a fairly good idea of the range of potential answers to each of the questions from STEP 4. And I’m trying to get a quantitative distribution across potential answers (what % of people in my target market would choose each one), which will help me make decisions, refine my feature set and guide my marketing tactics.
With a random household survey, I can get a more quantitative impression of how my chosen target market might respond to my marketing messages and product features/benefits. However, I always add a question at the end asking if they would be willing to elaborate on their answers by phone and to note the best way to contact them, and days/times that will work best. If someone says yes to this question, I contact them right away to verbally confirm and probe further on their answers, offering them a monetary incentive if they connect with me in the future. In this way, I’m building up my list of “beta testers” and people that I can ping for reactions to later refinements.
Quantitative research offers larger sample sizes than qualitative, budget depending. Therefore results will hopefully be statistically significant but sometimes they are not; depending on how detailed my cross tabs are, small sample quantitative may end up being “directionally qualitative”. At least I have a little more data to directionally guide decision making.
Congratulations, if like myself you’ve made it through STEP 5, you’ve gone through a pretty rigorous gauntlet of market feedback and only spent $500. Although it has taken time and effort, it’s an investment worth making to ensure that your product launches with the best possible positioning and marketing support to succeed.
However, if you’re now feeling that the feedback you’ve received is not quite what you were hoping for, and you need to pivot to achieve product-market fit, repeat STEPs 1–5 again. Do it, it’s worth it! Before you spend money on production and product launch, small refinements could make a big difference, especially if you can later attain market traction and scale faster because you have achieved superior product-market fit from the start. This is why I always try to do my market research on a shoestring budget in the first place.
Jennifer Apy is a marketing & business strategy consultant, and fractional CMO (Chief Marketing Officer). Passionate about helping small companies and startups grow. www.innovatestrategygroup.com