How to do market research for a startup

Market research is important throughout the life of a business. Even the oldest, most well-established brands conduct market research all the time to keep their products relevant. 

But for startups, market research is especially important. 

In this post, we’ll show you why—and lead you through six simple steps to doing market research for your newest idea. 

Why market research is valuable for startups and small businesses 

The point of market research is to study what your potential or existing customers—aka your target market—think about your product. (Need a deep dive? Check out our guide to market research.) It’s particularly valuable for startups and small businesses for 5 reasons. 

1. Identifying your audience 

Many startups begin with a cool idea for a product or service. But you don’t always know who your buyers are going to be. With market research, you can take a random pool of people and ask them if they’re interested in your product. Collecting demographic data from the people who are interested is key to getting an idea of who your target audience is. 

Example: A fashion startup wants to create 100% upcycled clothing. Using surveys, the startup discovers that millennial women and Gen Z shoppers from all genders are the most likely to purchase these clothing items. 

2. Learning which features your audience cares about

Once they know who’s in their target audience, startups can use market research to narrow down the features that do and don’t matter.  

Example: A startup developing a fitness app surveys its target audience. It discovers that users would rather get personalized workout plans than social sharing features. The startup then focuses on developing customizable workout plans instead of social features that users don't value.

3. Securing funding

It’s easier to get investors interested in your startup if you have hard, cold data that shows there’s a big appetite for your product.  

Example: A startup creating compostable packaging conducts market research that reveals 70% of consumers prefer sustainable options. Armed with this data, they secure investor funding by demonstrating strong market demand.

4. Gathering social proof

According to a 2021 survey, almost 70% of shoppers read between 1 and 6 reviews before purchasing a product. 

That’s how important social proof is for your business.

When you’re a small business just starting out, it’s hard to collect enough reviews to help convince shoppers to bite. 

The good news? You can use data gleaned from market research to support your marketing efforts. 

Example: Your startup is creating the world’s most leakproof water bottle. You run a focus group where participants put the bottle through all sorts of leaky situations. But the bottle does not leak. 

Every single person in your focus group is amazed and, when asked if the bottle is the least or most leakproof one they’ve ever used, 100% of the respondents say it’s the most leakproof. You can now use that statistic and focus group anecdote in your marketing. 

5. Staying competitive 

Getting a startup off the ground is just the beginning. To stay profitable, you have to get competitive. Doing near-constant market research on everything from your product descriptions to your ads is crucial to keeping up with the competition. 

Example: A startup that sells organic skincare products regularly conducts market research. It finds that competitors are focusing on clean, minimalist branding, and customers are lapping it up. Our skincare brand startup uses this information to rebrand. Now, its product descriptions and ads emphasize simplicity and the products' natural ingredients. 

6 steps to market research for startups

We’ve established why market research is critical for startups and small businesses. Now it’s time to get into the nitty-gritty of how to do market research for startups. 

It takes just 6 easy steps. 

1. Define objective

Defining your objective is the first and most important step in market research for any startup or small business. This step sets the direction for everything that follows. It helps you stay focused and get the answers you really need. Without a clear objective, you’ll get a bunch of data you won’t know what to do with.

So ask yourself this: what are you trying to learn? What decision will this research help you make? 

Maybe you’re launching a new product, and you need to understand what your target customers are looking for. Or maybe you want to increase your market share, so you’re trying to figure out where your competitors are falling short.

Think about what you really need to find out, and then write it down in one or two sentences.

Next, flesh out the objective so it's super specific to your needs. Take a look at these two objectives, for example: 

• Objective A: Find out if people want to buy my product.

• Objective B: Find out who is interested in my product and perform audience segmentation to learn more about my target market’s demographic, psychographic, geographic, behavioral, technical, and needs-based characteristics. 

Objective A is a start, but it’s not very clear. It doesn’t tell you what to do once you know whether people want to buy the product. Option B, on the other hand, assumes there will be someone interested in the product and gives you more to do: basically, learn everything you possibly can about that group of people. 

The more specific your objective, the more useful your findings will be.

2. Identify the target market

Once you've defined your research objective, the next step is to identify your target market. Who are your ideal customers? Which groups of people are most likely to want or need your product?

For a startup, we’d start by looking at the characteristics that define our potential buyers.

First, study the broad demographic factors like age, gender, income level, and geographic location. Are you targeting young professionals in urban areas who are likely to carry water bottles to work? Or is your focus more on outdoor enthusiasts who need durability? Or parents who want to carry the bottle in a diaper bag and not worry about it leaking everywhere?

Next, dig deeper with psychographic information. This includes understanding your target market’s lifestyle, values, and behaviors. For instance, are they environmentally conscious? Do they prefer high-quality products despite higher costs, or are they more likely to grab a bargain?

