Most startups fail because there is no need for the product or service they sell. This sounds like something too big to miss, but when you’re just starting, it’s really hard to tell the difference. 

What does it mean that there’s no market need? 

Well, sometimes a product sounds like a good idea, and when you approach potential customers and ask them if they need it, they will give you an affirmative answer. However, if you ask an extra question or two, like: “How much would you be willing to pay for this product?” things suddenly become much more complex.

Basic market research can solve all of this uncertainty; however, first-time entrepreneurs often don’t know how to conduct one. To help you out with this, here are the top four tips for conducting market research for your first business. 

1. Find an existing market to analyze

The best thing you could do is research the market that you’re planning to join. Start with competitor research, check market segmentation, and try to see how a business of your own size would fare against such competition. 

Now, if there’s no local market for you to research, you still have a few options to make these things right. First, you could find an existing market abroad. In order to research it authentically (without geo-locational biases), you should get yourself a VPN and set the location as the target destination of the market you’re researching.

For this, you want the best of the best; however, when reviewing software, solid arguments can be made for a couple of alternatives. In other words, there’s no one best VPN service. Instead, you need to check your options and pick one that suits you the best. 

Sometimes, however, you’re in a groundbreaking field and paving the way for a completely new field. Just think about video games starting a new sub-genre on their own or products that are new technological inventions that never before existed. 

While this is a challenge, what you can do is try to identify similar trends that existed in the past. 

Being an early adopter is a huge opportunity, but it’s also a terrible risk, one you shouldn’t be too eager to take. Trends don’t just appear out of nowhere; marketing teams with multi-million-dollar budgets carefully craft them. Just because you have an amazing idea, it doesn’t mean that you’ll make it. Likewise, if you fail, it doesn’t mean that the idea was bad. 

2. Understand your customers

The next task you’re facing is understanding your customer. Without knowing who you’re doing business with, there’s no talk about crafting a solid marketing strategy. Your outreach depends on personalization, and you can’t do that if you don’t know who you’re talking to. 

First, you need to create a customer profile. This means imagining your ideal customer (or your median customer) and listing all of their characteristics. It’s bringing down an entire demographic that belongs to this target audience and breaking it down to the smallest common denominator.

Even more importantly, you have to segment your audience. Even though a median or an average is insightful, it can often be misleading. A 10-year-old and a 30-year-old are, on average, 20 years old, but if you make a strategy to appeal to 20-year-olds, you’ll miss both of these groups. So, make segments (make several profiles) instead.

When researching, you need to gather a significant sample in order for your data to mean anything. If you’re surveying 2-3 people, there’s too much room for randomness and peculiarities to taint your sample.

Most importantly, you need to incentivize participants and give people a reason to take you seriously. Sometimes, being transparent about what you need this data for is enough. At other times, you have to consider rewards. 

Knowing your customers is the most crucial component of your business plan. As such, it’s something you have to get out of the way as soon as possible. 

3. Conduct brand research

Next, you need to understand your own product. Keep in mind that you are an insider, someone who knows more about the product than the majority of the audience will be able to see. While this is important for the sake of logistics, you also need to find a way to understand the brand from the perspective of your customers. 

Make a customer perception map in order to get a better idea of where your business and product, as well as their attributes, stand. Everything is clearer with a graphical representation, and this is one of the best ways to get it. 

Sometimes, you need to conduct a product survey and ask people directly what they think about your products. Just make sure to ask questions that are fairly specific without being too leading. This way, you could lead your audience towards the answers you want to hear. 

Next, you need to focus on measuring customer satisfaction. This is the single most important metric out there. Just think about it: roughly 80% of your profit is made by just 20% of your customers. This means you have to appeal to the most loyal of your buyers to the best of your ability.

Most importantly, you need to engage in social media listening. This way, you get the privilege of learning what others think of you when they think you’re not listening. 

Ultimately, there’s no good marketing campaign or approach to sales without understanding your product. 

4. Clearly define your goals

Market research can lead to a number of outcomes, but in order to measure its success rate, you need to define your goals clearly. In other words, you need to define success in advance so that you can know when the research is finished. There are four main aims of market research:

• Making important business decisions: Every decision that you can’t back up with data is guesswork, even an outright gamble. A businessperson needs to avoid this behavior at all costs. Just keep in mind that you’ll never know all or have all the data. 
• Securing investments and funding: You need to know your investors in order to raise funds more efficiently. By doing your homework, you’ll get into this negotiation much better prepared and have a far greater chance of success.
• Determining new business opportunities: Tracking trends and consumer behavior can help you become an early adopter of a quickly rising brand and massively capitalize on this. Just make sure that you know the end goal - diversification or pivot. 
• Avoiding business failures: You can never avoid making a mistake, but some mistakes are apparent from a mile away if you’re willing to do the research. Sometimes, deciding not to do something can be the best decision that your company will ever make. 

This approach to market research is the so-called backward tracing. What you’re doing here is finding the outcomes that you’re trying to achieve and taking steps backward to make decisions and take action to get you started on this path. 

Thorough market research will ensure that your launch goes with as few unpleasant surprises as possible

No battle plan survives the first contact with an enemy, but going into battle without a plan is reckless beyond belief. You need to know what you’ll face when you actually get into business, and while this is impossible to know with 100% certainty, the better idea you get, the fewer surprises there’ll be in the fog of war