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Starting a new business venture is exciting. As you think about launching and promoting your product or service, it’s essential to conduct market research. According to the Harvard Business Review, 75% of new business ventures fail within the first few years, often due to inadequate market research (1). Market research involves gathering consumer feedback on your product or service and collecting pertinent information on the marketplace, including your competitors and their pricing strategies. It’s a crucial step when putting together your business plan.
Market research helps you determine if there’s a fit for your idea and whether people will pay for it. Before moving forward with your small business or startup, you need to do the behind-the-scenes work.
Market research helps you address key questions, such as who your customers are, their spending habits, the market landscape, who your competitors are, and potential opportunities for growth. A study by CB Insights revealed that 42% of startups fail due to a lack of market need for their product or service (2). The more information you have upfront, the better off you’ll be and the better business decisions you can make.
Market research can be conducted using various methods, such as social media analysis, interviews, experiments, and observation. Gathering data on your business and industry is essential, and you’ll need to collect primary data (new data from prospective customers) and secondary data (existing data from sources like government census data and surveys done by other companies).
The cost of conducting market research can vary widely depending on the methods you choose and the scope of your research. According to Vernon Research Group, you can expect to spend between $4,000 and $6,000 per focus group, between $15,000 and $35,000 on consumer research, and up to $50,000 for business-to-business research (3).
Despite the costs, market research can yield a significant return on investment by helping you make informed decisions, optimize your product or service, and identify opportunities for growth. A study by McKinsey & Company found that businesses that invest in market research and data-driven decision-making are 23 times more likely to outperform their competitors in customer acquisition and six times more likely to retain customers (4).
Market research is crucial for the success of your startup or small business. By conducting comprehensive research, you can better understand your customers, competitors, and market trends, allowing you to make informed decisions and optimize your product or service. Investing in market research can yield significant returns in the long run by helping you identify growth opportunities and mitigate risks.
Don’t overlook the importance of market research. Good market research empowers you and helps you make the best decisions for you and your business. Guesswork can cost you valuable time and money, while data-based decisions can drive your business in the right direction.