Carrying out a successful market study: how and why?
As an entrepreneur, what could be more natural than to want to know if your project can be successful? Are there customers willing to pay for your products or services? Should you really invest time and money to bring your idea to fruition?
Don't you know the answer to these questions? Market research! That's right...! Market research is an essential step for all entrepreneurs! Doing your market research is an excellent way to get to know your market and to greatly reduce the risk of your project failing. Nevertheless, many preconceived ideas, myths and grey areas prevail when it comes to actually carrying out your market research. So, rather than re-explaining what others have already documented very well, I've decided to explain why it's so important and to share with you my top five resources (books, articles, mini-guides...) that you can use to do your own market research.
Scientific entrepreneurship
Let's start with some context... Just to better understand the topic as a whole. At the end of the 2000s, a movement emerged that can be described as scientific entrepreneurship. The core of this movement: test, test, test! Indeed, you have got to test your hypotheses on the market, with your prospects or clients, in small iterative cycles. This is THE right method for accurately matching your offer to market demand.
At the origin of scientific entrepreneurship, we find entrepreneurs, researchers and investors who tried to understand and come up with theories regarding the key success factors of a company. We can mention people like Steve Blank, Eric Ries, Alexander Osterwalder or Ash Maurya as the most famous and prolific. They have brought to light methodologies and tools that have revolutionised the way we approach business creation.
From a focus on supply to an obsession with demand...
There's no longer any room for a "product"-focused approach: I sell what I can make.... Why? Because in our modern economies, where information circulates instantaneously thanks to the Internet, the customer is easily able to gather a lot of information before making a purchase. He or she can compare, read reviews and find alternatives simply by pulling out their smartphone. In the past, of course, this was not possible. This fundamental paradigm shift even has a name: ZMOT (Zero Moment of Truth)! In short, it is much more difficult today for a company to push its range of products through with heavy marketing.
Instead, the previously mentioned authors all emphasise a customer-centred approach that focuses on the problems the customer is trying to solve. Their methods help entrepreneurs get to know their market and understand their customers before launching their solution. This shifts the focus to the customer: I make what I can sell.
The build-measure-learn feedback loop
The work of these authors is strongly inspired by the scientific method, according to which hypotheses are formulated and then validated in the field through experimentation.
This is the principle of the famous continuous feedback loop described by Eric Ries in his bestseller "Lean Startup":
Ideally, market research could be divided into five distinct and consecutive stages:
Step 1
Form hypotheses about the riskiest parts of your project. These are primarily assumptions about your customers and their problems: Who are they? How do they behave? What are their needs? Their problems? Their expectations? Their motivations? Etc.
Step 2
Create qualitative questionnaires that allow you to gather information in order to test your customer and problem hypotheses.
Step 3
Analyse the results, validate or refute your hypotheses, measure this validation or refutation.
Step 4
Start building your product offering and testing it through a new wave of qualitative questionnaires. This is where you will validate your pricing and fine-tune your value proposition.
Step 5
Launch a larger-scale quantitative evaluation to answer the question that will make all the difference for the future: is there a strong demand for your product?
In reality, these steps may need to be adapted depending on the nature of your clients (B2B or B2C) and your project. Life rarely works like a well-ordered process of hypothesis validation. đBut understanding the importance and usefulness of this mindset is often what makes THE difference between a project holder and a true entrepreneur.
The great thinkers and experts in entrepreneurship have understood this and have set out to pass on this knowledge through books, methods and tools. These well-referenced and sound pieces of advice can help you discern the major stages, green lights, red lights... with greater clarity! So here are my "top 5" below! You can think of it as a survival kit for the budding entrepreneur to find out if there is a real market interest in your project.
Follow the guide!
5 essential resources for successfully performing your market research
1) The difference between a qualitative and a quantitative survey
These are essential elements to understand before embarking on your market research. For example, did you know that "Google Forms" type questionnaires are rarely reliable and accurate, and therefore risky, in the discovery phase of your market? Indeed, these so-called "quantitative" questionnaires (in which we collect numerical information that can be processed in the form of statistics) require a great deal of mathematical rigour to be useful. If you are looking to survey your market, it is better to use qualitative questionnaires, which are made up of open-ended questions that lead to longer and more descriptive verbal responses.
2) Running Lean
This is a fundamental book in the field of entrepreneurship. It synthesises in a very clear way the scientific entrepreneurship method that we talked about earlier. You will learn how to build your project step by step together with your future clients. You will make sure that there is a real demand before investing your resources.
There is nothing like a quote from Ash Maurya, the author, to sum up the core of this book: "Lifeâs too short to build something nobody wants".
3) The Mom Test
You have an idea that you have been obsessing over for several months. You want to gauge the general opinion of those around you to see if there is any interest. You ask your friends and family what they think... Two types of reaction stand out: on the one hand, recommendations to drop the idea immediately, not without a touch of fear or even criticism. On the other hand, there is unlimited encouragement: they think your idea is brilliant, revolutionary and "it definitely will work".
Who is right? Who is wrong? Unfortunately, no one in your circle is!
The Mom Test will teach you how to choose the right people to interview to validate the potential of your idea and how to gather information in an objective way.
The title of the book is a nod to the biases that often plague entrepreneurs when it comes to asking the opinions of people around them: what kind of answer would you expect when you ask your mom for her opinion? đ
4) Testing your business model
This mini-guide outlines several techniques that can be used to quantitatively validate the demand for your project: landing pages, pre-orders, etc. Bonus: if you want to delve further into this topic, you can take a look at the book Testing Business Ideas, by the same authors as this mini-guide. There are similarities with Running Lean but the approaches can be very complementary!
5) What MVP (Minimum Viable Product) should I build
This article provides a visual overview of different techniques and tools you can use to validate your project at different stages of development. It will be particularly useful for the quantitative validation phases, when your task will be to verify the existence of a large enough market.
Worth remembering!
This list is of course not exhaustive. I could add many other resources. However, remember that beyond the theory, the most important thing is your mindset when doing your market research! Two recommendations for the (entrepreneurial!) road ahead:
- Adopt the posture of a listener, not a salesperson, and
- Start with the assumption that you know nothing about your project!
Formulate hypotheses and quickly confront them with reality by talking to your potential clients. They are the ones who will ultimately have the last say. It is vital that you learn to listen to them and take their feedback into account in order to turn your idea into a success!
If you would like us to help you with this exercise, contact the nyuko team!
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