The starting point of each project is to know whether there is a market for such a product. Market research is not a holy grail, and once you make it, it does not mean that you are going to succeed no matter what. But it increases your chances significantly.
There is 4 essential information you must know about the market before you start working on your project. This information will define your product.
You can outsource market research. It would be money well spent.
Because of my technical background, people ask me to become a cofounder in their project. When it comes to that, my potential partner reveals me only the idea, which usually is feature-oriented, and he or she has no clue about the market. Well, sometimes they know the market capitalisation, but they typically use it to draw an image of how successful and wealthy we may become if we do that project together.
Only one time I've agreed to make the project together. It was Jason Alexis who came to me and explained what he would like to do, introduced the market research he made, explained to me how the market works and who the clients are. Additionally, he was operating on the market for a couple of years, so he had the experience and knowledge about that market. He prepared it that good, the numbers added up, I agreed, and now we have a 16% trial-to-paid conversion rate. The starting point of each project is to know whether there is a market for such a product. Market research is not a holy grail, and once you make it, it does not mean that you are going to succeed no matter what. But it increases your chances significantly. There are many information market research delivers, but I am mainly interested in the following:
How many potential clients are out there? It gives an idea of whether the market is big enough so the product can make the revenue. It is especially important if you try to aim for a niche. In some cases, it may be straightforward to identify, and you can get a precise number, for example when you try to provide a service for other company customers, like creating "special" reports for google analytics users. The number of potential clients would equal the number of google analytics users. In other cases, it may be not possible to learn that number with that level of accuracy, but you should get at least a narrow range, for example between 10 and 12 thousand. If the range is too broad, use the lowest number.
What is the situation on the market now and what are the forecasts for next year? The business is not something you do overnight. You need some stability and time to grow. Learn whether the market will still need you in the future. Look at trends and situation of your competitors. Some products have a very short lifetime on the market. Those vanish after a year or a two, check if your product is among them.
How many businesses are out there that are on the market you are trying to enter and what is the market cap? It is valuable information as it will give you an idea about with whom you are going to compete. Also, you will probably learn how to make your product stand out. A thing that is worth focusing on are channels your competitors use to reach the client. Depending on that, you may visualise what cost you would have to make to use these channels. I would also try to figure out what is the level of defragmentation. I mean, whether there are a couple of big players or there are many businesses and any of them has a dominant position.
You may know that email or cold call template some salespeople use: "I'd like to talk with the decision-maker". It's not that easy. The famous "decision-maker" does not necessarily have to be a manager, director or CEO. For example, in most IT companies, it is usually a team who decides whether to purchase a product. It means that you may be on the market, where the need comes from the bottom of the company. That completely changes the way you would advertise your product. The market research should bring that information to you along with the profile of your ideal customer.
So here it is, a basic set of information you must have before you start doing anything related to your product because this information will define it. It is easier said than done. You may find yourself overwhelmed with all of that, and at some point, you may lose the idea of what you want to do. So if you have a budget, consider hiring someone to make it for you. You can outsource it. Big companies spend a lot of money on consulting. You can do it too but on a smaller scale. Also, you should see here the importance of this: if enterprises are spending that money on the research, it probably means it's worth it. You can look for a one-man-band market researcher as well as use services of the small or medium company. Prices can vary, but you should be prepared to spend something between $2,000 to $5,000. Just remember to hire someone that has experience in the market you want to conquer.
Market research is not business development. You must provide as much input data as possible, so your contractor knows what you want to achieve. The more information you provide, the better. Some companies may require from you many data before they start work, and you may have an impression that this is something they should do. The fact is that if you find such a company, it means they will dig deep, and you will get in return very accurate information.
So regardless of whether you outsource the market research, do it by yourself. It will help you compare the results and give you a better perspective of what you think and what's out there. Researching by yourself should take around two weeks. It will require much creativity and thinking outside the box, but it is doable.
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