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How to conduct market research in startups and small firms?

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Many business mistakes are made due to insufficient market research. That’s why U created for you this guide to simple market research methods supported byon-line course so that you can see how with virtually no money you can research many important to you aspects like the size of the market or segment, the sales tactics of competitors, customer preferences etc. .
I will show you 3 groups of market research methods:
1. Consulting methods
2. On-line methods
3. Off-line methods
Since we want you to be able to do market research on your own there will be very little theory and loads of nice examples in many fields. You will master the market research in fields such as: retail, fast moving consumer goods, food sector, on-line businesses, services and some off-line businesses. This training will be especially beneficial for small business owners, startup, and consultants. You will learn what mystery shopping, store-checks is, bottom-up , top-down approach and others.
You will be able also to download from the on-line courses many additional resources
1. Links to free presentation and movies showing examples of research
2. Links to books worth reading
3. Excels with calculations showing you how you can do the market research as well as analyses and draw conclusions

Published in: Business

How to conduct market research in startups and small firms?

  1. 1. 1 Market research and spying on competition Guide for startups and small businesses
  2. 2. 2 Introduction
  3. 3. 3 Market research can be divided into 3 main categories Market research Consulting methods Off-line research On-line research
  4. 4. 4 The simplest methods are used by consultants and only require a bit of imagination Market research Consulting methods Top-down Bottom-up Off-line research On-line research
  5. 5. 5 Off-line research are a must not only in physical good businesses Market research Consulting methods Off-line research Interviews and discussion with (potential) customers Being where your (potential) customer is Work for your (potential) customers Store checks of competition Mystery shopping at competition On-line research
  6. 6. 6 The last group of on-line tools puts at your disposal numerous solutions giving you in-depth knowledge of your competitors and markets Market Research Consulting methods Off-line research On-line research On-line interviews Facebook Audience Insight Customers profiles on facebook/instagram/pinterest Keyword Planner for Google AdWords SimilarWeb Branch sites and reports Slideshare and Youtube Markets for applications
  7. 7. 7 Type of markets Existing Better Product Resegmented Niche Strategy Low cost New Market New users New product Some methods are more useful on a specific type of markets…  Mainly consulting methods  Off-line and on-line research of customers for proxy or similar markets  Off-line and on-line research of customers for similar business models  Off-line and on-line research of customers (chosen segments) and competition  Off-line and on-line research of customers and companies on similar / proxy markets  Some usage of consulting methods  Off-line research of customers and competition  On-line research of customers and competition
  8. 8. 8 More developed version of the market research with examples and helpful files you will find in our on-line course on Udemy Click to check my course
  9. 9. 9 Consulting methods
  10. 10. 10 The simplest methods are used by consultants and only require a bit of imagination Market research Consulting methods Top-down Bottom-up Off-line research On-line research
  11. 11. 11 …the one you will for sure use is bottom-up approach where you go from single (typical) consumer to market research  First you should imagine the typical users  Then you should try to guess his consumption level  By estimating the number of typical users you and their consumption level you get the rough size of the market
  12. 12. 12 …sometimes it makes sense to divide markets in segments and estimate them separately (i.e. average and typical users, women and man, people in different age groups or segmentation by lifestyle) Segment A Segment B
  13. 13. 13 …lets do a simple example. Imagine that you want to make an application for franchised restaurants  You pick the sample group / area you want to estimate i.e. city (here Warsaw)  You count the number of all restaurants in the area  For the chosen area you count the franchising restaurants  You check the population of the whole country – here Poland  Assuming similar density as in Warsaw you scale up the number of franchised restaurants proportionally to the population
