Your product is your passion. Whether it is fixing windscreens, mowing lawns, baking delicious cakes, or providing legal services, you have an idea for a business that was born from your personal or professional interests. Or perhaps you are keen on starting a business, but you are unsure what to sell. In either case, you will greatly benefit from conducting a thorough phase of market research. Market research is essentially the process of applying the scientific method to answer and resolve business questions and issues while minimizing risk and maximizing opportunities. Understanding marketing will help you identify the demand for your product or service; determine a competitive price point; develop a marketing strategy that resonates with your audience; and gain insights that drive sustainable business growth.
Market research is often conducted with a specific product in mind, but it can also be applied to business procedures or various business considerations (logo, customer experience, reputation, competitors, etc.). Market research can be conducted either through primary or secondary research. Primary research is research you conduct yourself, while secondary research relies on data collected by other individuals/institutions.
With solid market research, you will be well-positioned to discover (or develop) a product to sell. This market research will also provide you with an excellent foundation for other business planning procedures, putting you on the path to success. In this article, I will give you the information and procedures you need to conduct quality, efficient market research, as well as ideas on how to translate this research into product development. Let’s get started!
How to Conduct Market Research
1. Form hypotheses
As with any type of research, it is recommended to form a hypothesis before you begin collecting data. Forming hypotheses about a product will guide your research, making it focused, relevant, and efficient. A good hypothesis can be proven or disproven and corresponds to a relevant question you have about your product or general business operations. For example, if you are thinking about entering the candle industry, you might wonder, “How much can I charge for a single vanilla candle?” Based on your observations, you might hypothesize that “generally, consumers are willing to pay $20 for a vanilla candle made with beeswax.” This is a statement that you can test, prove, and use to make iterations of your product. Generally, hypotheses for market research deal with pricing, customer pain points, market size and demand, as well as competitor analysis.
2. Identify research method
The choice to conduct market research through primary or secondary research (or both) depends on the hypothesis being tested. If you are interested in answering questions about competitors, general demand for a product, or market size, secondary research will be the most efficient option. You can find secondary data in a variety of places, but generally, any relevant, publicly available, trustworthy platform will suffice. For example, Statista, IBISWorld, Google Trends, competitor websites, and government reports all provide reliable data that can be used to validate a general hypothesis.
In contrast, if your hypothesis is concerned with an aspect of your business or a particular product, it will be very difficult to collect relevant data through secondary research. Therefore, it would be more appropriate to conduct your own research through focus groups and interviews, test marketing, word-of-mouth, surveys, polls, or other types of statistical sampling. Although it is important to obtain a decent sample size and eliminate the effects of bias, this is not the time to design intricate sampling procedures. If you choose to launch your business, you will obtain a large amount of primary data through your day-to-day operations. This phase of research is simply meant to provide a preliminary assessment of your business’s viability, ideally without making considerable time or financial investments.
3. conduct research
Now that you have identified a hypothesis and a method to test it, you should begin collecting data. Be careful to only include data that deals directly with the hypothesis you formed. In the previous example, I would begin by researching prices of vanilla beeswax candles on various websites (Amazon, Etsy, and candle business websites). This would give me a general idea of what people are willing to pay for these candles online. If I intend to sell my candles online, this is the most appropriate method of research. However, I might consider having a brick-and-mortar location, too. In that case, it would be interesting to visit local candle retailers and collect data on their pricing, as well as to compare their retail and E-commerce pricing strategies. You will continually collect more data as your business grows, which will allow you to answer new hypotheses, or better support (or disprove) prior hypotheses.
4. Analyze trends and take action
As you collect data, what patterns are you noticing? Is there any evidence to support or reject your hypothesis? In my example, if I noticed that vanilla beeswax candles were consistently selling at about $15, whether through a website or in-person, that would seem to suggest my initial hypothesis is wrong. If I did not conduct this research, I might have assumed consumers were willing to pay $20 for my candles, resulting in disappointing sales results. Even if my candles or consumer experience are slightly different, I still benefit from a more realistic pricing estimate.
Using the information from my market research, I can then create a set of action items to improve my product:
- If customers are only willing to pay $15 per candle, pricing at $20 might be too high unless I add a unique selling point (e.g., premium packaging, luxury branding).
- If consumers express demand for soy-based candles over beeswax, I might reconsider my material choice.
- If a specific size (e.g., 8 oz jars) is more popular than larger candles, I may adjust my inventory accordingly.
Again, market research does not only apply to products or products pricing strategies. Use market research to find answers to any and all questions you may have about your business.
