Michelle Flower: How to do market research on a startup budget?
So after much deliberation, a bit of inspiration and a lot of hard work, you’ve come up with an idea for an amazing product – congratulations! However, there’s one very important step you need to take before you go any further: learning more about your potential customers. You could have the best product in the world, but if there’s nobody who’ll buy it, then you’re not going to succeed. It’s vital to know who your customers are, and what they want. With that in mind, we spoke to one of our Virgin StartUp mentors, Michelle Flower, who’s also marketing acquisition lead at Sheffield based broadband provider Plusnet.
Why is this important, I hear you ask?
"'The customer is king,' – we’ve all heard this saying, but it’s a classic that cannot be ignored. Creating a business without making sure you know your market could mean you fall into a number of traps, such as:
- Over- or under-estimating demand for your product or service
- Choosing the wrong price point for your product
- Choosing the wrong method of distribution; for example, will customers pay extra for one-day delivery, or are they happy to wait for three days or so?
Unless you have a powerful brand or highly innovative products, customers will quickly go elsewhere if you don’t give them what they want and are expecting. Not only this, but they might well shout about their dissatisfaction loudly on Twitter, Facebook, a review site… the possibilities for an annoyed customer to complain on social media can seem endless!
Design your product or service around your customer’s characteristics and needs as best you can, and you are more likely to keep them satisfied, ensure they’re back for more, and hit the sales target you’re aiming for.
What you need to know
Just who is your ideal customer? Create a vision of them in your mind, and try to see things from their point of view. Ask yourself questions such as:
- How much do they earn?
- Where do they live, and what do they do?
- Do they have a family?
- How do your products answer their problems?
If you are pitching to businesses rather than consumers, you should still be asking yourself these kind of questions. What kind of company is it, and what need will you be fulfilling within the company?
You may find you have a few different types of customers – if so, group them into main groups. This can be a simple as dividing them into small, medium, and large businesses. Make sure you identify the key decision maker in the purchases, and think about what influences them in the steps to purchase.
Finding out as much as you can about the people that will be buying your product will not only ensure that your product is well-suited to them, but will also shed light on how you reach your customers and gain their attention - where they are likely to shop, what they read, and where do they get their recommendations from? It will also help you understand more about exactly who your business is targeted at, and what you are aiming for. Are you a small beauty salon targeted at locals only, or are you offering high-end innovative treatments for which customers will travel over ten miles to access?
Tips for finding all this out
Large businesses have customer segmentation tools and modelling data to tell them all this - but with a small startup you’ll have to do some guesswork to begin with, so start with painting your own picture based on what you already know. Create your own ‘customer persona’ and check your assumptions in any way you can. Assuming you don’t have thousands of pounds to pay a research agency, there are a few things you can do:
- Surveys: SurveyMonkey do a free online survey tool, and you don’t require permission to email businesses. Be careful of coming across as junk email, but create a survey of questions and request it be filled in – offer free advice as an incentive for completing it.
- Family friends and contacts: Put out a shout-out on Facebook – what do people think? Will it work? Don’t be afraid to ask for help and opinions.
- Other entrepreneurs: If you can, talk to people that are already doing something similar to you. If you are worried about competition, think about whether there is a contact in another area you could speak to, or a non-direct competitor who wouldn’t mind giving you some info
- Test: If possible, start off very small. Test the idea before you commit fully and then you can be flexible to customers’ needs as you learn more about them.
- Feedback: When you do get sales, ask for feedback, feedback, and more feedback! Be prepared to be professional and thankful, even if you don’t like what you hear. This information is gold dust, and you can use it to make informed choices about where you take your business.
Review this information and keep it updated regularly – you should constantly have a finger on the pulse of your customers, and this is not a static thing. Customers and their needs change.
If you know your target market, what they want, and how they want it, then you can not only aim with confidence and integrity for the targets you set yourself, but change and grow with your customers and their needs.