When I started my first software company, market research for startups wasn’t a topic that was discussed at any great length, and as such, I had to figure it out on my own.
I could have done some things better, that’s for sure. But I found that by just doing a little market research, my business was in a better position to grab market share. Looking back, I think that making a point to do some market research for the business resulted in it being profitable from the first day it officially launched.
Despite what you may believe, the truth is that doing market research for startups is actually easier than you might think. In this article, I will discuss market research at a high-level, and the main areas you should focus on so that you get the most return on your time investment.
The four phases of market research.
Why even go through the process of market research for your business? Shouldn’t you focus on your product first, and then dive deeper into the market?
Well, that is certainly one way to go about it. You often hear stories about inspired entrepreneurs who get an idea and put their head down to make it come to fruition. They get it created, release to the world, and start off profitable.
But that’s a small minority. In fact, it is extremely rare that you can just build something, launch it, and have a thriving business.
The entire point of doing market research for startups is to clearly identify the target audience for the product, understand their behaviors (and needs), and to look for ways to differentiate among your competitors. That’s it. You need to answer the question: “what’s in it for me?” … and the answer needs to be a good one.
Market research activities are not a “cookie-cutter” process. In fact, market research for startups changes over time across four main phases.
- Year 1
- Year 2 & 3
- Year 4 and beyond
Pre-launch market research tasks.
Chances are, you want to first get a minimal viable product out (MVP) before you build a ton of features. That’s a good idea so that you can get to market quickly. To maximize the positive response for your offering, you should perform some high-level market research.
Specifically, what we are looking for with your pre-launch market research is a winning angle. How are you going to stand out? Why would someone choose you over a competitor?
The best way to do this is by analyzing the reviews of your competition in two places specifically:
- Third-party review sites
- Your competitor’s websites
Third-party review sites are a goldmine for finding profitable opportunities in the market. You can see exactly what people love about your competition, and what they hate. This will give you the initial development priorities for the MVP and the months after your launch.
But why should you look at your competitor’s websites for reviews? Won’t they be biased?
Yes, they will – and that’s the point!
When your competitors are building out their sales pages, they will pull out the best reviews that they have received. These are the ones that they believe most accurately describes their value proposition. This is how your competitors see themselves, which means you can use this to form your own market approach.
What you should do in Year 1.
Once you have launched, the hard work begins. The first year of any startup is the most important. You have to make noise, iterate quickly, and make raving fans.
How do you do this? You guessed it: keeping an eye on your market.
Again, the easiest thing to do here is to look at the reviews that are out there, but now that your product is available, you need to be analyzing the reviews that people leave for your offering. Take them seriously! The people are telling you exactly what they need, and it’s critical to stay on top of this in your first year of existence. Otherwise, they will move on and not tell anyone about your product.
Staying on top of reviews your customers leave is a critical market research for startups strategy. Supplement it with the metrics you obtained in pre-launch, and you should have plenty of ideas for product positioning to make a lot of noise.
Years 2 & 3 research activities.
After the rush of Year 1, things will settle down a bit from an iteration standpoint. No need to continually innovate based on reviews, at least not as rapid as before because at this point you have a solid footing in the industry.
Your market research now is a combination of:
- Scoping reviews
- Performing customer analysis
With customer analysis, your goal is to get a clear picture from a demographic, behavioral, and sentimental perspective so that you know what your customers want, why they choose you, why they leave, and what is missing in the market.
TIP: Want to learn more about customer analysis? Check out these 3 types of customer analysis that drive revenue growth!
Market research for Year 4 & beyond.
At the third year, your business should be well established in the space. Your goal for market research is about staying up-to-date with the latest happenings in your space, as well as seeing where there are new opportunities, and focusing on your overall conversion rate.
By staying on top of your industry using market research, you will benefit from being the “first provider” for the new trends that you discover by analyzing the market. This is how businesses stay around for a long time!
Regarding competition, only keep an eye on a few that are immediately around you. As always, analyze their reviews to see how their offering continues to be perceived in your market.
In addition, keep an eye on new entrants. They will often enter your market with a new approach based on their own market research. As a more established player, you have the opportunity to make a play on their findings quicker and more efficiently.
By continuing to do market research, you will be nimble and relevant for years to come!
No one will argue that doing market research for startups is important. Any entrepreneur who wants to maximize their chances for success will take the time to study the market and the conversations that exist around the leading players. What’s more important is staying consistent!
Your market research endeavors will change over time, but they should always be present.
If you haven’t noticed by now, the one thing that is consistent over the life of the business is continually keeping an eye on reviews. Reviews gives you immediately insight into the psyche of a market.
That said, keeping track of them for your business and your competitors is a pain. This is where we at GapScout become a valuable tool in your toolbox. GapScout leverages the best in AI and machine learning to scope and analyze reviews for you, helping you to pinpoint the golden opportunities!
If you’d like to learn more, email us today and let’s discuss your specific needs!
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