Knowing all the details about trends in your industry, who your audience is, and what your competitors are offering is a must before launching your startup.
By the end of this guide, you'll have everything you need to do market research that helps you gather this crucial information.
But first, some basics.
What Is Market Research?
Market research is the process of collecting and analyzing data about your target market to determine how successful your specific product or service can be and decide how best to develop and launch it.
This usually involves a variety of research methods, including conducting surveys, reading industry reports, and running focus groups.
The Importance of Doing Market Research for a Startup
Performing market research allows you to:
- Gauge demand: Uncover whether there’s sufficient demand for your product or service before you invest money into developing and marketing it
- Understand customers: Learn more about your customers and their unique needs and purchasing criteria, so you can sell to them more effectively
- Create an effective go-to-market strategy: Get a better understanding of your competitors and identify opportunities to succeed in the market
And all of the above can help you create a pitch deck to attract investors for your startup. Like this one from Prolific:
Types of Market Research
Primary vs. Secondary Market Research
Primary research is when you gather data on your target market yourself. For example, by surveying potential customers or organizing focus groups.
Secondary research includes analyzing data others have collected or compiled. Gathering data from industry reports or surveys would be an example of secondary research.
Quantitative vs. Qualitative Research
Quantitative research involves collecting and analyzing numerical data to identify patterns and insights. Polls and surveys are typical examples of quantitative research.
Qualitative research aims to gather and interpret non-numerical data to uncover insights from respondents’ personal experiences and opinions. It often relies on open-ended questions and research methods such as interviews and focus groups. Or techniques such as social media listening or review mining.
How to Conduct Market Research for a Startup in 6 Steps
Ready to perform market research for your startup? Follow these steps:
1. Define Goals
You should start by defining what you’re looking to accomplish by performing market research. This will help you choose the right research methods and guide your entire market research project.
Some potential goals for your market research might include:
- Understanding the viability of your product or service
- Finding specific market segments to focus on
- Determining how much customers would be willing to pay for your product or service
- Identifying your main competitors in the market
2. Read Industry Reports
Reading industry reports is an easy and affordable way to get started with market research.
These types of reports can help you understand the total size of your target market and allow you to identify important trends.
This IBISWorld report is a good example:
Industry reports are widely available. And there are multiple market research firms offering up-to-date reports on almost every industry.
Here are a few sources to get you started:
3. Analyze Your Competition
A competitive analysis involves identifying and analyzing your competitors to understand their product or service, positioning, messaging, etc., and using the insights you gain to improve your own go-to-market strategy.
Here’s how to get started with doing a competitive analysis.
Identify Competitors
Industry competitors can roughly be divided into two types: direct and indirect.
Direct competitors sell a product or service similar to yours and to the same market you intend to target.
Indirect competitors sell a product or service that isn’t identical to yours but could be used as a substitute
How do you identify industry competitors? Well, you probably know about some of them already.
But you can use Semrush’s Market Explorer to uncover more.
Click on the “Analyze Category” tab and choose your location and business category. Then, click on “Research a market.”
The tool will then generate a detailed report on your market.
From here, you can scroll down to the “Domain vs Market Dynamics” section to see a list of your top industry competitors. And the percentage of traffic their websites get compared to the total traffic for your market.
Once you’ve identified competitors, you can visit their websites and analyze the following:
- Product/service and features: What are the core features of their product or service? Does it have any features you’re missing?
- Growth strategy: Are they using a product-led or sales-led growth strategy?
- Pricing: What does their pricing look like? Do they offer discounts?
- Customer sentiment: Check out their reviews and testimonials. What do customers like or dislike about your competitor’s product or service?
Analyze Competitors’ Organic Search Performance
Once you’ve identified your main competitors, you can use Semrush’s Organic Research tool to learn more about their search engine performance. Including how much traffic they’re generating from organic search and which keywords they rank for.
Here’s how:
Enter a competitor’s domain and click “Search.”
The tool will then generate a report on that competitor’s organic search performance.
At the top of the “Overview” tab, you’ll be able to see the total number of keywords the domain ranks for and how much traffic it’s generating from unpaid search engine results.
From here, click on the “Positions” tab to see a list of all the keywords the domain ranks for.
Next, click the “Pages” tab to see the domain’s most popular pages.
And export all of this information to reference later by clicking the “Export to PDF” button.
Analyze Competitors’ Advertising Activities
The next step is to learn more about your competitors’ advertising activities to find out how much they’re spending on paid search ads, which keywords they’re bidding on, and what their ads look like.
Semrush’s Advertising Research tool can help here.
Type in a competitor’s domain and click on “Search.”
