Market Research – 8 Strategies for Getting it Right, Quickly
I had a really good conversation with a business colleague who is launching his products into a new channel, with fresh messaging, pricing, etc. We talked about all the various ways of validating the concept before formally announcing it to the world. Like all entrepreneurs, he wanted to know that his chances for revenue and profit were high before making a larger commitment. Specifically, he wanted to know the following before launching into the new channel:
- Potential size of the market
- Best target segments
- Details of the offering
- Most appropriate keywords
- Pricing options
My friend’s first instinct was to do traditional market research activities like focus groups and telephone/online surveys, supplemented by tools like SIC code analysis. However, my caution was that these types of tools — while instructive in the qualitative sense — are not that precise when it comes to answering the real question: Will people/companies spend money on a particular offer, and if so, how much? The key problem is that market research is based on the theoretical (e.g. would you buy this) and not the practical (sign the contract).
After being involved with hundreds of product launches in my career — some backed by heavy market research and others thrown into the market based on little more than gut instinct – I can find no correlation between the amount of time and money spent on pre-launch research and the degree of success enjoyed by the product.
According to Product.com, about 85 percent of new consumer product launches fail, and these are some of the most researched types of products on the planet. One other notable point from Product.com is that products often fail because managers become too ego-involved with pet products and overestimate their chance of success. Best to get the ego out of the process. However, there are exceptions to this rule, such as when analysis showed that the Sony Walkman was going to flop in the marketplace. However, Sony Chairman Akio Morita overruled his lieutenants and created a massive revenue stream. Steve Jobs was another founder who relied on his gut more than market research.
Even when you do a lot of research, you can still get it wrong: the market shifts, a competitor outflanks you, the economy crashes, etc. All this is not to say that you shouldn’t try to validate your idea before launch – of course you should. But please do this in a way that minimizes your costs (time and money) and maximizes your speed to market. Here are a few ideas on how to accomplish this:
- Ask people who are already selling something similar. Your direct competitors will probably not talk to you, but those with complementary products or who are in non-competing geographies may give you great information.
- Query people at community share sites like Quora.com or Reddit.com. These are open business forums where people answer questions and provide input on subjects of interest.
- Crowdfund your idea. This is more of a long shot, but there have been notable success stories of companies launching (and pre-selling) products before they were ready for market.
- Take advance orders. What a great way to validate your product – offer it for a discount for pre-ordering. This is definitely a confidence builder for both product manager and CFO.
- Run test ads (e.g. pay-per-click). More companies than you realize actually run ads before the product is available. There are ways to do this without offending potential customers.
- Talk with people who bought a competitive product or service. While you may not have a short-term sales opportunity with these people, their opinions are valid since they actually made a transaction.
- Check out which books people are buying on Amazon that are related to your business area. This will give you a good idea of what the current hot buttons are and perhaps provide you with some messaging strategies.
- Do online keyword analysis to determine what terms people search on to find a similar product or service. Look at your competitors’ — as well as your own — notions of the motivating benefits and/or pain points.
By the way, LinkedIn can be an extremely useful tool in target segment sizing as well as product validation and message testing. There is much more to say about this, so I will save it for a future blog post. In the meantime, contact me at info@FusionMarketingPartners.com if you have any questions.