Vector of a magnifying glass over a globe. Represents the need and steps to conduct market research and get to know your customers.

How to Do Market Research

Kody Wirth | Oct 29, 2023

Don’t skip market research. 

If you do, you’ll waste countless hours (and money) building a product or service without knowing who you’re selling to, or even worse, find out that no one wants to buy it.

Don’t let this happen to you. Take the time to do market research. Let’s show you how.

What is market research?

Market research is the process of gathering information about your potential customers. It helps you define your buyer personas and target market and understand the viability of your business by answering questions like:

  • Who are they? 
  • What are their buying and shopping habits? 
  • How many of them are there?

Why do market research?

When starting a business, getting to know your customers is one of the most important things you can do. By conducting market research, you can:

  • Prove product viability: Determine if customers will pay for your product or service.
  • Reduce risk: Inform critical decisions with real-world data.
  • Understand competitive position: Know how competitors and alternatives to your business represent themselves in pricing, quality, and placement.
  • Identify market trends: Stay ahead by spotting emerging trends and shifts in the market.
  • Enhance customer experience: Improve customer satisfaction by addressing their pain points.
  • Improve marketing/sales process: Know what messaging and interactions resonate with your target customers. 

6 steps for effective market research

Follow these steps to focus your research efforts.

2. Talk to your potential customers

Data helps identify the basics about your customers. To get business-defining insights, you’ll need to engage with them directly. 

Set up 1:1 interviews, put together focus groups, or simply observe your customers in action. 

If scheduling face time is difficult, start with a survey and request to follow up. Whatever the process, you aim to get direct, unfiltered, and honest feedback. 

Do this one thing, and you’ll be miles ahead of your competition. Why? Because most people skip this step. It’s intimidating to talk to strangers. What if they don’t want to buy what you plan on making?

4. Find out if your market is big enough 

After identifying and validating your target market, ensure it’s large enough to sustain your business. 

Use the attributes you defined in the target market step and determine how many people meet your demographic, psychographic, or location criteria. If you’re in a highly competitive industry, seek out industry reports or trade publications for more recent market size estimates. 

You must consider changing your product or service offering if there aren’t enough potential customers to sustain your business and your competitors.

For example, suppose your target market only has a few thousand potential customers. In that case, you must either sell to them frequently or reasonably high price to create a sustainable, profitable business. Additionally, if multiple competitors already serve this audience—you may need to take a drastic position (like a shallow price point) to pull them away. 

If that doesn’t seem possible or profitable, this may not be a viable customer base.

Identifying a niche audience comes down to segmentation. You need to dig deeper and establish subgroups within the target audience you’ve already established. Your goal is to find the most dedicated customers or show the potential to be.

To do this correctly and get valuable data, you must revisit step two and talk to your customers. Doing so will help you bypass traditional demographic information and hone in on values, interests, relationships, etc.

6. Document your findings 

Lastly, record your research findings—ideally, as part of your business plan.

The formality depends on its use—informal for internal communication, formal for investor presentations. 

Make the data work for you and your needs. You can always revisit and add to it later on. 

Dig deeper: How to do better market research

Check out these additional resources to help you conduct more effective market research.

Market research informs your startup decisions

Data collection and analysis are vital. 

Without it, you’ll be starting a business lacking insight into your market, customers, and any challenges that await. With it, you’re ready to complete the remaining steps to start a business.

Now, knowing what you do about your customers—it’s time to select your business model and determine how you’ll make money.

Market research FAQ

Begin by defining your objectives, identifying your target audience, and choosing the appropriate research methods. Collect data through surveys, interviews, observations, or existing sources, and then analyze the results to draw conclusions.

Individuals can conduct basic market research with available online tools and resources. However, consulting with professionals or using specialized software might be beneficial for more in-depth or specialized research.

A company launching a new product might conduct surveys to gauge potential interest, hold focus groups to get feedback on product design, or analyze competitors’ products to determine market positioning.

The duration varies based on the project’s scope and objectives. Simple surveys might take a few days, while comprehensive studies can span several months.

Qualitative research explores subjective data and seeks to understand reasons, motivations, and feelings, often using interviews or focus groups. Quantitative research quantifies data and uses statistical analysis, often through surveys or experiments, to draw generalizable conclusions.

Common criticisms include potential biases in data collection, over-reliance on past or current data without anticipating future changes, and the possibility that research results don’t always translate into real-world success.