Market study: Crucial or waste of money?
What would a market research study answer?
I’m puzzled when start-up CEO’s tell me that they don’t need a market study. “We just need to sell!” they say most of the time.
Yes, being result oriented, having clear targets, are beneficial for success. However, how are you going to sell if you haven’t answered 5W of the business? I often come across start-up founders who haven’t even decided on basics for their business. Let’s review what a market study will answer.
What: This should be the most straightforward question. You know what you sell, right? However, in many early-stage startup cases, even what to sell is not clear. Do we sell the technology or product, the raw material or end product, licensing, or subscription? While the answer is critical to establish the correct strategy that would shape the future of the company, companies lack to have a clear vision.
So how to decide what to sell? We should decide on focusing on a product that would lead to the best results with minimum investment. I understand that it’s not an easy decision, but if you have some actual data, market information, competitor analysis, I’m sure it would be easier to decide.
Where: Does globalization lead to a single global market? Maybe in the future but we are not there yet. Global sales mean global investment, who has sufficient funds for that? Clearly, not an early stage start-up.
Therefore initial market selection (IMS) becomes crucial for start-ups. Scholars spent years to explain various models depending on cultural differences or geographical closeness. Major internationalization theories like Uppsala theory, Network theory, or more recent Born Global theory explain different ways of international expansion. However, each company has a unique business model that needs a novel approach for its internationalization scheme. In short, international business development is an applied science, better consult an expert!
Who: This question is the one that I find the best answered. I find firms are very successful at defining their target customers. B2B firms are also highly competent at targeting the best contact within the target company. However, I find the personal touch aspect quite weak with communication with these contacts. That generic approach usually stems from the automation tools used. I admit that automated outbound marketing tools help us considerably in time-saving. However, these automated tools imitating real people, damage the human connection aspect of the business. In the end, business is an exchange between a group of humans (company) with another group of humans. In my opinion, yes, defining the “persona” and refining the offer around the definition is essential but not complete. Refining the offer per human should be the goal.
Why do we do what we do? I don’t want to dive into philosophical warm holes that would lead to an existential crisis. But really? Why do we do what we do? As a customer or business partner, I would like to know about your involvement in the business. Some people call it the ‘story.’ Yes, they are tremendously powerful. Some anthropologists link that to human evolution. For thousands of years, people gathered around a fire and told stories. The ones that understood those stories got more access to scarce resources. We don’t have to go that much back, even today basic human beliefs and behaviors are based on stories.
Never underestimate your story. Take a few seconds to talk about your personal story. It could be a family business which is always a great story. Or, t could be a story of personal achievement. You could even be a newcomer but highly passionate because of a particular reason. I believe businesses always have a sense of meaning.
When: Timing is one of the most discussed aspects of successful businesses these days. When is it the perfect timing to launch the business or product? I find it the most challenging questions of all. All other questions can be answered with experience and education, but timing? Addressing the timing question requires real business acumen, and it cannot be obtained only by education or experience. Many startup founders are having a hard time explaining why it is now the right timing to start this particular business. Some arguments sound very reasonable but quickly turn obsolete. Here founders or any decision-makers should also be very careful at people giving them advice on timing if the timing decision is at odds with their interest.
In short, market research will analyze some or all these questions specifically for your business. Clearly, with this study in hand, your business will save time and money. Imagine the lost funds and opportunities in investing in the wrong market at the wrong time. You don’t only lose the invested funds but also miss the chance of a better investment decision.
However, if the business is short in money, many business owners are highly unwilling to invest in market research. While I understand this cautiousness, investing a small budget to decide where to focus activities or how to pivot would totally worth the money spent. Also, there exist many government funds dedicated to market research. Some criticize entrepreneurs for becoming ‘grantrepreneurs’ looking for funds to grow their company, but if there are funds to be used, why not give it a try. It’s always worthed to spend some time on these grants that cover a significant part of the costs related to a market study.
But the worst type of founders are the ones who believe no one could know more than them. For these types, nobody can contribute to their business except themselves. Well, for these helpless founders, a market study is indeed a waste of money because at the end they will not take the advice. They usually look down upon consultants who they believe to be ‘non-experts.’ It’s nonsense to except a consultant to know all aspects of your specific business. It’s evident that consultants wouldn’t know all the details of your business. They are outsider eyes with industry insights. The starting point for a market study cannot be based on preconceived notions. As Socrates said:
“Smart people learn from everything and everyone, average ones from experience, stupid ones have all the answers”