Market Research Tips
Leonardo da Vinci had lots of ideas, some of which were never realized until many centuries after his death. His era just didn’t have the capability of absorbing his inventions nor did he know how to exploit them. Da Vinci and the people of his time just lacked the knowledge to make them relevant.
A pity really because no one had an inkling how innovative his inventions were and how many years later they would confer such benefits to future generations.
Molto grazie, Leonardo!
There are lots of great ideas floating around. Some bad ideas and some really, really great ideas that for many reasons will never get into the hands or minds of customers.
Ideas are basically – a dime a dozen.
It’s not to say that every idea in the 12 pack is worthless, in fact some of them might be worth millions or billions of dollars. The cold reality is – if ideas cannot be implemented and show value then they are worthless. Good ideas need to be placed in the hands of users to make a difference; otherwise they will remain tragically unknown.
Over the years I have helped my clients answer this basic question – “How can I determine if there is a market for my technology?”
There are two broad types of entrepreneurs that come to me asking this question.
Entrepreneur Type 1 – Entrepreneurs with an existing technology and are looking for a market
This is the most common situation.
Case in point: A group of technologists come up with an idea and expend both time and money to develop a technology. After months of development and with technology solidly in hand, they open their lab door, peer out and wonder who might be eligible buyers for their invention.
Here’s an example, a team of entrepreneurs in the wireless sector have an idea to create a cool mobile application which they believe would solve a problem for market segment X. They develop the application build out resources and begin to talk to potential customers. Very quickly and disappointingly they realize no one wants to buy their technology.
These entrepreneurs represent a technology looking for a market. Somewhat problematic – since doing the homework after the fact gets complicated. Why? Because technologies developed in a vacuum rarely succeed.
Entrepreneur Type 2 – Entrepreneurs looking for a customer need or problem in a defined market sector
This is the least common situation.
Entrepreneurs decide to research a specific market to find an unresolved problem, find one and design a technology solution that will satisfy the market’s problem. These entrepreneurs spend time and money in assessing a market opportunity first, then identify and build a technology solution to solve the market segment’s problem(s).
These entrepreneurs may have market domain knowledge and technology expertise; but, they approach the market assessment process first without a predetermined technical bias. This puts the market place first and the technology second.
So back to the question: “How can I determine if there is a market for my technology?”
Let’s look first at this scenario: A small team of entrepreneurs decide to start another technology company after successfully selling their company to a larger competitor. They decide the thrill of building and selling a company is worth another shot. They set off looking for a market problem that would be the focus for their next company. Finding one, they design a product solution to resolve the problem. As the prototypes are being built they also test them in concert with lead customers in the market – to get the product right.
Answer 1: A Market Assessment Analysis
In the above example, the former activity is called a market assessment analysis which involves a high level scan of the marketplace and gradually narrowing it down to a targeted market segment candidate. Direct feedback from this candidate segment provides the team with further insights into the problems that need to be resolved and the possible solutions which should be designed for the target customer segment.
Answer 2: Market Validation
The latter analysis is called a market validation study. At this point the solution is being tested with customer feedback to refine the product and validate its ability to solve the problem the customer needs resolved. Often an iterative process yet very valuable in getting the product right.
Why the answers are important
For a technology to become a product it must solve a customer’s array of pain points and input/information from customers is required to make this happen. Why? Because a technology is not a product until it is a solution for a customer.
Regardless of what profile type you think you might fall into, conducting a market assessment and a market validation analysis is an important step in the commercialization process. It saves time and valuable development and marketing resources by testing a product concept, idea, position, and customer buying drivers before a product is launched or engineered.
My proven approach in conducting market assessment and market validation analysis can help any entrepreneur step through the process to get to the right markets and transform their technology into products.
I am currently writing an e-book to reveal my secrets for entrepreneurs. Let me know if you would like a copy once it is ready. Or just give me a call and I would be pleased to share my thoughts with you.
Do Canadian entrepreneurs need to up their game? That’s the conclusion from a recent Vancouver Sun article that caught my attention, though I disagree with the premise; it’s more accurate to say that we still need to work on building a business environment that helps entrepreneurs thrive.
Here’s an excerpt:
“Then it becomes interesting. I’m a big supporter of the Vancouver tech community and I feel like we have a really good base here. But in the end, the only thing we can do to accelerate the development is attracting better entrepreneurs and more entrepreneurs to Vancouver. The more talented entrepreneurs we can get into town, the better.” Senia Rapisarda shares that sentiment.
The vice -president for strategic initiatives and investments at Business Development Bank of Canada, Rapisarda said that while Canadians have the technology and skill to compete in the high-tech market they are “a bit behind” when it comes to fostering development of what she described as “serial entrepreneurs.”
