Many entrepreneurs are so excited about their business plans that they don’t fully consider that others might not be. As a startup pitching your new business or new product for the first time, market research can help you hone your business plan and target a niche where there is the strongest demand.
Your idea can only grow in a market with fertile ground for it. Market research for startups helps you test the waters at an early stage before you dive in headfirst. Effective research reveals the extent to which there is real market demand for your product, by gauging potential interest and the performance of your competitors.
This article breaks down market research for startups into six steps. Read on and you’ll walk knowing how to measure potential customer interest and also how to track your performance in an ever-evolving digital world, so you can continually improve and optimize your strategy for maximum success.
Table of Content
- Understanding the industry sector
Identify your niche with market research
In order to be a successful start-up, finding the right niche is fundamental. Market research for startups helps you pinpoint your niche and create a successful go-to-market strategy. By collecting and analyzing supply and demand information you can define your target market and discover your ideal niche.
You’ll want to gain insight into the character and size of your potential market and assess how big a market share you can win. The size of your share isn’t determined by your product or quality but mainly by how well you make out against the competition.
Identifying indirect and direct competition
Underestimating your competitors can put everything you’re trying to achieve in jeopardy. In such a competitive environment, having a comprehensive understanding of your competition can help you find lucrative opportunities.
Start with a competitive analysis to identify all your competitors – direct and indirect.
The competitive landscape in your market can be divided into two types of competitors: your direct and your indirect competition. The first group includes companies that offer a similar product like yours to the same audience that often solves the same problem. These competitors are relatively easy to identify, and probably the first on your list to keep tabs on. For example, McDonalds and Burger King are direct competitors. They both sell fast food and have the same types of products.
To find your indirect competitors, you need to dig a little deeper. These are businesses with whom you compete on only one or two metrics. They may address the same problem with a different product but target the same audience. Or they may offer a similar product to a different audience. Think McDonalds vs. Taco Bell. They both provide fast food, but the types of food they are selling is not the same. Indirect competitors could also be enterprises who might, in the future, take an interest in your niche. Large corporations spend a lot of time looking to invest in smaller companies that complement their business plan, but who aren’t direct competitors. Think Coca-Cola moving beyond just soda and investing in other beverage companies like Fuze and Honest Tea.
Also, pay attention to industry disruptors, in other words, small businesses that could suddenly change the entire landscape. It could be you!
Once you’ve identified your main competition, create a focus group for your market research. Your focus group should consist of your closest direct competitors. These are the ones to watch out for.
Market research for startups in 6 steps
Choose four or five businesses from your focus group and analyze their digital activity, their audience, and their performance using the steps below.
Types of metrics to measure
We’ve identified 6 key types of metrics any startup should measure while conducting market research in order to get a clear picture of market trends and industry analysis:
1. Measure market share to map your digital presence. Start by analyzing your competitors Using a competitive analysis tool, you can identify how much traffic each of your competitors receives and how they compare. This will give you a better picture of where you stand in the digital world. Here is an example of a high-level overview Similarweb reveals from the website performance page:
Examining how the competitors rank within a specific country and in terms of visits can give you valuable information to direct your own strategy. You can find market share formulas available here.
2. Identify best-performing pages and keywords. Discover which pages get the most traffic and conversions. See which keywords drive traffic to competitors’ sites and landing pages. This will help you inform your own keyword and content strategy. Whatever resonates with the audience is worth adapting and optimizing within your own business strategy.
3. Investigate marketing mix and identify channels. Investigate which channels drive most of their traffic and how they leverage them within their business plan. Also, try to determine if competitors are neglecting any high-value marketing channels. This could reveal an opportunity for you to take advantage of.
4. Analyze audience demographics. Knowing your audience is critical for market analysis for startups. Which type of audience reaches their website through which channel? How well does the audience match your target audience? What are the differences between the competitors’ audiences?
5. Compare engagement metrics and conversion rates. The next step is to pull metrics on audience behavior on competitors’ sites. You can find out how users are engaging with your competitors’ sites. Look into how much time users spend on pages, how frequently they return and check conversion rates by honing in on traffic to specific domain pages that are likely to indicate conversion. You can compare the results across the competitive set for a more complete picture.
6. Monitor social media presence and engagement. Find out how significant social media is for these companies. Look at the number of followers vs. the level of engagement. Establishing a social media presence takes a lot of work, and it’s essential that you evaluate how useful it is at the beginning before deciding how to allocate your resources.
Understanding the industry sector
You can always repeat this process with larger, top-performing companies in your industry to determine macro trends. However, this should be secondary research completed after your primary research into main competitors.
To get a broader picture of the market, benchmark the critical data like traffic share and conversion rates against the industry average and the industry best. This kind of data collection helps you understand where competitors are positioned in the market. It will also help you determine customer preferences. Maybe you’ll see that most of the website traffic for your industry comes from mobile web, you’ll want to optimize accordingly. You can also identify marketing channels that might be underperforming based on industry standards and adjust your marketing budget to more cost-effective solutions.