You’ll then be presented with a detailed report.
From the “Positions” tab, scroll down to the “Paid Search Positions” section. To see a list of all keywords a competitor is bidding on in paid search results. And accompanying information, such as each term’s search volume, cost per click (CPC), and the associated landing pages.
Advertising Research also lets you see the exact ads a competitor is using. Simply visit the “Ads Copies” tab.
Export this copy by clicking on the “Export” button. This will come in handy if you decide to take a closer look at your competition’s messaging later on.
4. Understand Your Target Audience
Understanding your target audience is crucial because knowing who they are and what they care about can help you avoid wasting time and effort focusing on people who aren't likely to become customers.
When researching your target audience, you’ll want to collect the following information:
- Demographic data: Age, gender, and location
- Socioeconomic data: Household size, employment status, income, and education level
- Pain points: The challenges your target audience is dealing with
- Current solutions: What prospects are currently using to manage their challenges
- Attitudes and behaviors: How your target customers feel about existing solutions to their pain points, what their research and purchasing process looks like, and more
This is just a starting point. Depending on your product or service, you might need more or less information on your target audience.
How will you find all of this information?
Use Semrush’s One2Target, which can provide you with plenty of insights on your target audience.
Here’s how:
Start by entering the domains of up to five competitors. Then, click on “Analyze.”
The tool will then analyze your competition and extract insights on your target audience.
In the “Demographics” tab, you’ll be able to see more information about your audience’s age, gender, and location. And average website traffic estimates for each of your competitors.
The “Socioeconomics” tab contains information on your target audience’s household size, income, education level, and employment status.
If you navigate to the “Behavior” tab, you’ll be able to see more information on your target audience’s social media and device usage. As well as their interests.
You can then take advantage of this information to help you find suitable participants for surveys, interviews, or focus groups.
You can also use methods such as:
- Surveys: Create a survey containing questions that will help you get a better understanding of your target audience. You can source survey participants yourself or use platforms like Pollfish and SurveyMonkey that take care of it for you.
- Interviews: Organize one-on-one interviews with potential customers by personally reaching out to them via LinkedIn. Or use Hotjar or Wynter to find relevant people to interview from the platforms’ participant pools. Try to interview at least 10 to 20 potential customers to learn more about them and their needs.
- Focus groups: Set up focus groups consisting of five to10 potential customers and discuss their needs, attitudes, and behavior in the context of your product or service. You can find participants yourself or use a platform like User Interviews to source them.
5. Perform a SWOT Analysis
A strengths, weaknesses, opportunities, and threats (SWOT) analysis aims to evaluate your startup in a variety of ways to help you make more informed decisions.
And it might look something like this:
| Strengths | Weaknesses |
|
|
| Opportunities | Threats |
|
|
Let’s go over each part of the acronym:
Strengths
Ask these questions to identify your startup’s strengths:
- What makes your product or service different from that of your competition?
- What exclusive resources do you have that you can leverage?
- What customer pain points do you address that other companies ignore?
- What advantages do you have by being new to the market?
Weaknesses
Use these questions to pinpoint your startup’s weaknesses:
- What do competitors do better than you?
- What are some things you’re doing inefficiently?
- What resources are you lacking?
Opportunities
Uncover opportunities in your target market by answering these questions:
- Which market segments are currently underserved?
- What emerging trends can benefit your startup?
- What proposed laws or regulations might positively affect your startup?
- What underutilized resources do you currently have?
- Which complementary startups you could partner with?
Threats
Identify threats that might prevent your startup from succeeding by asking these questions:
- What sorts of changes to your target market could harm your business?
- What industry trends or changes could negatively impact your startup?
- What sorts of unplanned expenses could hurt your chances of becoming profitable?
- How could any new competitors entering the market prevent you from succeeding?
- What sorts of global or geopolitical issues could negatively affect your startup?
6. Compile Data and Summarize Your Findings
At this stage, it’s time to compile all the data you’ve gathered during your market research and summarize your findings.
ChatGPT can help in speeding things up at this stage. You can feed it all the data you’ve gathered and ask it to extract key insights and create a summary.
From here, you’ll need to create an actionable plan with specific next steps you’re going to take to make your startup a success.
What those steps entail will depend on what you discovered.
Maybe it’s revisiting a product design to better suit audience preferences, adjusting your planned pricing to be more competitive, or something else.
Ensure Your Startup’s Success with Market Research
Market research is an important first step in preparing your startup for success.
And while getting started can be intimidating, using tools like Market Explorer and One2Target make it easy to gain valuable insights that will help you along the way.
Try them today with a .Trends subscription.