Market research is as important as ever for startups, with technology delivering more sophisticated and cost-effective ways of testing the water
Every entrepreneur’s journey to success starts in the same way. Regardless of where they were or what they were doing, at some point they had a moment of creative clarity in which their product, concept or service appeared in their mind. But after the blueprints are drawn up, recipes perfected, patents lodged and business plans formulated, there is another all-important step left before launching: market research.
While most organisations will have a rough idea of their target market, others will invest time and money into pinpointing their key demographics. Some businesses, however, know theirs from the outset. When starting her wedding dress company Motasem, Sabina Ali knew exactly who her client base was: brides. But during the process of market research, she learnt that while consumers thought all the dresses in the market looked the same, they also had a firm budget in mind.
“I did start off as a bespoke dress company but I carried out a survey on Survey Monkey and I asked about what kind of dresses people were looking for,” Ali says. “From that research I realised people felt that everything looked the same and there is not much choice but they wanted to spend around £1,500 to £2,000, a lot less than I thought. So I went back to the drawing board and thought how can I offer more choice at a better price? “
This research altered the fundamentals of her company. Changing her business model, she designed her first set of dresses and went back out to the market in the quest for sales. Her research did not stop there though. “I didn’t take too much time to develop the dresses,” Ali says. “I got some dresses together and took them straight out to get some feedback. I then went back to the drawing board, tweaked the formula, and back to customers for more feedback. I have been through that cycle about five times now.”
Ali knew she had found the right designs when she started receiving calls from Australia and the US. Her dresses may be different from her original plans but listening to her customers has proved invaluable. “The collection has now evolved to the point that each of the dresses has various designer details and optional extras that brides can ask for,” she says. “There are different necklines and sleeves that they can add so they get the feeling of something they designed themselves but at an off the peg price.”
Keeping a competitive edge
While market research gives you a great insight into your customers, it also proves a useful tool when sussing out the competition. Diving into a fiercely competitive market with an under-cooked product is a sure-fire way to see your business fail. Through research, however, you can spot opportunities and seize them. “Market research told us that our competitors hadn’t been doing a very good job PR wise,” said Paul Makepeace, co-founder of LED Supply & Fit, the energy-saving lighting company. “They also focused on trade persons rather than the consumers. We supply and fit the goods directly, which gives us our USP.”
As the winner of the 2014 Outstanding Trader Award for her Avocado Café market stall, Louise Maddy is fully aware of the benefits of keeping your friends close but enemies closer. “Being in the marketplace I was able to notice what my competitors were doing: their branding, how they presented things and how they incorporated different flavours. It gives you loads of think about.”
This opinion is mirrored by Carol Deeney, whose Scottish food stall has proven popular at several locations around London. “When I first joined the markets my business was still quite young,” she says. “I hadn’t quite sculpted the menu and it wasn’t defined in anyway. I came along to one market and figured out all of the pricing people were doing, the offers and what was proving popular. Straight away I was able to alter what I was offering.”
Quite simply, market research is a step that cannot be avoided. But if your start-up is struggling for funds, is there away round this potentially expensive endeavor?
The digital revolution
In this digital age there are numerous services available for entrepreneurs. One quick internet search will return a host of companies offering surveys, email marketing and research data at a reasonable cost. However, with no interviewer to clarify and probe for accurate answers, the possibility that your key market is not internet-savvy or the issues surrounding the precision of second-hand data, the results might not be as helpful as you wished.
Unfortunately, as Makepeace explains, arranging a focus group is very expensive. “We looked into focus groups and found the price to organise an actual location and everything else would have been costly,” he says. “It would have been good to do if we had the money but we needed to minimise expenses at the start.”
Makepeace and his partner decided to utilise their professional skills to do their research. Coming from an online marketing background, Makepeace was able to do a variety of research for minimal cost. “As well as three Google surveys that cost £45 each, I got an email list of 10,000 subscribers from Mail Chimp. The list was free so the only cost was setting up the website and the landing page. As a web designer it only cost my time.” All that was left to do was print off some fliers and walk into shops to explain the savings that could be made. “With my online skills and the methods we used, we most probably saved £1,000,” he continues.
Deeney, who also boasts a business degree, tapped into her advertising knowledge and contacts from her previous career to help her business get off the ground. “When you’re starting a business you’ve got to start with a brief and bring that to life,” she explains. “I had to put myself in the shoes of both the client and the client services rep and fulfill the brief that I had set myself. In advertising, if you go through that process it helps makeit quite comprehensive for you. I had contacts who helped me, which kept costs down.”
It’s important to clarify the difference between personal skills and individual knowledge. Ali has years of experience within the fashion industry but she was often surprised by which of her designs got the most sales. “It’s funny: the dresses that I think will be the top sellers tend not to be, while the designs that I think won’t be as popular are the ones that sell.” It’s this sort of insight that’s crucial for everyone considering starting up a business. “Gathering feedback from customers is the best research that you can do.”
Maddy also championed the customer feedback research which has seen her product range improve and expand since she launched in 2013. “It’s been a nice way to evolve the product, rather than doing a few focus groups and launching like that,” she says. “It has been a gradual process and you wouldn’t get that if you have just been doing research and development. You really start to build up a great understanding of who your customer is.”
And, at the end of the day, isn’t that the entire point of market research?
Carol Deeney underwent extensive market research before she started her Scottish-style food stall. “I would go out looking at prices, menus, which markets were busier and the various stalls’ offerings. Did people like things hand-held or packaged to take back to the office? You find what’s the best but also the differences between the locations.”
After launching Deeney’s and her range of haggis toasties and soups in the summer of 2012, she discovered Shepherds Markets, which enabled her access to locations across the capital. Relishing her new surroundings, Deeney found her food began to get a reputation. “I whittled the menu down to just a few things that people wanted. Our main sandwich is The Macbeth, a haggis, cheddar, caramelised red onion and rocket toastie. People would look forward to it once or twice a month. They liked the routine.”
She also admits that at times she had to swallow her pride in order to get people to swallow her sandwiches. “I’ve been quite stubborn about things. It’s very easy not to listen if you have a clear idea in your mind and if you’re set in your ways. But if that’s what you’re doing then you won’t be successful. You have to listen and react to demand. Keep asking the customers. Don’t be shy because they’re the ones you should care about.”