Start-ups need research too

Blog by Neil Francis Posted on Tuesday 12th February 2019 at 4:00pm

Entrepreneurial start-ups can benefit greatly from economical market research.

Major corporates and medium enterprises are generally well-versed in the powerful benefits that market research brings to decision making. Entrepreneurs, especially those in the start-up or early growth phase, are less likely to consider market research. Why is that?

New ROI scaling

For smaller ventures it’s quite understandable: you’re not going to spend your entire to-market budget, or a great majority of it, on research. It makes more sense to get your product to market and see if it’s a goer or not.

A major barrier has been the traditional cost of market research: simply out of reach for new entrepreneurs. A custom study in the past could cost $40k – $50k. ResearchSquirrel, however, employs an entrepreneurial approach by avoiding layers of management, fancy offices and big egos, and by digitally automating all that can be while maintaining rigorous standards. The result is a reduction in the cost of a significant custom study to $10 – $20k.

So, if your investment capital is, say $200k, or $2m, it’s astute to invest 5 – 10% or less (or 0.5% – 1% or less!) on finding out what’s likely to work in your intended market, what’s not, and why.

Tactical benefits

Market research can bring numerous critical insights to a new or growing venture. Here are three examples.

1. Branding

Research can help establish which branding resonates most with the target market, ensuring that prospects’ mental journeys from non-buyer to buyer are both shortened and quickly strengthened. For example, which branding is most likeable or believable; makes the most sense; communicates the right values; or invites enthusiastic word-of-mouth?

In one of our most revealing studies, six branding alternatives had been crafted for a B2B opportunity. We put them to the target market, and the market … disliked all of them! After analysing respondent explanations, four new brandings were formulated, and quick market research on those four established that one was a clear favourite.

2. Product features and segmentation

A new-product venture needs a clear understanding of features that the market (not friends and family) actually values. Market research can establish not only the Minimum Viable Product (MVP) feature set, but in which order to develop what features to appeal to a growing market of early adopters, and then an early majority. You won’t waste valuable time and cash first developing features only laggards want.

A well-tuned feature set also helps generate positive PR by enthusiastic innovator and early adopter customers, and maximises early sales revenue to fuel further growth.

3. Approach to pricing

Revealing customer attitudes toward the product’s pricing helps clarify likely revenue flows and profit margins so that the venture’s cash flows can be forecast with greater accuracy. Price elasticity can also inform whether a skimming pricing strategy makes sense, or whether a penetration pricing strategy would be wiser in order to achieve economies of scale sooner.

Pricing can also inform decisions about product variants to more exactly meet different segment needs. The pricing that the market will bear for each variant underpins revenue and profitability analysis of a potential variants porfolio.

Strategic benefits

Independent, professional research provides authoritative strategic insights and evidence that inspires injection of new financial capital, provides an empirical yard-stick to fairly apportion new shareholdings, attracts the right talent, and aligns stakeholders to work together on shared goals.

It’s a key tool to help minimise friction, stamp out chaos and avoid costly miscalculations.

Conclusion

Market research helps entrepreneurs refine the enterprise’s vision and translate it into targeted and efficient action plans that propel enterprise growth while avoiding costly — and potentially even fatal — mistakes.

To find out what market research can deliver for your venture, and the likely required investment amount, check out ResearchSquirrel’s Research Plan product.

Keywords:

Branding research / Positioning research