STARTUP WEEK 2020: Tips and Tricks for Market Research and Customer Discovery
The Techstars Alaska Startup Week op-ed series features entrepreneurs and entrepreneurial ecosystem builders sharing their thoughts and ideas on a variety of topics related to startups and innovation. Techstars Alaska Startup Week is a week-long series of events hosted by entrepreneurs and business leaders from across the state. In 2020, all events are virtual, and you can find them here: Startup Week Schedule. All are welcome, please join us!
You have an idea for a business and you shop it around to your friends and family to see if it’s a really great idea. Have you found yourself asking someone or been asked by someone, “I have this great idea for [insert business idea here]! Do you think it’s a good idea? Would you buy my [insert product here]?”
This is about how you respond to these questions, and what you say to a friend or stranger when they ask you them. Probably something like, “Sounds like a great idea!” or “Sure, I might buy that.” But does your response actually give this person any valuable information to test their idea?
That is the challenge of doing market research and customer discovery. In Alaska, 18% of businesses close their doors in the first year. Post-mortems of 101 failed startups listed lack of market need, user unfriendly product, ignoring customers, and timing as common reasons for failure. Thorough customer discovery and market research can make chances of survival or pivoting easier for startups, and help enable longevity.
Customer discovery and market research are two separate processes but are equally important to the health of a business of any stage. Market research is the process of assessing the scale of your industry in any given geography, the market share of your competition, and estimating your number of customers. Market research is frequently, but not always, data driven.
It helps you understand the landscape you are operating in. Are you one of five coffee shops in a given area, or one of 20? How many businesses or households reside in the immediate area? How many cars drive by each day? These are important questions to help you identify your business's place in the market.
Customer discovery is the process of fully understanding your customer: their wants, preferences, challenges, and characteristics. Knowing your customer helps you, the entrepreneur, understand the key aspects of your product or service.
But it is not just understanding who your customer is, but also testing your assumptions about them. The process requires detailed investigation and looks at the why, diving deep into the factors that drive potential customers.
The problem that most entrepreneurs face is that while most know they need to do their research, many do not do it enough or at all. The work required to constantly analyze, interview, self-evaluate, and repeat is exhausting. On top of that, data can be scarce for small businesses lacking resources to collect their own.
The reality of market research and customer discovery for startups is that it is most likely going to be difficult. Large companies have the resources to collect data on a grand scale, with systematic interviewing, focus groups, and surveys. For small businesses and startups, the process requires talking to a lot of people combined with a fair amount of creativity.
Here are some tips and tricks for conducting small scale customer discovery and market research in Alaska:
It is impossible to talk to everyone and that is okay. The quality of the interview is more important than the quantity. A handful of fantastic, detailed interviews will always be better than 20 surface level interviews. While it's good to set goals for the number of interviews you want to conduct or survey responses you want to collect, it is important to be flexible with the targets you set for yourself.
Consistency is nice but not if it is a constraint. Research interviews can take many forms and vary in structure, but customer discovery experts advocate that open-ended, semi-structured conversations are often the best for determining customer needs and opinions. If you are working off a list of questions do not be afraid to dive deeper. If a potential customer says something that sparks a follow up question, ask it.
It is okay to compare yourself to others. Learning from the experiences of others is a powerful tool to enable resilience, especially businesses. When you are working in a data deprived environment, with little information to be gleaned from your immediate surroundings, it helps to expand your focus. Are you opening a bike shop in your town and have no clue what your expected revenues, customer traffic, and service demand might be? Examining similarly situated towns with recreational opportunities can offer key perspectives and inform your decision making.
Learn from the big guys. If you are a startup entering an established industry, even if the product or service is unique, information can be gleaned from the market research conducted at a large scale. Information on global or national industry growth trajectories, consumer demographics, and more can shed light on trends happening at the local level.
You are never done learning. Thinking customer discovery or market research is something that only happens at the early stages of business development is a mistake. If you just do it once you are freezing your business or startup in place. Customer preferences and markets change constantly, and the information you gather to inform business decisions needs to keep up with those changes. If you are collecting information as your business evolves you know better if you need to make modifications to your product/service or pivot.
And finally, there is no one right way to conduct customer discovery or market research, and talking to strangers is not always fun. The need for information and the method for procuring it depends entirely on the business, the industry, and the entrepreneur. But the need for information is universal and it is an important component of business health. So, do your research.
Richelle Johnson is a life-long Alaskan and Lead Analyst for University of Alaska Center for Economic Development.