Entrepreneurs should talk to prospective customers – perhaps over coffee – to test their assumptions.
You’ve come up with your best idea in a long time. You’re sure it’ll take the world by storm. You just need to build it right? Wrong. One of the big reasons why start-ups fail is because founders haven’t tested the key assumptions around their idea.
While large companies can pay big bucks to engage the services of market research firms when starting a new business or product line, most start-ups don’t have this luxury, and yet I see so many start-up founders who are keen to build their product or technology without conducting market research. Market research is the responsibility of every founder. It involves having conversations with your potential customers and understanding how your product or service may fit into their lives.
Got a business to consumer idea?
So how many people should you contact? If you’re exploring a business to consumer (B2C) idea, I suggest you survey at least 500 potential customers. These are people who are in your primary target market. They should be the potential users of your product, not your family and best friends! Think carefully about who these people are. If you’re building a new application or technology, these people are likely to be ‘early adopters’. It’s ideal if you can create personas around these people. Is it Jane who’s a 25-year old student who lives close to university or Bob who’s a 43-year old professional who works in the city?
Once you’ve worked out your primary target market, construct a survey to ascertain their habits and attitudes towards your idea and key assumptions. The questions you ask will be critical; you’ll want to avoid bias. You can administer the survey through a number of online survey collection tools and panels. One great way to test your survey before you unleash or to confirm your survey after it’s completed is to conduct some in-depth face-to-face interviews. One of the businesses I’m working with is doing this right now. We’ve selected 20 primary target members and have been engaging in a detailed structured conversation with them (much like a detailed survey). As part of the process we’ve learnt so much about their thinking process, which has been completely different from the assumptions we’d used.
Got a business to business idea?
If you’re exploring a business to business (B2B) idea, it may be more difficult to survey potential customers en masse. Instead, I suggest you engage with 20 domain experts. Domain experts are potential users of your product, influencers within organisations, and those who may have worked on competitive products. Similar to the B2C in-depth face-to-face interviews, prepare a structured conversation outline and approach domain experts asking for half an hour of their time. It also helps if you offer to buy them a coffee! As you go through the structured conversation, you should learn more about the real problems and issues around the idea you’re pursuing. You may also learn that you need to change your approach based on confirmation or rejection of your key assumptions.
Whether you’re pursuing a business to consumer or business to business idea, testing your key assumptions is critical. If your market research proves negative, you then have the opportunity to adjust or change or idea before testing it again. If it proves positive, you can continue on your path and may have acquired a few early customers. Regardless, market research should help you make informed decisions and reduce your risk of failure.
This post was originally published on BRW, a leading business magazine examining the trends and opportunities shaping Australian business.