How to Develop a Product
Product development is the process of developing a product or service that is unique, meets genuine customer needs, and which you are passionate about. The product development process only applies if you are developing your own product. However, market research applies to all business types. As I detail the five-step process recommended by most professionals, I will discuss how each step improves the marketability of your final product. My hope is that this will contribute to your product’s overall quality, and inform you of what a good product is.
1. Brainstorm Product Ideas
You have probably engaged in the brainstorming phase of product development without consciously acknowledging it. One of the best beginning points is to consider your interests, skills, and abilities. Remember, small business ownership can be very difficult, so identifying a product you have a significant interest or passion for will sustain you during difficult phases of your business’ life. Answering the following questions would be a valuable place to begin a brainstorming session.
- Are there specific professional projects you have worked on that piqued your interest?
- Do you have personal hobbies that you want to turn into an entrepreneurial endeavor?
- What industries are you fascinated with?
- Do you have specialized knowledge or skills that others frequently need? If so, what are they?
- Do you and a spouse, friend, or family member share an interest that you frequently engage in? If so, what is your interest in?
- Have you spotted any opportunities in the market that you believe you can capitalize on?
2. Define Your Product
Once you have answered the brainstorming questions, consider how your answers might translate to a specific product or service. This is where you need to get creative. Let’s suppose that I am a plumber with extensive experience working for a residential plumbing company. My favorite jobs have involved installing energy-efficient water heaters and helping homeowners upgrade their plumbing systems to be more eco-friendly. Because these jobs are my favorite, I have conducted my own research into eco-friendly plumbing best practices, as well as the market as a whole. I’ve noticed a growing demand for sustainable home solutions that has largely done unmet in my hometown. Based on this, I could develop a specialized eco-friendly plumbing service that focuses on water conservation, energy-efficient fixtures, and sustainable materials.
This phase of product development should run concurrently with any relevant market research. If the market research you conduct supports your defined product, proceed to step three. If the opposite is true, make iterations to your product or identify new products to conduct research on. The goal is to obtain a defined product that you are passionate about, and which can be validated by thorough market research.
By way of example, here is a sample list of market research hypotheses and conclusions which validate my product (eco-friendly plumbing service).
Hypothesis #1: Eco-friendly plumbing systems reduce utility bills.
Validation: Research into peer-reviewed studies has shown that eco-friendly plumbing designs inherently improve water and energy efficiency, reducing utility costs for homeowners.
Hypothesis #2: Urban areas (where I happen to live) hold a higher demand for eco-friendly plumbing systems.
Validation: Research into peer-reviewed studies has shown that interest in eco-friendly home upgrades is rising, especially in urban areas where sustainability incentives exist.
Hypothesis #3: Few eco-friendly plumbing services exist in my area.
Validation: After conducting some primary research, I found no existing plumbing services within a 50-mile radius that specialize in eco-friendly plumbing solutions.
3. Develop Prototypes
If you want to sell a physical product, this stage includes the actual design and building phase for your product, which results in a basic version of your final product. If you are selling a service, this stage has more to do with the development of your knowledge, skills, and abilities to provide these services. Since this stage is so specific to your business, I have very little general guidance to offer. However, during your prototyping phase, one thing which is absolutely necessary is to identify any regulations that are applicable to your product. As with any legal considerations, you should consult an expert in the relevant industry.
4. Test and Iterate
Once you have developed a basic, viable prototype for your goods and/or services, you can begin the testing process. Based on your market research, you should already have an idea of what market segment your product is viable in, as well as the best audience to test your product is. For example, if your product is a delicious homemade jam, you might offer free samples at the local farmer’s market to gather feedback. However, if your product is a project management software, the local farmer’s market is, in all likelihood, not a great place to gather relevant feedback. So, test your product in a relevant environment, preferably in a manner that does not encourage biased responses. After you have received relevant feedback, begin making iterations to your product. It usually takes several iterations to create a product that you are ready to sell, so don’t be discouraged if you initially receive negative feedback. Thank your respondees for their honesty and take their feedback seriously; you will be better off for it.
If your product is a good (not a service) you can then decide whether you want to produce this product yourself or outsource it to another business to produce for you. This involves evaluating the production and marketing costs associated with outsourcing your product, as well as contractual and quality control issues associated with handing over your production process to someone else.
Regardless of how you choose to conduct your market research and product development, remember that these processes can take a long time, depending on how much time you choose to dedicate to them. Also, different businesses require different research and development processes depending on their relative complexity. Take your time, have fun, and never stop improving your product! As a wise man once told me, “don’t let perfection get in the way of progress!”
The Accounting Geek 
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