  14. 14. 14 …to make you better at this method imagine you want to sell home made dog food….. First you have to estimate how many dogs they are…..  First you should pick your sample – can be your friends or neighbors  Next step is to calculate how many dogs they have  Once you have the number also calculate how many households they are in the sample  It is now enough to know how many households there are in the country  And assuming similar proportion as in your sample you scale up the number of dogs +
  15. 15. 15 …with the number of dogs you just have to estimate the number of food eaten per year by average dog…..and you get to the size of the food market  We have the number of dogs in the whole country. Now we have to get from here to the dog food  This requires us to estimate additionally how much food would average dog eat per year  In this way using annual average consumption per dog and the estimated number of dogs we are able to estimate how much food is eaten every year in the country +
  16. 16. 16 Lets sum up the bottom-up approach Bottom-up approach enables you to estimate within one minutes the indicative size of the market It is very good for the B2C markets For better estimation you should segment customers and increase the sample size
  17. 17. 17 When to use top-down approach? You know the size of the whole market You are interested in a specific segment of the market Segment is big enough You are thinking about niche strategy or low cost strategy (market re-segmenting)
  18. 18. 18 For a change lets see how it would work with top-down approach  You use the total market size to get to the size of the segment in which you are interested  You have to use some sort of sample measure  By applying the result from the sample you can get to the size of the segment in which you are interested
  19. 19. 19 … let’s use the top-down approach to estimate the market for science fiction books sold in Poland….  You use the total number of books sold in your country  Then you go to the bookstore that belongs to the biggest chain of bookstore and check what percentage of the shelves are take by science fiction books  If you use this proportion to the whole market you should get the rough estimation of the science fiction book segment
  20. 20. 20 Off-line research
  21. 21. 21 Off-line research are a must not only in physical good businesses Market research Consulting methods Off-line research Interviews and discussion with (potential) customers Being where your (potential) customer is Work for your (potential) customers Store checks of competition Mystery shopping at competition On-line research
  22. 22. 22 Off-line interviews
  23. 23. 23 As a part of the market research you have to define what characteristics should have in your MVP. Off-line interviews are perfect for this purpose Find a problem worth SOLVING Find a solution that someone will WANT TO PAY for This will determine the features and functionalities of the MVP
  24. 24. 24 Conducting face-to-face interviews is very important because it allows you to find or confirm the existence of the problem
  25. 25. 25 There are a few rules of interviewing to keep in mind: • Minimum of 15 respondents • Talking face to face • Neutral place • Do not record - take notes • Prepare script of the interview with ready questions Source: Lean Analytics: Use Data to Build a Better Startup Faster; A. Croll, B. Yoskovitz; Running Lean, Ash Maurya
  26. 26. 26 While interviewing have in mind the following advices: Set the stage Identify the segment Introduce the problem Test the problem Verify the solution Ask for something • Highlight the aim of the meeting • Explain what you will talk about and what you will ask him to do • Check which segment he/she belongs to • Collect the demographic data and specify the segment to which belongs the respondent • Explain the problem • Explain how you came across the problem and why you believe it is important • Sometimes not to lead the witness speak generally about problems in the respondent field or skip this stage entirely /move it to the end of the interview • Ask the respondent to rank problems from the most important to the least important • Ask about other related issues / problems they think are worth mentioning • Try to understand respondent ‘s point of view • Discuss problems in the order of importance and how the respondent solves them what solution he is using • If he does not show interest this it means that there is a discrepancy between your business model and the reality • Ask for another meeting to discuss the solution (in the future this may be one of the first customers) once you have something that shows • Ask for several contacts to his friends to also perform a conversation with them Source: Lean Analytics: Use Data to Build a Better Startup Faster; A. Croll, B. Yoskovitz; Running Lean, Ash Maurya
