Conducting Market Research
From time to time, I am asked to either conduct market research or teach market research. Lesley Spencer Pyle’s September 2010 article, "How to Do Market Research – The Basics", featured in the in Entrepreneur magazine, is a good primer on this topic (link below). In particular, at Chapman and Company we regularly see businesses commit the three “Common Marketing Mistakes” discussed at the end of the article. The simple solution to market research is a multi-faceted approach.
Many people are afraid to make phone calls or talk to actual customers. I think some of this is just human nature, but I also think that new entrepreneurs who have never market-tested anything are afraid to get a “no.” They are afraid that one “no” will invalidate their idea or market problem. Instead, market research is an excellent way to start to slice the market into segments of buyers and types.
In many ways, Chapman and Company believes that the goal should be to get to a “no.” When doing your research, are you more or less asking “Would you ever sort of maybe kind of consider buying this?” If asked in this way, you are doing market research incorrectly. Instead, ask “Would you buy a software product of this kind for $99 per month?” Also, you need to pick up the phone or get out on the street and talk to customers (not your friends). In pushing towards that “no”, you can delve into pricing. Specifically, if you know that 80 of the 100 buyers will buy at $29 per month but only 10 will buy at $99 per month, you have learned very useful pricing information. Getting people to say “no” at $99 is essential to that analysis.
However, do not assume that your survey will be correct. Primary sources – surveys and interviews – are better than nothing or only secondary research. They are still only part of the market research program of work. It is my experience that for small products (stuff under $100), surveys tend to overstate consumer interest by about 30%. This is an estimate only, and not a scientific certainty, as each product is different, but it underscores the importance of viewing survey data for what it is – one piece of good information.
I am amazed by the amount of good entrepreneurs or otherwise smart people that just assume they know the market without asking any questions of customers. You may be 80% correct about the market – but that 20% is a HUGE difference regarding pricing or market adoption, for example. Just spend some time to get 100% of the way there.
Please click on the link below to read the article: