How do you conduct market research analysis for a new product idea? What tools are needed for market research? Well, I advice you read as this article will answer your question in detail.
A couple of years back, Mark stumbled upon a business idea during a brainstorming session. The idea seemed so promising that he called it the “next big thing.” And really, there was a large market for the product.
Mark’s idea was unique; no other business in the same industry had offered a product that works the same way in the past. Even though the startup cost was a bit on bit on the high side, Mark was sure he would quickly make his profits. And, like any other enthusiastic entrepreneur, he started taking steps to implement his idea.
Since he had enough savings and was able to provide all the startup funds from his own end, Mark needed no third party funding to get started. Nothing could stop him, not even money.
Mark obtained all necessary licensing and fulfilled all legal requirements. He found a good location. He purchased the needed equipment and hired skilled and experienced staff. And he marketed his business aggressively and had created much awareness even before launch.
When he eventually launched the business, it became obvious that his target market was lukewarm towards his product. But Mark felt it was too early to draw conclusions. After all, a new business normally passes through an initial “low-sales” phase before blossoming.
Out of optimism, Mark pumped more funds into the business over the next months to keep it alive. This was against his plan, but the business wasn’t yet generating enough sales to support itself. After one year of running the business, things didn’t improve as Mark had hoped. In fact, sales dwindled. And Mark could no longer continue to fund the business.
Mark approached a seasoned business consultant to figure out what could have happened and what could be done. That was when he discovered shocking facts about his business idea. He was enthusiastic, but his target market wasn’t. His product was unique, but it didn’t really fill the consumer’s need in a unique way.
And because his product had to be priced a bit high to guarantee profit, his target market stuck with the other products, since his product didn’t really solve their problem in an easier or quicker way than the cheaper alternatives.
Eventually Mark’s business crumbled just after the first year of its launch. Why? Because he didn’t research the market before launching his “big” idea. And so, he couldn’t survive the harsh realities of the market.
Back to the present
Having understood—from that story—the importance of conducting extensive market research before starting a new business, you will now learn how to do it yourself. Conducting market research for a new business idea isn’t as difficult or complex as you might think. And it comes down to just four steps, which are discussed below:
How to Do Market Research for a New Business Idea
1. Identify your target market
Your target market is the group of people you will promote, advertise, and eventually sell your product or service to. To define your market, you need to answer certain questions, such as the following.
- What are the demographics of the locality you’re running your business in?
- What is the age range of your target market?
- Are you targeting males or females, or both?
- Are you targeting married or single individuals, or both?
- What is their occupation?
- What are their interests?
- How often will they need your product? Every day or only at specific times?
Giving answers to these and other relevant question will help you define your target market. The rule here is to make your target market clear enough that you can visualize them in your mind.
2. Analyze the need to be filled
Chances are that you already defined the need, but you still need to analyze it to figure out if the need is really felt by your target market and if your product or service is capable of filling that need.
List the features and benefits of your product or service that make it the perfect solution your target market needs. In addition, list the factors that will prompt your target market to buy your product or service. This could be low price, convenience, higher quality, and other factors.
3. Ask questions from potential consumers
Get in touch with your target market and gather relevant information about their needs and preferences as well as your product or service. You can do this using interviews, surveys, or questionnaires. Some important questions to ask might include the following:
- What factors do you consider when purchasing this product or service?
- What do you like or dislike about products or services currently in the market?
- What suggestions do you have for improvement?
- What do you think is the most appropriate price for this product or service?
- Asking questions like this will help you better understand what your target market expects from your product or service.
4. Analyze the competition
Find out more about similar products or services already in the market. What are their prices? What are their strengths and weaknesses? And how will your own products and services compete against them? This last step helps you figure out the competition’s weak areas that you can capitalize on. These are your unique selling points.