  27. 27. 27 Pay attention to the signs saying that your idea is a good one: YES Money Did they already try to solve the problem? How interested is he? Nonverbal communication  The responder wants to pay for your solution right away  The respondent tried himself to solve this problem  The respondent has a strong interest and passion in talking about the problem  The respondent is animated and leaning forward (positive body language) Source: Lean Analytics: Use Data to Build a Better Startup Faster; A. Croll, B. Yoskovitz; Running Lean, Ash Maurya
  28. 28. 28 Disturbing signs that may show that the idea is not entirely good: NO Focus Did they already try to solve the problem? How interested is he? Nonverbal communication  Respondent is not focused on the conversation and the topic; seems distracted  Respondent did not undertake any attempts to solve the problem  The respondent talks a lot about everything but not about the problem  The respondent is slouching in his chair of his shoulders are slumped; shows a lack of any interest (negative boy language Source: Lean Analytics: Use Data to Build a Better Startup Faster; A. Croll, B. Yoskovitz; Running Lean, Ash Maurya
  29. 29. 29 Use interviews to answer 3 important questions: Is the problem serious? Does the problem affect a large number of people? How the problem has been solved so far? or or
  30. 30. 30 You need to assess all interviews according to standardized scores Design assessment criteria Define responses Assign points  4-10 criteria  3-4 closed replies  Fore example. use scoring system form 0 to 10 points per answer  Come up with at least 4 criteria for scoring respondent's behavior during the meeting  Come up with 3 types of answers, to which you can assign your observations, for example: • Yes • More or less, • No,  or • Yes, by itself, • Yes, at my request, • No  Assign scores to answers for example: • Yes-10 points , • More or less-5 points, • No-0 points  Set the threshold for judging whether it makes sense to solve the problem or not – should be around 75% of Maximal Total Score # options Description Source: Lean Analytics: Use Data to Build a Better Startup Faster; A. Croll, B. Yoskovitz; Running Lean, Ash Maurya
  31. 31. 31 If the total score is below set threshold then you should reconsider what to do next Source: Lean Analytics: Use Data to Build a Better Startup Faster; A. Croll, B. Yoskovitz; Running Lean, Ash Maurya Is the total score above the threshold? YES Proceed with market research NO Abandon the idea Look for a subset of interviewee for which the total score was much higher
  32. 32. 32 Below you can find some examples of evaluation criteria allowing you to check what is the attitude of the respondent to the problem  Did the respondent sort by importance the problems presented by you?  Has the respondent been undertaking any active steps to solve his problem?  Was the respondent focused during the interview and engaged in the conversation?  Did the respondent agree to another meeting related to the presentation solution?  Did the respondent refer you to other people with whom you could talk? Source: Lean Analytics: Use Data to Build a Better Startup Faster; A. Croll, B. Yoskovitz; Running Lean, Ash Maurya
  33. 33. 33 Using the top-down and bottom-up analysis you can calculate for how many people the problem is interesting enough so they can spend some money on the solution TOP-DOWN ANALYSIS OF AVERAGE RESTAURANT REVENUES • The total amount spend by people in the USA on eating in restaurants • The percentage of the amount spend in NY • The number of restaurants • The calculation of revenues per one restaurant BOTTOM-UP ANALYSIS OF AVERAGE RESTAURANT REVENUES • The average number of tables in a restaurant • The percentage of reservation of tables and average price per table • Multiplying the number of days in the year (including seasonal effects)
  34. 34. 34 Suppose you want to design a new solution that helps people lose weight…
  35. 35. 35 …then you should check whether people are trying solve the problem and if yes how do they do it?
  36. 36. 36 The fundamental question to yourself: Do I want to deal with this problem over the next 5 years?
