I mentioned on a recent show that I read that 42% of startups fail because there is no market need for their products or services.
Some people say this number is too high. I’m sure the number varies depending on the options listed, and most businesses fail for more than one reason. But I don’t care what the actual number is, because any number higher than zero is almost always avoidable.
I’ve since had a couple of listeners comment that they’re not surprised the number is high, since most startups don’t have the cash to do market research.
If you mean hire an expensive market research company, this may be true. But there are usually ways to do at least SOME valuable market research on a budget, especially if you’re creative and persistent. Here are some suggestions to get your juices flowing!
- Use the internet to research your competitors. See how they position themselves, how long they’ve been in business, and where they market themselves.
- Use surveys – there’s Survey Monkey, including a paid version of Survey Monkey that’s actually not very expensive.
Be careful that you’re actually surveying your customers. Some people will put surveys out on LinkedIn and social media sites, but do you know if YOUR future customers actually on there much or make their buying decisions there?
Also, I’ve had people tell me these don’t work – everyone is surveyed to death already! And yet, the lack of survey response can be telling right there.
For example, a colleague & I had an idea to create a whole training course on a topic, but we couldn’t get anyone to respond to our requests for feedback. We dropped the idea – if no one cared enough to give us feedback, we figured it would be mighty hard to sell.
If you do a survey or request feedback, consider making it fairly provocative. Maybe take a devil’s advocate position or make a controversial statement & see if that improves the response. People ARE surveyed to death, so you need to grab their interest!
- Make sure you’re asking the right questions. Don’t just ask: would you find my product/service interesting? the answer might be Yes! But make sure you ask: at what price? With what features/guarantees?
- My favorite suggestion: chat up people.
Some ideas here:
- Your existing network – really look at all those LinkedIn & Twitter connections – you may be surprised at the resources there. You may also find out some surprising things about your neighbors and colleagues, as well, if you just ask.
- Trade association folks, or editors of trade publications. These people know lots about their industry and have their finger pretty firmly on the pulse of their industry.
- Call up or talk to potential customers. I recently helped a client with a new veterinary product with some market research and spent several days just calling up vet clinics of different sizes and types, asking them about their purchasing & use decisions. It was extremely insightful, and once I got over my shyness about calling, was actually a of fun talking to actual customers and hearing their perspectives.
- The Google Machine
This may seem obvious, but it’s amazing the stuff that’s out there for free or for not much money. Guest after guest on The Savvy Entrepreneur show has told me that Google has been one of their best resources.
The Google Machine is great not only for demographic information, but also can produce a wealth of information about pricing, competitors, and even alternatives that you might not immediately think of as competitors.
People sometimes forget, or just haven’t taken the time to get good at web browsing. Don’t believe me?
A venture capitalist guest on the show recently told me about an entrepreneur who was pitching to them to invest in his company. He insisted that he had absolutely no competition. The VC proceeded to do some quick Google searches on the spot and produced a list of several potential competitors. The entrepreneur was flustered and unprepared for this. Needless to say, he didn’t get funded by that VC!
I’ve had some people tell me “I don’t time to do market research!”
Well, actually yes, you DO! What you DON’T have time for is dumping your whole life savings or the money given to you by friends & family & charging full speed ahead with an idea that may not have any traction.
I’ve had people tell me that they don’t feel comfortable doing that – calling perfect strangers, and maybe getting hung up on. Well guess what – if that’s you, you may not be cut out to be an entrepreneur. Because you’re likely going to be spending a fair bit of time once you’re up & running doing just that!
Also, when you’re chatting up folks, DO NOT, I repeat DO NOT try to sell them. I recently listened in on some conversations an entrepreneur had with potential customers for a new medical device. And it was clear he was trying to persuade them on the product. Naturally, they told him all sorts of positive things.
What you want with all of these folks you’re chatting up is HONEST feedback. You won’t get that if you’re trying to sell. You might almost consider the opposite – ask them to poke holes in your idea & make sure you LISTEN – look to clarify, but don’t push back!
I am living proof as a failed entrepreneur that failing to do market research is ultimately a failure. Two colleagues and I had the idea of creating a repository of template documents – things that HR professionals and supply chain professionals and marketers frequently use. We invested a lot of time taking our various templates from corporate life and combining the best of them, perfecting, making them fillable.
We also invested a lot of time and money on building a website and setting up an e-commerce platform. And then promoting it on social media. And we spent time loading all kinds of – what we believed was – useful content.
We didn’t we do? We didn’t do any market research to find out if people really wanted these, or what – if anything – they’d be willing to pay for them. And truly shame on us – because one of the three of us was a marketer by training!
The result? We made a few sales over the months, but not anything close to covering our out-of-pocket costs, much less our time. We ended up shutting the whole thing down two years after we started, a lot poorer but wiser for the exercise.
Please! Don’t do what we did. Don’t convince yourself that your idea that no one else has had is what people really need. Maybe they do, maybe they don’t. But do yourself a BIG favor by verifying your assumptions with some basic market research.