The Importance of Market Research for a Successful Startup

Some say that successful entrepreneurs are born, not made.
Others disagree, saying entrepreneurship is a talent that can be learned. The
truth of the matter probably lies somewhere between the two. The desire to
create and grow a business, no matter the size, requires a combination of character,
talent, vision, timing, and market research.
As an entrepreneur, the market for your product is the pool
of consumers or businesses that have a need that your startup business may help
them address.  So, you need to define
your market before conducting research. Once you define the scope of your
potential business and the potential market for your product, you can then find
out why a consumer or business would purchase from you rather than a
competitor. Before investing in starting your business you need to find your
niche and determine your clients’ willingness to pay for your product ‘ which is
where market research comes in.
In order to gather this information, entrepreneurs use resources
to conduct market research including the chamber of commerce, the U.S. Census
Bureau, and the SBA, provide valuable information to business owners.  For instance, Shawn O’Connor, founder and CEO
of Stratus Prep, recently told
Forbes
about a tool made available by the SBA called SizeUp. It allows you
to put your business’s industry and city and it maps out your competition,
highlighting areas with a lot of competitors in orange and areas with potential
customers but few competitors in green.
In addition, be sure to conduct your own research to get
information specific to your business and the consumers you hope to attract. A
few research tools to consider include interviews, surveys, and focus groups,
which can identify information about the importance of price and features as
well as the strengths and weaknesses of competitors.  In fact, before starting Stratus Prep, O’Connor
held focus groups to determine the market size and willingness to pay for his
offering. This process also helped him identify which features were most important
to potential customer. Then, he compared the consumer information to cost
structure to ensure that after expenses; the business would be profitable based
on the price consumers were willing to pay.
According to O’Connor, it is important to be open-minded when
conducting market analysis as the feedback you hear may not be what you were
expecting. ‘You may feel attached to your business idea and wish to change
nothing about it, but after conducting a survey you may find that customers are
looking for different service or additional features. So, don’t scrap your
idea, but consider adjustments to accommodate your customers’ demands,’ he
explained.
An example of a company that performed this market analysis
is JetBlue, which prior to launching, determined that airline passengers cared
more about comfortable leather seating and TV entertainment than the other
‘amenities’ offered by legacy carriers. JetBlue invested in upgraded seating and
TVs and emphasized a relaxing journey at a modest price. Turns out, the
strategy was so successful that other airlines followed suit and numerous
imitators emerged.
Additionally, Starbucks identified and catered to unmet
consumer needs, which turned an everyday beverage into an experience. While Starbucks
is known for its coffee, it is also renowned for its atmosphere, where
professionals, college students and anyone who wants to kick back can set up
shop with free WiFi and a comfortable workspace. ‘The modifications made to the
industry standard drew an enormous and loyal following, which is why there is a
Starbucks on every corner,’ commented O’Connor.
By doing your market research homework before starting your
business, you will make company a powerful force in this competitive business world!