  37. 37. 37 People say what they think the other person wants to hear, so use the 4 measures to prevent "guiding the witness" (push polling) Do not show your emotions Ask specific questions Dwell on a subject Watch for signals • Avoid biased expressions like: "Do you agree with that ..." – it may lead them to the answer you expect; ask questions in reverse, so that he has to disagree with you to show that he cares about the problem • When the respondent knows something about you, i.e. you're a vegetarian, he will be inclined to positively respond to questions about the protection of the environment • Look neutral, do not send signals, and do not suggest any point of view • We get an honest answer when we put the respondent in uncomfortable situations, for example ask for prepayment of 100 EUR • The more specific questions, the more realistic answer • Ask about friends. Do not ask him if he "smokes pot", but "what percentage of your friends are doing it" – reflects his approach • Ask 5 times the question "why" • You can interview accompanied by a partner who will follow body language of respondents; maybe something causes nervous ticks and indicates a sense of discomfort • Columbo-style question: unexpected question that asked after you had already said goodbye to the respondent. In this way, you can surprise and confirm or deny something important, what has been said earlier in an interview Source: Lean Analytics: Use Data to Build a Better Startup Faster; A. Croll, B. Yoskovitz; Running Lean, Ash Maurya
  38. 38. 38 Where you can find respondents? • You can watch someone that does not necessarily have to reply with the same; • Do not spam these people, only when they mentioned about an interesting question you can speak to them; • It allows you to reach a large demographic data; • You do not have to have their in your contacts; • There are specific groups you can join. They focus on specific topics • All contacts are mutual • By searching you can specify the size of the market, i.e. restaurants, because they have own pages • You can also join groups and invite them to participate in the tests or interview Family, Friends, Neighbours Where Type of business Comments Twitter Linkedin Facebook • Limited number of respondents; • Small differences in demographics; • The answers may be subjective; • On the other hand, you can count on friends for honest answers • Mobile application • Site media • Retail • B2C Products • B2C Services • UGC • SaaS • SaaS • Site media • B2B Services • B2B Products • B2B • Mobile application • SaaS • Site media • all Source: Lean Analytics: Use Data to Build a Better Startup Faster; A. Croll, B. Yoskovitz; Running Lean, Ash Maurya
  39. 39. 39 You will learn more on interviewing customers from the books below. Click on the cover of the book to get to the Kindle version Click for more Click for moreClick for more Click for more
  40. 40. 40 Being where your customer is
  41. 41. 41 Typical day  6-7 AM Home: wake up, washing up, dressing up, breakfast  7-8 AM Transport : going to the university (by bus, train, tram or subway)  8 AM-2 PM University: classes at the university  2-5 PM Cafe: meeting with friends from the university; determine what needs to be done in projects and dividing responsibilities  5-6 PM Transport: homecoming  6-8 PM Home: free time, relaxing at home  8-11 PM Home: doing homework, projects
  42. 42. 42 TT W S S T F S S T TM W F TW F S S T W FT S S M Additional activities T M W T F S S M What When How long Why Babysitter Dance Driving licence Travel Student group Party M SS T F TM W 2, 3 times a month once a week 10-12 times a month once a quarter once a week once every two weeks money health and fun Personal development relax learn, experience, fun fun
  43. 43. 43 Perfect place for students advertising fitness cafe billboard newspapers subway bulletin board at the university club
  44. 44. 44 Work for your customers
  45. 45. 45 Imagine that you want to open your own restaurant. What could you learn by working for a well established restaurant? • What does the consumer like, prefer, buy, order? • How old are they, what gender are they? • To which social group do they belong? • What is the customer segment? • How many consumers visit the restaurant daily? • How many consumers stay inside and order the food? • How big is the conversion rate? • How long does the restaurant prepare meals? • How much do ingredients cost? • How big is the restaurant? • How many clients can fit in the restaurant / What is the capacity of the restaurant?
  46. 46. 46 Imagine that in order to prepare for your SaaS startup you decided to do some consulting and learn more about your clients • How serious is the problem? • How the problem has been solved so far? • How much does it cost him? • Are there any competitors on the market? • What solutions do competitors offer? • What about the infrastructure? • Is there a need to install additional equipment? • How much can they spend on investment? • What is the payback period of the proposed solution? • What is the depreciation of the proposed solution in time?
