How to do market research for your new business

As a startup, it is crucial that you conduct market research to determine the feasibility of your business idea - regardless of how great you believe it is.

This vital step will determine how large your potential market of customers is and will help you to predict how successful your venture will, or won’t, be.

There are many resources available to help you with this process, including government agencies and private sector organisations. We've put together a quick guide to help your startup be the success it deserves to be.

What is market research for a startup?

There are some basic elements of market research a startup needs to consider.

Understand your target market

A better understanding of your target market is key when conducting market research for a new business.

This will give you an appreciation of the size of the market for goods or services, the competition and where there may be room for you to thrive. Once you have collated this vital knowledge, you can begin to identify your competition.

Identify your competition

To stand out from your competitors, it is important to scrutinise their marketing and buyer retention strategies.

Who are they? What do they offer? How do they market their products? By knowing this, you will know what questions to ask and what data to collect.

Get a grip on your target customer

To find your target audience and discern how you will present your product to them, you will also need to identify your ideal customer profile.

What are their buying habits? What motivates them to make purchasing decisions? These answers will form your marketing game plan, determine pricing and create a brand proposition that resonates with your target audience.

With this information in hand, you'll be well on your way to success with your new business.

How to collect the data

You can conduct surveys and focus groups. Ask your target consumers about their thoughts on your product or service, including interviews and observation.

Analyse the data you have collected

Analysing the data you collect will help you understand your market and make decisions about your new business. You should also analyse data about your potential rivals from social media and other online platforms.

What are people saying about their product or service? Is there a niche you could exploit? This will help validate your idea.

Communicate your findings

This can be done through a variety of methods, including presentations, reports and articles. This research will be vital if you are looking at funding.

Don’t lose sight of the fact that market research allows you to determine the feasibility of your business idea - and to understand your target market.

Why market research is so important

It is crucial to have a good understanding of your target consumers, their requirements and the options available to them.

This will impact everything from product development to marketing, sales strategy and seeking investment. And while large companies may spend millions on research every year, it is entirely possible to do market research on a smaller budget.

You are doing this to find the niche or edge that will help your new business to stand out from the competition. Fortunately, market research can help you not just effectively grow brand awareness but also make loyal customers.

How much does market research cost?

The cost of carrying out market research varies, and you can influence the final cost by outlining how in-depth it needs to be.

You can select a specialist firm to do your market research for you, but you’ve got to allow a longer time frame than if you were doing it yourself because it will take time to get the results.

According to one marketing firm, you’re looking at:

• Between £750 and £1,000 for a professional survey, depending on the number of participants.
• Focus groups of between £500 and £700 for a 60-90-minute session.
• Telephone interviews will cost around £35 each.
• Face-to-face interviews are around £1,500 for a day on the field.

That might be out of reach for most start-ups which is why you should consider free and low-cost options including:

• Online survey and focus groups, and interviews.
• Many universities offer free or reduced-rate market research services to small businesses.
• Use online tools such as Google Trends and Twitter Analytics to gather data.

Plus, you can interview industry experts to gain insights into your sector.

There’s no doubt that market research is vital for any new business. It allows you to better understand your target market and customers, validate your product idea, and stand out from your competition.

By following these tips, you can set your new business up for success and then, hopefully, look at implementing a share scheme to attract, retain and motivate the best talent.