Keep going with behavioral, technographic, needs-based, and firmographic data, if relevant. (If you’re not sure what these terms mean, check out our guide to customer profiling.)

By the time you’re done analyzing these segments of your target audience, you’ll have a trove of valuable information about your future customers. You can then use this data to continually refine your product and make it desirable to your audience.

3. Choose methods of research

Now it’s time to figure out how you’ll get the information you need. There are all sorts of ways to get it, including from: 

• Questionnaires

• Surveys using your own audience and a tool like SurveyMonkey or Jotform 

• Surveys using pre-screened panels from services like InnovateMR, Qualtrics, or PickFu

• Focus groups

• Existing data from big survey publishers, such as Nielsen, Gartner, and Statista

• Interviews

• Competitor analysis

• Customer feedback

• Social media listening

The list of potential ways to gather information can be overwhelming, so we recommend starting with 1-2 methods. When those market research efforts are done, try another 1-2 methods. You’ll soon learn which methods work the best for your startup based on your research objectives. 

4. Recruit participants

Market research methods like surveys (unless you buy a third-party panel), focus groups, questionnaires, and interviews require you to bring your own audience to the table. 

You can recruit these participants from all sorts of places: 

• Your existing customer base, if you have one

• Your email newsletter list

• LinkedIn contacts and/or groups

• Facebook contacts and/or groups

• Professional organizations and associations

• Universities

• Trade schools

Here’s the secret sauce for actually getting people to sign up: rewards. 

When my son was a toddler, I took him to the doctor for a well-child visit. In the lobby, a stranger came up to me with an offer: if I joined her research team’s survey on toddler sleep patterns, I would receive a total of $100 in Visa gift cards. The survey had four phases, with a $25 gift card after completing each phase. The phases would take me 30 minutes to an hour to complete. 

The researcher gave me her credentials and other information that made her seem legitimate.

I said yes, and I did the surveys to the very best of my ability—because I was getting compensated to do so. 

If this person had come up to me and asked if I wanted to join her survey efforts for free, I would have declined. It just wouldn’t be worth my time without some sort of return. 

The point of this story is this: people want to be compensated for their time. They’re more likely to hop aboard your market research train if they know they’ll receive a reward to do so. 

So take a good, hard look at your budget. Use our research incentives calculator to figure out what you can offer. When you approach potential recruits, tell them exactly what they’ll receive as compensation—and when they’ll receive it.

You could, for example, offer a $10 reward if they take your screener survey, a $10 reward if they’re approved, and a $40 incentive once they complete the research.

5. Run the research via your selected methods 

Now for the fun part: doing the actual research.

Remember how we recommended choosing 1-2 methods to begin with? Start with your first choice, whether it's surveys, interviews, focus groups, or something else.

Next, create a list of questions that, when answered, contribute to your research objective.

Let's say we're that unbreakable, leakproof water bottle startup. For this round of market research, our objective is to learn how much our target audience (millennials and Gen Z) would pay for our 16 ounce water bottle, and why.

Which, by the way, is leakproof, unbreakable, and eco-friendly to boot. We’ll call it the Unbreakabottle. 

Here’s what the survey might look like. 

__________

The Unbreakabottle 

Survey A

How much do you typically spend on a reusable water bottle?

• Less than $10

• $10-$20

• $20-$30

• $30-$40

• More than $40

What is the most important feature you look for when purchasing a water bottle?

• Leakproof design

• Durability (unbreakable)

• Eco-friendly materials

• Size/Portability

• Price

• Brand reputation

How much more would you be willing to pay for a water bottle that is guaranteed leakproof and unbreakable?

• 0% more (not important to me)

• 10% more

• 20% more

• 30% more

• 50% more

• More than 50%

If a water bottle is made from eco-friendly materials, how does this influence your purchasing decision?

• I would definitely pay more

• I might pay a little more

• It doesn't influence my decision

• I prefer eco-friendly but wouldn’t pay extra

What price range do you consider reasonable for a high-quality, eco-friendly, leakproof, and unbreakable water bottle?

• Under $20

• $20-$30

• $30-$40

• $40-$50

• Over $50

Which of the following would make you most likely to purchase our water bottle?

• Positive customer reviews

• Certification of eco-friendly materials

• A demonstration of its unbreakable and leakproof features

• A discount or promotional offer

• A strong warranty/guarantee

How likely are you to recommend a water bottle that is leakproof, unbreakable, and eco-friendly to your friends and family?

• Very likely

• Likely

• Neutral

• Unlikely

• Very unlikely

Would you be more inclined to purchase this water bottle if it was available in a range of colors and designs?

• Yes, definitely

• Maybe

• No, I prefer functionality over design

What brands do you currently trust for reusable water bottles, and why?

• [Open-ended response]

On a scale of 1-10, how much do you value sustainability when purchasing everyday products like water bottles?