  47. 47. 47 Store checks
  48. 48. 48 5 10 15 5 35 Number of SKU Location: Number of salesmen: Competition: Saturn, Karen Notebook, iSpot Size: Number of SKU Presented products Structure of the exposition (%) =100 PC Laptop Printers Phones Monitors Photos Others - 6 E + Knowledge of the product offer Sales skills How active salesmen are Behavior Usage of marketing materials Level of service • Salesman was able to respond to the request placed by the customer and it seemed that he had deep knowledge of the products • Salesman did not try to figure out what price level I was interested in. Surprisingly was proposing always the cheapest products • Salesman did not show the full potential range of benefits coming from the purchase (price of the software was for some models incl. in the price, possibility to buy in installment) • Salesman was very enthusiastic during the talk • Salesman did not try to convince that the price is good and did not try to understand why I leave without the purchase • Salesmen did not try to do some cross selling or up-selling to other customers who purchased the base products Shopping mall 70 sq m 2 Other observations Here you can see an example of store check for B2C – a shop selling computers Laptops: Pendrives: Firma No. of pieces Cool drive Kingston Toshiba 6 1 1 Brand No. of pieces HP Toshiba Asus Sony Samsung Lenovo Fujitsu 10 11 5 3 2 1 1
  49. 49. 49 10 5 85 00000 Store profile Location: Rating of the location: No. of salesmen Competition level: Size: Number of SKU Presented products Structure of the exposition (%) OSB Others =100 - 6 E + Ability to adjust the product to the customer Technical knowledge and knowledge on the application of the products Ocena pracowników składu Center 1 500 m2 4 Service level 3 Plywood Chipboard MDF i HDF OSB Plank Veneer Countertops Furniture fronts Fittings Other 0 0 0 2 0 0 0 0 1 1 Number of competitors in radius of 3 km 3 Fittings No. of SKU Lead time Home delivery Other services offered Shop with fittings Limit on receivables Payment terms Other non standard products immediate n/a no Yes n/a n/a Building materials Here you can see an example of store check in B2B sector for a company selling wooden semi-products Sales skills How active salesmen are Knowledge of the product offer
  50. 50. 50 More developed version of the market research with examples and helpful files you will find in our on-line course on Udemy Click to check my course
  51. 51. 51 Mystery shopping
  52. 52. 52 Mystery shopping has 3 stages and concentrates more on the customer experience Preparation of the visit an choice of channels Visit Data analysis and conclusions  Prepare the scenario of the visit with written questions  Chose recording tools (hidden cameras, phone, pen and pencil)  Make a list of things you want to collect (marketing materials, offers, contact details)  Chose channels and the sample  Execute the visit according to the plan and collect data  Analyze gathered data  Prepare summary  Try to map the customer service process from what you have gathered  Analyze the offers and materials to understand the legal construction
  53. 53. 53 On-line research
  54. 54. 54 The last group of on-line tools puts at your disposal numerous solutions giving you in-depth knowledge of your competitors and markets Market Research Consulting methods Off-line research On-line research On-line interviews Facebook Audience Insight Customers profiles on facebook/instagram/pinterest Keyword Planner for Google AdWords SimilarWeb Branch sites and reports Slideshare and Youtube Markets for applications
  55. 55. 55 Facebook Audience Insight
  56. 56. 56 Facebook Audience Insight is a module available to Advertisors but can be also used for market research
  57. 57. 57 More developed version of the market research with examples and helpful files you will find in our on-line course on Udemy Click to check my course
  58. 58. 58 What enables you Facebook Audience Insight You can choose any segment on the basis of demographics, income, behavior, interests and other criteria For the chosen segment you can see how active and in what way do they act on facebook, how much do they spend (relatively), what do they buy, what are the household characteristics for the chosen segment, status and what are their interest (what pages do they like)
  59. 59. 59 Customer profile on facebook
  60. 60. 60 You can learn a lot by looking at your potential customers profiles  Try to figure out what language use your target group, how do they communicate and with whom (family, friends from school, friends sharing their passion etc.)  Visual language (photos, images) are as important Language and the way they express themselves Description Where to look for it?  You can check what people are interested in and what kind of communication from brands /companies they react toLikes Activity  Comments  Staff put on the timeline  Photos  Pages liked  Liked posts  You can understand better what do they do in real life  Comments  Staff put on the timeline  Photos  Events
