When launching a new product, it is important to analyze it. Without it, you may release a product that no one will buy – which means you will have wasted your money.
It is good if there is open data. But usually, there is no such market research for a startup, and it is too expensive to order. In this case, we offer step-by-step instructions on how to conduct market research for a startup.
Step 1: Assess The TA
Without this, you can’t start. You will need market research for a startup. For example, without knowing your TA, you can’t understand their pains and needs. That means you can’t create an ad with a high CTR (clickability). Think about who needs the product, and try to create a detailed portrait of the potential buyer.
Let’s say you want to assess the market for a new product. We use logic. Based on this data, we find out the size of the TA in the region in which we plan to sell. The data will be inaccurate. This is normal, you need rough calculations, and you can only get accurate ones after the product launch.
Step 2: Evaluate The Capacity
Capacity is the number of goods and services that customers can buy at prevailing prices. It is usually calculated for a given territory in physical or monetary terms. The natural value is the number of products, while the monetary value is their value.
The capacity can be potential and real. Potential is an approximation: the one we will calculate. It is impossible to know the real one, for this, you have to get financial reports of all market players.
As part of market research for a startup, we can get accurate data by interviewing potential users. At the same time we could find out what they are concerned about and what problem they want to solve. Immediately we could estimate the dynamics of market capacity from indirect data.
Or if new competitors appear every year, this also indicates growth. The ideal situation is when it has a large growing capacity, and there are almost no competitors. In practice, this is rarely the case.
Step 3: Evaluate The Dynamics Of Supply And Demand In Market Research For A Startup
Demand is how much people are willing to buy your services. Supply is how much companies or people are willing to sell.
The easiest way to estimate demand is to use keyword query statistics in search engines. You choose your region and specify the main queries people can use to search for your product.
It happens that the product is new, and there are no queries for it yet. Then you need to proceed from the problem it solves. Look at how often people are asking for it on a search engine, and draw conclusions. Evaluating the dynamics of demand is also real.
So you can track how demand changes over the year. It happens that potential customers themselves declare their needs, and the demand is obvious. But even in this situation, you need to analyze.
Before you start working on the product itself, analyze to see if people need your project. First, study the audience on social networks. Do market research for a startup on promotion and pricing to keep the value of the product. This whole set of actions will help to release a product that will exist for many years and constantly evolve. To evaluate the offering, you need to find competitors.
Knowing the number of competitors and how many shares they have is important to assess. You can find your competitors through search engines and directories. Next, you can try to find their financial reports.
You can also estimate the share by indirect indicators: for example, compare the number of subscribers in social networks and check the sites in services that evaluate traffic.
You can assess the dynamics of the offer by looking at how it has changed over the years. How many new ads or companies have appeared, have prices gone up, and what new services have been offered to clients?
The ideal situation is when demand increases and supply decreases. But in practice, this is rarely the case. The main thing is that there should not be five sellers per buyer – in conditions of such competition, it will be very difficult to start.
Step 4: Evaluate General Trends In Market Research For A Startup
Сhanges in legislation, international politics, inflation, pandemics, and military operations affect a lot of things. It is important to follow all these trends and assume where they will lead.
An example from everyday life: during the pandemic, international flights were closed, which led to developing domestic tourism. Now flights are too expensive and long, so we can assume that demand for domestic tourism will increase again.
The international situation and inflation are also important. People are trying to save money because of falling incomes. And they will also be looking for the best balance between price and quality of the product – so they will probably have to dump first to get attention.
Step 5: Look For Any Mentions Of Market Valuation
The more data you get for analysis during market research for a startup, the better. So you can look for more information: any data about what we plan to conquer. It can be:
- market research for a startup about changes in demand;
- statistics on changes in consumer behavior;
- information on global trends;
- interviews with start-ups that produce similar products or are direct competitors;
- speeches by leaders about our future product.
Market research for a startup of all this information will take at least a few days. It’s okay – it’s better to spend two or three weeks on the analysis and realize that it’s not worth launching a product than to launch it and get a loss.
How To Decide If A Product Is Worth Releasing
The decision should be made based on all available data. You need to assess the total TA, potential capacity, supply and demand, trends, and additional data. Then you make a business plan, calculate the margin of the product, and decide whether it is worth working on it.
It is worth abandoning the idea if there are serious problems. For example:
- A large company that has a 90% share or more. A good example is developing an analogue of Instagram or TikTok;
- Lack of demand – people ask for the product a couple of times a month, but there are a lot of offers;
- small capacity of a couple of million, which is already divided among competitors.
In all of these cases, promoting the product will require significant investment in marketing, and the payback period will grow.
To avoid risking money, during market research for a startup, you may conclude that it makes sense to use the MVP – the minimum workable product.
This means that at first, you don’t invest all the money in the development and promotion of the product, but create it at a minimal cost. For example, you make a free website where you talk about the service without hiring anyone on staff.
Then you test the demand: run ads and bring the site to the top for low-frequency queries. Then, if everything goes well, you refine the product: register the company, hire people, and add services.
The concept of MVP minimizes the risks and complements the preliminary analysis. Even if you are wrong in your calculations, you won’t spend a lot of money to launch the product, which means that even if you fail, you won’t incur heavy losses.