“Doing something, being successful and coming back for more, or doing something, failing, and coming back for more. We don’t have a lot of those, and we need them.”
I don’t think the problem is a lack of entrepreneurial spirit in Canada or even parts of the USA outside of traditional business hubs. If somebody tries to make it as an entrepreneur, fails and keeps failing, they still have to put food on the table. No one wants to keep banging their heads against the wall, so would-be entrepreneurs go back to working for others. The main stumbling block to creating serial entrepreneurs is how to provide an environment that supports entrepreneurship.
How to Develop an Entrepreneur-Friendly Business Environment
How do we develop an environment that creates more entrepreneurs and give these aspiring entrepreneurs (and serial entrepreneurs) an edge? Here are a few ideas:
- Get people thinking about entrepreneurship earlier. Think back to high school or your childhood and when someone asked you what you were going to be when you grew up. How many of us listed a type of job rather than “starting a business”?
- Educate entrepreneurs about the resources that are available, such as government grants like SRED that help companies get the most out of limited budgets. All entrepreneurs understand the concept of bootstrapping, but not all understand that they can apply for funding even before they are ready to raise capital.
- Promote mentoring. The knowledge and wisdom of a board of advisors can be as critical to success as the raising of capital. There are some avenues for startups to take advantage of these knowledge resources through organizations like New Ventures BC, but these opportunities have plenty of room for expansion.
- Fail Fast; but fail cheaply. Entrepreneurs need to know the benefits of doing market research and how it can avoid costly mistakes. Make this business analysis tool set a fundamental part of any new and existing enterprise to minimize risks and increase value propositions. We know entrepreneurs rarely consider it an important element of business success. Companies should be encouraged by funders and advisers to do market assessments, market validations, new product development research, customer segmentation and other research activities to make better decisions.
What else can we do to provide a more supportive environment for entrepreneurs? Leave a comment
Gathering market research on your competition is easier than it seems. One of the most straightforward (if counterintuitive) ways to begin is to be your competitor’s customer.
- (Download our Industry and Competitive Market Research tool for just $19.95 — and essential tool for entrepreneurs and established companies)
Ways to Gather Market Research on the Competition
If you want to conduct the research on your own, start by visiting their website. See how their shopping cart works. Sign up for their newsletters. Register for customer web forums and take a look at what other customers have to say about their experience.
Inc. Magazine rightly suggests that you could also consider having a knowledgeable colleague shop at your competitor’s for you. Just make sure you’re clear about what you need them to report on. If that doesn’t work, you might also think about interviewing your own customers (who you know are also already doing some business with your competitor) to get an idea of whether they would buy similar types of products or services from you. Do what you have to do to get the data you need (but do it legally).
While conducting market research on the competition, don’t make the mistake of drinking your own kool-aid and thinking they’re dumb but lucky, bound to be pushed aside by you when your plan comes together. They’re already set up with a business plan, marketing strategy, supply chain and a product that people are already buying. You’re only able to access a lot of information because of their success – so be very clear about what it is that they’re doing right. Ultimately, you’re going to have to do it better than them.
In the long run, you’ll want to conduct formal in-depth surveys via library databases, the Internet and with other personal interviews with stakeholders external to the competitor, such as trade associations, other competitors, suppliers and sales channels.
If you find out after the market research process that the competition has got a market position you can’t beat with the resources, timeline or expertise you have on hand, don’t be discouraged. Reexamine your strategy for entering the market and re-focus your competitive edge. If you still come up with nothing and decide that your competitor has too much of an established position, at least you’ve saved yourself from throwing everything you’ve got – including your investors’ capital – at a brick wall.
Hopefully, your research into the competition will yield critical business intelligence that you can use to make your business model work. If you discover your competitor’s customers are unhappy with customer service, maybe that’s where you can compete. Perhaps they’ve been asking for years for functionality that your competitor hasn’t met – and you’ve got just the app extension to convert those customers into your own clients. Look for competitive advantage – and when the time comes, use it.
- (DOWNLOAD our Industry and Competitive Market Research-ebook & PowerPoint for just $19.95)
It might sound great to you to have no competition. You have an automatic monopoly and can presumably charge a premium (at least until others get wind of what you’re up to). But even then, you’ve got a head-start. So long as you stay on the cutting edge of development, you’ll leave these Johnny-come-lately’s in the dust.
Perception Hurdles to Raising Investment Capital for Your Startup
That’s not how investors see it, though. They see three possibilities, none of which are likely to make them want to inject funding into your startup.
