In a recent article, I mentioned that one of the top reasons for startup failure is creating a product or service that nobody needs. A lot of problems and significant costs could have been avoided if startups had conducted a market study prior to launching their business.
A market study is a research and analysis of your target market. This is an important part of your marketing strategy. You can come up with the marketing strategy and implementation plan only after you know who and what you are dealing with.
The market study attempts to gather all relevant data in order to investigate and analyze all aspects of your target market. It should answer almost everything you do not know about your market.
It all starts with a clear profile of your target market and what specific needs or problems of this market you are trying to address.
A typical market study covers the following major fields:
There are usually two categories of data that you have to know: demographics and psychographics.
Demographic data are statistical data related to the population in general or to a selected group in particular. These include gender, age, civil status, location, income, and other data commonly gathered in a census or survey.
Psychographic data pertain to the general or common attitudes, values, interests, and personality of a selected group of people including how they perceive a particular product/service/brand in relation to their needs/problems, what factors influence their decision to buy or not a product/service, why they prefer a particular product/service/brand, or what makes them brand advocates.
Pyschographics enable us to understand what beliefs and values drive the purchasing behavior of our customers.
You basically deal with two market sectors: B2C and B2B markets.
In B2C, you deal with the consumers. Consumers buy your goods/services for their personal use.
In B2B, you transact with industrial or institutional clients. They purchase goods/services to be used in producing other goods/services or in running their business.
The B2C and B2B markets differ in their demographic and psychographic data.
In collecting these data, you use two research methods: primary research and secondary research.
Primary research is getting the information directly from your potential customers by way of surveys, focus group interviews, and other direct methods.
Secondary research is gathering the information such as statistics, studies, or reports published online and offline by private and public organizations.
- Total market
You gather the total current and potential number or value of product/service used by the overall market.
- Target market segments
You collect total current and potential number or value of product/service consumed by the market segment(s) you are targeting.
- Product/Service sales
If you can access appropriate sources, determine the unit/value volume of current and potential sales of the product/service you intend to offer or, if none exists yet, those of substitute products/services currently available in the market.
These figures cover both historical and projected growth of the total market, market segments, and product/service sales.
Another important part of market research is getting critical information about your major competitors. You have to know the features of their product/service and how these address the needs, problems, or pain points of the target market. You also have to know how they market their product/service – how they position their brand, their pricing, promotions, and distribution strategies – and how they generate sales. It is also helpful to know the feedback of their customers.
Most important is knowing their competitive advantages. With all these information, you can come up with an assessment of their respective strengths and weaknesses. Your strategy will include how to neutralize their strengths and how to take advantage of their weaknesses.
Another part of market research is to determine how the industry where your business belongs are affected by political, economic, social, technological, legal, and environmental developments. These developments would have an impact on the current and future situation of your industry and ultimately your business.
Gather news, discussion points, or opinions about where the industry is headed. Take note of demographic and psychographic changes.
If you are not able to do the market research yourself, you may consider hiring a professional market researcher. A well-done market study is a sound investment.
Businesses that are backed up with a solid market study has a very good chance of succeeding. Failure to do a market study can lead to a catastrophic outcome for startups.