• 1 (Not important) to 10 (Extremely important)

__________

The answers our water bottle startup would get from a survey like this would deliver information on: 

• Pricing expectations

• Perceptions of the bottle’s value

• Features customers would like prioritized

• Importance of sustainability

• Word-of-mouth potential

• Design preferences

• What drives the purchase

These insights line right up with our objective to learn how much our target audience would pay for our water bottles, and why.

Remember to reward your participants during this step! If you want a fast, flexible, and easy way to do this, Tremendous can help. It’s free for you to send any type of incentive you can think of with us. 

6. Analyze results

Once you've collected your market research data, it's time to analyze the results. In this phase, your team will organize your raw data so you can quickly access it to make business decisions.  

Start by sorting the data you’ve gathered. For quantitative data from surveys, use tools like Excel, Google Sheets, or specialized software like SPSS or Tableau to compile your data. Look for patterns, trends, and correlations that stand out.

For example, if a large percentage of your target audience says they would pay a higher price for eco-friendly materials, that’s a strong signal to make sustainability a priority.

For qualitative data from interviews or open-ended survey responses, categorize and code the feedback to identify common themes and sentiments. Tools like NVivo or even manual coding can help in systematically sorting through this information.

For instance, if many respondents mention frustration with current water bottles that leak, this reinforces the importance of highlighting your bottle’s leakproof feature.

Once the data is organized, compare it against your original research objective. Are there clear insights into pricing preferences? Did you uncover unexpected needs or desires? Use these findings to make informed decisions about product development, pricing strategies, marketing messages, and the overall direction of your business.

Finally, use visual aids like charts, graphs, and summaries to condense the key takeaways into a format that's easy to act on.

Template for startups doing market research

Here’s a template to help you organize everything you’ve learned in this piece and turn it into action. Feel free to copy it and customize it to fit your business’s needs! 

Market Research Template

Define Objective

Objective Statement:

• Clearly define the goal of your market research. What specific question or challenge are you trying to address?
  Example: "To determine the pricing strategy for The Unbreakable Unleakable Bottle among eco-conscious millennials and Gen Z consumers."

Key Questions:

• What decision will this research help make?

• What problem are you aiming to solve?

Identify Target Market

Target Audience Description:

• Define the demographics (age, gender, income, location) and psychographics (lifestyle, values, behaviors) of your ideal customers.
  Example: "Eco-conscious consumers aged 18-35, living in urban areas, who prioritize sustainability and durability in everyday products."

Key Considerations:

• Are there specific behaviors or values that align with your product?

• How does your target audience currently engage with similar products?

Choose Methods of Research

Selected Research Methods:

• List the methods you will use (e.g., surveys, focus groups, interviews, social media listening).
  Example: "Online surveys distributed via social media, followed by focus group discussions for deeper insights."

Justification:

• Explain why these methods are best suited to achieving your objective.

Tools Needed:

• Specify any tools or platforms required for your research (e.g., SurveyMonkey, Google Forms, Zoom).

Recruit Participants

Recruitment Strategy:

• Outline how you will find and recruit participants for your research.
  Example: "We will recruit participants through targeted ads on Instagram and by leveraging our existing email list."

Consumer Profiling:

• Utilize consumer profiling to ensure participants match your target audience. (For more on consumer profiling, see this article.)

Incentives:

• Detail any incentives you will offer to encourage participation.
  Example: "Participants will receive a $10 gift card for completing the survey."

Run Research via Selected Methods

Execution Plan:

• Provide a detailed plan for conducting your research.
  Example: "Distribute the survey over two weeks, followed by three focus group sessions."

Example Questions:

• List sample questions you will ask in your research.

• "How much would you typically spend on a reusable water bottle?"

• "Which features are most important to you: leakproof, durability, or eco-friendliness?"

Data Collection:

• Outline how you will collect and store the data.

Analyze Results

Data Organization:

• Describe how you will compile and organize the data.
  Example: "Quantitative data will be analyzed using Google Sheets, and qualitative responses will be coded and categorized."

Analysis Methods:

• Explain the methods you will use to analyze the data (e.g., statistical analysis, thematic analysis).

Key Insights:

• Highlight what key insights you expect to gain from the research.
  Example: "We aim to identify the most valued features and the price range that resonates with our target audience."

Actionable Outcomes:

• Detail how these insights will inform your business decisions.
  Example: "Adjust product pricing and marketing strategies based on the insights gathered."

Conclusion

Researching new markets can feel overwhelming. But there are steps even businesses of less than 10 people can take to understand more about their buyers, their competitors, and product preferences.

The simplest way to send research incentives to participants around the world is with Tremendous. Give participants the choice of more than 2,000 redemption options, from Venmo transfers to Amazon gift cards to direct bank transfers.

Send your first incentive in minutes, or chat with our team about how Tremendous can help you build data-backed marketing initiatives.