- The thing you’re selling is not unique after all. You just haven’t done your industry and competitor research properly. I’ve seen plenty of company reps turn a pale shade of green when an investor getting pitched asks them, “What about company X? Or company Y? I just bought from them last month…”
- Your company is selling a substitution product. You’ve invented what you think would be a great alternative to skis. Well, every ski manufacturer is still an indirect competitor. And it’s very difficult to succeed with substitution products because you have to change consumer behavior (not impossible – but investors want low risk and high reward).
- The thing you’re selling actually is unique. But it solves no pain point and has no obvious customer (which is why no competitors have emerged).
When you’re talking about competitors in front of investors, use this as an opportunity to talk about what makes you different. How is your product more efficient, or how does offer more options than the other offerings?
- “As you can see, our process makes the service 50 percent more effective, so the customer gets better ROI.”
- “Our blender doesn’t just blend – it slices, dices and minces faster and easier than any other kitchen tool on the market today.”
To avoid a rude awakening at an investor pitch meeting, it’s important to do your research.
I’ve written a lot lately about market research for my recent workshop, on Accelerating Business Value with Market Research. We covered topics like market demographics and overcoming market research myths (particularly, that it’s not necessary to be successful. It is). But what are the questions that companies need to focus on to direct their research?
- (DOWNLOAD our Market Research Tool Box 47-slide PowerPoint for just $9.95)
There is no magical shortlist that will cover all possible avenues of research, but these 15 market research questions will get any company off to a good start:
- What is the market size?
- What is the growth rate?
- What stage of development is the industry (introduction, growth, mature)?
- What is the number of industry participants (who, size, reputation, niche, strategy)?
- What is the nature of competition (price, quality, delivery mechanisms)?
- Are there barriers to entry (costs, regulatory approvals, expertise)?
- What trends exist (social, political, economic, technology)?
- What are the prospects for the industry?
- What are the key drivers for success (profitability)?
- Have there been any acquisitions in the industry?
- Is the industry fragmented or is it dominated by large suppliers?
- Are there underserved market opportunities?
- How are sales channels organized?
- What are the value chain structures (horizontal and vertical)? Who are the key players in each category?
- What do buyers need?
These are all critical questions for startups and growing corporations in any industry. Investors want to see that you have done your homework and have a good handle on customers, competitors and industry dynamics.
- To learn more, check out our Market Research Tool Box containing 47 PowerPoint slides with an overview of the tools you can use in conducting market research to make better decisions.
What questions would you add to our list of important market research questions?
I’m getting ready to present my workshop on Accelerating Business Value with Market Research at SFU Harbour Centre in December. Market research is always a hot topic: managers need to know how to do it. Investors need to know that the people running their companies know how to do it. And reporters, analysts and blog writers are constantly writing about it.
Here are some of the more interesting articles and blog posts I’ve read recently. Get a flavor for some of the topics I’ll be dealing with in my workshop and enjoy some keen insights:
- The democratization of market research. What if just about anyone could pose questions to a target population and receive unfiltered, immediate answers they could trust? It has already begun.
- Why market research needs to stay classy. Don’t do flimsy surveys, people.
- Social Media and Market Research: The Marriage That Can’t Be Ignored. Be a market research methodology agnostic.
- Fail Factors – Why Startups Die: Market Research. “Good companies do this research BEFORE they make huge bets. Arrogant/stupid companies don’t do it at all. Inexperienced companies do it too late, normally.”
- How Much Should Market Research Cost? Good question.
- How Market Research Could Have Saved Netflix From Losing Over 800,000 Customers. Great case study.
If you’ve read any interesting articles on the topic of market research lately, feel free to leave some tips and links in the comments!
Learn more at my workshop on December 7 in Vancouver. Register today for Accelerating Business Value with Market Research
The company founded by Steve (“We don’t do market research”) Jobs and Steve Wozniak launched “Apple Customer Pulse” earlier this year with the aim of helping the company “get the complete picture” through targeted customer feedback. One more nail in the coffin of the Myth of No Market Research at Apple.
- (Download our Market Research Toolbox. Just $9.95 for a PowerPoint 47-slide product showing you how to conduct market research)
Thinks Different. Identify Your Customers’ Needs
Let’s give Jobs credit where it is due: customers may not be able to identify the revolutionary products and innovations that would make their lives so much better. That responsibility is for the “crazy ones”, as Jobs put it – the people who think they can change the world. The people who “think different”.
No Apple customer ever wrote in to Apple in the 1990s and said, “What I really need is a touch-screen phone that allows me to conveniently check my email, search the Internet, record podcasts, play games and, uh, call people.” Nobody was asking for that. Read more