Market Research for Startups - A Complete Guide

Planning to launch a start-up is a big step in itself. Entrepreneurs put a lot of effort, work for 14 to 16 hours every day with diligence to see their business idea grow and reach a position they have always imagined. But do you know what that one factor is that keeps the startups on track? It’s learning how to survive the odds of failing online business ideas in India.

The failure rate of the startups in 2019 was 90%. According to research, almost 21.5% of startups fail in their first year, 30% in their 2nd year, 50% in their 5th year, and 70% in the 10th year. But have you ever thought why even the good-going business ideas tend to fail later?

Some Common Reasons Why Startups Fail:

• No market need
• Not the right team
• Running out of cash
• Getting outcompeted
• Not a user-friendly product
• Cost issues/ pricing
• Poor marketing
• Not having a business model
• Ignoring customers

If you’re wondering whether there is any solution to this, the answer is a big fat YES! It is market research. The most crucial step for startups (small business ideas and large) is usually left out or ignored by many. Market research is the first step that startups should consider, and there is no way around it. Market research helps companies prepare a business plan, gives new business ideas and the tone and direction required for the project. So what exactly is market research?

Understanding Market Research

• Market research is nothing but a process using which startups gather facts about a specific market.
• It is a kind of analysis made to study the rationale of potential customer behaviour and market dynamics.
• With market study, startups get to know online business ideas, business conditions, and potential clients, which helps decrease the possibility that the product produced is the one that nobody wants.

Let us now see how startups perform market research:

1. Defining the Purpose of Market Research

There are various reasons why market research is mandatory for online business ideas in India. The basic idea behind getting market research done is to create possibilities and avoid issues. It helps in investigating the past problems faced by the startup to reduce future risks.

Having decided that the market study is to be done, startups need to determine the market worth entering with their idea or product. Market research can be external or internal (or both) depending on the orientation. The external goal for business ideas includes the microenvironment—for example—studying the startup’s development trends economically. At the same time, the internal goal might be regarding making business activities better or increasing revenue.

Startups can have different goals for performing market research—for example—doing market research for attracting investors, searching for business ideas, testing an idea, etc.

2. Types of Market Research

Market research is key to a successful business strategy and improved service/product for online business ideas. While setting the revenue targets, choosing the appropriate research approach for business ideas can make a huge difference. The two types of study in market research based on business goals are primary market research and secondary market research.

1. Primary market research:

• Primary market research is also called field research.
• Primary or field market research is the one in which you (or an organisation or a person you pay) collect any information. It’s all about the market study of current sales volumes, customers, and metrics. It also includes studying the effectiveness of the new business ideas, their operation, and the competition.

2. Secondary market research:

• Secondary market research is also called desk research.
• A secondary or desk research study is associated with data analysis that a third party has already prepared. It generally includes studies and reports from the government, other companies, organisations, and other groups or entities engaged in the industry.

The best methodology is to use the mix of both when we consider online and offline research.  Both the research study methods have their advantages. Using both of them, startups can get different types of information about their target markets. Online research will help you in getting the data required for your online business idea fast and inexpensively. On the other hand, offline research will help small business ideas provide access to appropriate information and yield better and in-depth results.

3. Keeping a Check on Industry Trends

Before starting the market study, startups should know the industry’s nature in which your online business idea will exist. They describe the industry in terms of size, trends, growth direction, and life cycle. If a startup knows a solid description of the industry, it will guide small business ideas to greater heights.

Startups should know their target market. They should know for whom exactly their service/product is designed. With this comes the need to understand the customers’ nature and know where they will come from.

4. Comparing the Competitors

To analyse the market condition for an online business idea, knowing the competition is very important. Startups should prepare a list of target competitors in the industry. They need to outline the weaknesses and strengths of their competitors. They can use the information to map their business ideas’ market position and the advantages of identifying those.

At times, it will also help to know the indirect and direct competitors. An indirect competitor of your online business idea is the one that has the same key audience as yours, but the service/product is noticeably different. In contrast, a direct competitor is the one who sells services/products at the same price segment and has a similar distribution and promotion channel, products, and target audience.

5. Knowing the Correct Market Research Method

Any online business idea can be successful with the correct market research method. Depending on the mode in which the data is collected, the different market research methods are as given below:

• Interviews: It is a personal kind of market study. It allows you to delve into the analysis more deeply, and it also provides extensive clarification and communication.
• Surveys: A survey is a way of collecting information from the target audience using questioning. Surveys are most commonly used and can be tremendously versatile. Surveys can clarify a lot of doubts and questions for new business ideas.
• Focus groups: It is a method in which a team or group of people sit together and discuss a particular topic. The organiser controls the discussion. He/she also performs checking questions and notes the insights gained from the meeting. This concept sounds simple but conducting it is not an easy task.
• Observation: It is the most commonly used and reputed market research method. It is all about observing the target audience, say, watching a video recording in a shop.
• Social media listening: Social media provides an immense amount of information. It provides the exact reflection of what a person needs and cares about, as it is spontaneous and unfiltered.

Successful startup owners usually prefer focusing on one or more research study methods. It generally depends on the time, resources and budget.

Bottom Line

Thorough market research is a must before implementing new business ideas. It requires money and time to study and analyse the market for giving a kickstart to the startup. The data collected throughout the process needs to be such that it can be applied to today’s online business ideas.

Market research should only be based on official and trustworthy data. It will help in reflecting on the real-world situation. Startups experience many twists and turns, and things might not go as planned, and market research is the only solution that makes the startup sustainable.

Also read:

1) How to Know if Your Business Idea is Going to Be the Next Game Changer?
2) Why Do Businesses Need a Good ERP System?
3) What Are Some Good Startup Ideas?
4) Startup Ideas: How do you know if your Startup idea already exists?
5) OkCredit: All you need to know about OkCredit & how it works.

FAQs

Q. What are the basic steps in a market analysis?

Ans. Determining the target audience, defining the purpose of market research, collecting reliable data for market analysis, profoundly studying the insights received from market research methods, etc.

Q. What are the commonly used market research methods?

Ans. Interviews, surveys, focus groups, observation, and social media listening.

Q. What can research question types be asked in surveys?

Ans. The research questions can be quantitative (comparative, descriptive, and relationship) or qualitative (non-directional, adaptable, flexible).

Q. What is the success rate of online business ideas?

Ans. According to many studies, almost 90% of online businesses fail within their first few months. Most of them are the ones that do not carry out adequate market research.

Q. Should I prefer online or offline research?

Ans. The best methodology is to use a mix of both. Using both the research methods, startups can get different types of information about their target markets.