  61. 61. 61 Keyword Planner
  62. 62. 62 You can learn a lot by having a look at the searches fed into the google  You can see for what people were searching and how many searches there were  Size of the market (in terms of people interested or rough number of transaction) can be estimated on the basis of it Size of the market Description Tips  Key word planner gives you estimate how much you would have to pay per click for a given keyword  If you know how much paid traffic you want to attract you can estimate the needed budget for google AdWords (ads showing when people search) Potential money you would have to spend on marketing  Use many different phrases  Look what keywords pop-up  Look how many clicks there were per keyword  Look at the price per click but also look for the number of searches performed. Ideally you would want to have a lot of searches at lowest possible cost  AdWords gives some estimation on the level of competition  Sometimes it is not that optimal (for conversion purposes) to go for Page 1 in searches. Those willing to go beyond Page 1 are more likely to convert  Always when thinking about the marketing budget have in mind how much you benefit from a customer. CAC should be much lower than LTV
  63. 63. 63 …here you have an example of key words for t-shirts in USA
  64. 64. 64 More developed version of the market research with examples and helpful files you will find in our on-line course on Udemy Click to check my course
  65. 65. 65 SimilarWeb
  66. 66. 66 SimilarWeb enables you to spy on your competitor and learn where they get the traffic from as well as what is the engagement of their customers  Estimated Visits  Time On Site  Page Views per visit  Bounce Rate  Favorites subdomains Customer engagement What you can learn Application  Estimate how much attention you can get and what level is achieved by competition  Traffic source (direct, referral, mail, social, etc.)  Countries where they come from  Referring sites  Top destinations  Detailed analysis of search traffic, social and advertising Where customers come from  Guess marketing and sales strategies used by others  Estimate their cost  Audience interests  Similar sites  Connected / similar mobile ads Audience analysis  Analyze specific group of people i.e. customers of specific company  Figure out where you customer gather and how you can approach them
  67. 67. 67 …here you have an example of results of www.wp.pl – Polish media site
  68. 68. 68 More developed version of the market research with examples and helpful files you will find in our on-line course on Udemy Click to check my course
  69. 69. 69 Slideshare and Youtube
  70. 70. 70 Extremely useful can prove Slideshare and Youtube. You can find thanks to them many useful materials….  B2B  SaaS  2-sided markets  E-commerce  Retail  SMCG  Media site Type of business for which it is useful  Strategy summaries  Case study analyses  Annual reports  Materials used in content marketing  Sales pitch to customers (B2B)  Comparison of competition  Market reports (size of the market, main players)  Sales process  Examples of marketing materials What you can find there  SMCG / FMCG  E-commerce  Mobile applications  Media site  B2B  Retail  SaaS  2-sided markets  B2C Services  Interviews with CEOs  “How to use it” movies  Movies done by users – praising, comparing or using the product  Materials from conferences where product or strategy is discussed  Marketing movies and commercials  Sometimes mystery shopping movies
  71. 71. 71 Markets for application
  72. 72. 72 ..if you are into mobile applications or B2C markets you should have a look at mobile application markets Which markets you should have a look at  How many users have the applications  How the application is perceived by customers  What is working well and what is not in the application  Is it still used to the same extent What you can learn from the markets  Nr of downloads  Average rating  Nr of comments (positive and negative – calculated separately)  Dates of comments – if you have a lot of comments and the beginning and afterwards nothing it may mean it is not used to such extent anymore Markets KPI  Apps on the market:  Amazon App Store: 330 K  Google Play: 1 500 K  Windows Phone Store: 300 K  App Store (Apple): 1 400 K
  73. 73. 73 More developed version of the market research with examples and helpful files you will find in our on-line course on Udemy Click to check my course
  74. 74. 74 If you sign in to our newsletter you will get a package of 18 useful tools. Click on the picture below to go to our site
  75. 75. 75 Check my extensive presentation on productivity hacks to see how you can me 10x more productive Management consultant productivity hacks How to be lazy and still get things done presentation
  76. 76. 76 Check my presentation on on-line models to understand them properly Business models Practical guide for startups and entrepreneurs presentation
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