How to conduct market research in startups and small firms?

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Market research and spying on competition

Guide for startups and small businesses

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Introduction

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Market research can be divided into 3 main categories

Market research

Consulting methods

Off-line research

On-line research

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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

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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

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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

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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

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Material presented here I discuss in more details in the courses mentioned below. Click on the left picture to go to the FREE course on how to conduct the market research. Click on the right to get 50% off for our course “How to analyze and improve your startup”

Free -50%

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Consulting methods

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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

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…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

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…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

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…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

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…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

+

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…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

+

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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

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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)

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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

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… 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

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Off-line research

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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

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Off-line interviews

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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

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Conducting face-to-face interviews is very important because it allows you to find or confirm the existence of the problem

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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

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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

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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

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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

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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

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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

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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

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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

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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)

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Suppose you want to design a new solution that helps people lose weight…

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…then you should check whether people are trying solve the problem and if yes how do they do it?

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The fundamental question to yourself: Do I want to deal with this problem over the next 5 years?

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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 asubject

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

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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

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You will learn more on interviewing customers from the books below. Click on the cover of the book to get to the Kindle version

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Being where your customer is

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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

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T T W S S

T F S S

T T M W F

T W F S S

T W F T 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

S S

T

F

T M 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

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Perfect place for students advertising

fitness cafe billboard newspapers

subway bulletin board at the university

club

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Work for your customers

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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?

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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?

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Store checks

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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

-6E+

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

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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

-6E+

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

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You will find comment s to the store checks along with 3 advanced examples in our course “How to analyze and improve your startup”. Click on the picture below to get 50% off for the course

-50%

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Mystery shopping

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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

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On-line research

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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

Facebook Audience Insight

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Facebook Audience Insight is a module available to Advertisors but can be also used for market research

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An example of using the Facebook Audience Insight you will find in the on-line courses. Click on the picture below to go to the FREE course on “How to conduct the market research”

Free

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)

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Customer profile on facebook

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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 to Likes

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

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Keyword Planner

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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

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…here you have an example of key words for t-shirts in USA

64

An example of using the Keyword Planner you will find in the on-line courses. Click on the picture below to go to the FREE course on “How to conduct the market research”

Free

65

SimilarWeb

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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

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…here you have an example of results of www.wp.pl – Polish media site

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You will find example how to use SimilarWeb and draw conclusions in our course “How to analyze and improve your startup”. Click on the picture below to get 50% off for the course

-50%

69

Slideshare and Youtube

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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

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Markets for application

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..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

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Branch sites and reports

74

I strongly recommend you to take both our on-line courses. Click on the left picture to go to the FREE course on how to conduct the market research. Click on the right to get 50% off for our course “How to analyze and improve your startup”

Free -50%

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Baza casów

Have a look at our presentation on Slideshare and our resources

Źródła funduszy Baza narzędzi

Książki startupowca

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