About market research before introducing a product

Outstanding products don’t just come from great ideas; they result from market research. Wondering how to do it? We’ve got some tips. Read on to find out more.

Market research before introducing a product - table of contents

About market research before introducing a product to the offer

Startups fail for various reasons. According to CB Insights, specifically due to twelve reasons. These include a lack of funding, a flawed financial model, or pricing strategy (we wrote about it here). They also fail because they bring products to the market that their potential customers simply don’t want to buy later.

Fortunately, the risk of introducing an unwanted product into the market can be minimized – we will address this issue, and market research will help us solve it. However, we will approach it a bit differently than you might expect. We will explain what we mean in a moment. Meanwhile, we would like to add one more thing.

Namely, coming up with a product and researching the market is just the beginning. After that, it’s necessary to continuously develop and update the product. This is where creativity and an innovative approach to building a business come in handy.

Another thing. How do you know that your product truly meets the market’s needs, that customers actually need it, that they really want it? Let’s take a closer look.

“This product is a gold mine”. Signals of interest

Let’s look at it from the perspective of two situations – before and after the purchase.

Situation #1. Before the purchase

Customers ask about a product. You don’t have the product in your offer, but customers still inquire if you offer it or even suggest that you should sell “this and that.” Moreover, this often happens, for example, when you share valuable content online. People consume it and then crave more—something they are willing to pay for.
Customers pay. Positive statements about your product don’t mean much if people aren’t opening their wallets. It may sound trivial, buta purchase is a sign of interest that you should look out for.

Situation #2. After the purchase

Low churn rate, meaning a small percentage of people who abandon your product. For example, if you offer a web application on a subscription basis and customers don’t cancel, it means that you’re genuinely meeting their expectations. Or, if you run a store, and they visit and buy regularly, that’s also a good sign.

Rising prices doesn’t make everyone leave. A higher price may push away those who don’t see the product’s value or only see a fraction of it. Such people will most likely stop using your product after the increase.If they stick around, it means you’re offering something they truly find valuable.

The second situation refers to the so-called product-market fit and continuous product improvement. We discuss it here. Now, let’s focus on the first situation before the purchase, looking at it from a market research perspective. How do we conduct such research? And what did we mean when we said we’d approach it a bit differently?

Market research vs. the product

Usually, when introducing a product to the market, either it is launched without prior market research, which is a significant risk of failure and, of course, a mistake, or the market is analyzed, and then the product is launched on a full scale – such an approach is definitely better, nevertheless, it still carries significant risk.

However, it is possible to do things differently. You can slowly enter the market by either having a prototype or just announcing the product without one. This method is known as a fake door test in the startup environment . We’ll discuss it in a moment because even if you decide to carry it out, you should first use traditional research methods, such as quantitative and qualitative analysis.

Step 1. What do you need to know about the market? Hypotheses

To research the market, you need a business hypothesis. And startups usually have no problem with that because they have product ideas. That is, they more or less know what they want to do and who they want to sell it to. At this stage, however, it is not worth getting too attached to this vision – after all, it may not work out. So it’s better to treat it as a hypothesis, a set of assumptions that we will modify as we get in touch with the market.

To formulate a hypothesis, we need to find answers to the following questions:

What product do we want to introduce to the market?
Who is our target audience for this product? Who is our customer?
What significant and pressing problem does our customer have?
How does our product solve the customer’s problem?
Do we have competitors in the market? What are they like? What is their strength?
How much of a market do we want to capture?
Is the market we want to enter growing, shrinking, or has it remained unchanged for years?

In the first phase of market research, the following will be helpful:

all industry reports examining the size and condition of a given market,
websites and social media of competitors, including customer comments,
industry media, where we can find statements, opinions, and interviews with industry experts,
industry trade fairs, where we will meet representatives of the market in question,
and, of course, internet search engines and tools for measuring the popularity of keywords.

Step 2. Conversations with customers and the ASK campaign

After collecting numerical data about the market, it’s necessary to go into the field.

Not necessarily literally, although that is always a good option. In any case, you need to talk to potential customers. Either directly or indirectly. And preferably both. By direct contact, we mean one-on-one conversations, and by indirect, we mean any kind of standardized research, such as surveys.

In their book “Understanding Marketing,” Artur Jabłoński and Marek Piasek described something they called the “ASK campaign,” which is a campaign of asking questions. Its assumptions are simple.

Customers don’t always know what they want.
Therefore, ask them smart questions.

How, in the context of “customers don’t always know what they want,” do smart questions sound?

Let’s say you’re creating software. You’re considering selling it as a subscription service (SaaS) or as a one-time purchase under a license. So you can ask your potential customers: “Would you prefer to use my software on a subscription basis for a lower monthly fee, or purchase it once for this much or that much?

But you can also ask differently, as Artur and Marek suggest. In a less direct way, for example: “How do you prefer to access software?” Let’s say the response is, ‘When I need it.’ Now, your task is to figure out how to meet that need. Perhaps, you’ll decide to charge your customers on a “pay-as-you-go” basis instead of a subscription model.

Anyway, the authors of “Understanding marketing” recommend asking customers about their problems and needs rather than directly about offers. Customers may know their challenges but not necessarily how to solve them – that’s where the entrepreneur comes in. Gathering this information helps create better products.

Step 3. Do a fake door test

We mentioned earlier that it is not worth relying on customer declarations like “This is a great product, I’ll buy it when it’s available”. Declaring and buying are two different things. That’s why instead of asking for feedback, it’s better to try to sell – even if the product isn’t ready yet. That’s the beauty of the fake door test method – trying to sell something you haven’t produced yet. How do you organize such a test?

In simple terms, we need two things:

Landing pages– that is, the page where we present our offer. Such a page must look real (it must actually be real), so it should include product mockups, descriptions, and, very importantly, the “buy now” button (or a similar one).
Website traffic – meaning potential customers who will visit the website, review the offer, and click the mentioned button to purchase the product. After clicking it, of course, they won’t buy anything because the product doesn’t exist yet, which they will learn just now. They will also find out that the product will be available at a certain time, and they can join a waiting list by providing their email address.

That’s the basic idea of the fake door test. After conducting such an experiment, we will be able to count how many people visited our website and how many of them clicked the button. This will allow us to estimate the real interest in our product. Moreover, we build an email list during the test for future marketing campaigns when our product is ready.

Market research before introducing a product – summary

Market research is valuable at various stages of product development. Not only when estimating market potential but also during product creation. That’s why in the startup environment, it begins with imperfect prototypes and Minimum Viable Products (MVPs). Along the way, customer feedback is gathered, and the product is modified based on their input until it finally takes on the desired form.

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Author: Adam Sawicki
Owner and Editor-in-Chief of Rebiznes.pl, a website with news, interviews, and guides for solo entrepreneurs and online creators. In media since 2014.
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