Start Ups Cannot Ignore Market Research
• The prevailing attitude is that market research are exclusive to big multinationals
Numerous studies, both in and outside Africa, have pointed out very high mortality rates for start-up companies. In South Africa, for example, a study done by Africa Public Service and Delivery Review (APSDR) shows that over 70 percent of small to micro and medium enterprises (SMMEs) in that country fold within the first five to seven years of their inception.
Whilst there are varied reasons why these start-up companies fold, it is generally linked to the lack of basic research by owners when they decide on a business venture. It is therefore very common to see start-up entrepreneurs just plunging into the unknown with the hope that things will shape up and they will be able to find their feet as they go. Unfortunately, most of them never see their day.
When a start-up fails to identify its customer needs, the company may not be addressing a real problem in the desired way. If the company doesn’t invest in having a conversation with customers about their product, they will lose the opportunity to refine the product to their needs and to improve chances of the product being successful in the market. Unless a proper analysis of the market competition is done, the company cannot seize the market opportunity and the potential growth in the market. It is blind to its immediate opportunities and the threats hovering over it.
Developing strategies about pricing, marketing and sales, among others, needs to be done based on a thorough understanding of the target customers (by asking the right question to the right audience) and the analysis of competition that the firm is going to face in the market. A big part of some of the start-ups is to secure funding by courting those with resources to invest in their idea and vision of the product. Without proper marketing research, it is hard to base and justify how one’s product would be successful in the market and why it is worth spending a huge amount of money from an investor.
There are a number of reasons why start-ups may not bother to do research for their own benefit. Start-up companies ignore the importance of market research for their enterprise assuming research is only for large multi-national companies. Normally, business founders think that they have the best deal in town. However, with a lack of proper market research, the product fails because the target audience didn’t share their idea of this revolutionary and fantastic product and the product fails to register with the target market and consequently fails to make any meaningful impact on the market.
A common mistake that start-ups make is that they perceive market research as a cost that does not generate any tangible return on the investment, unlike advertising that gives the company return in terms of brand awareness. Such infant companies plan to align towards research once they have established a customer base which sometimes does not happen in the first place because the market research was not properly done and the target customer’s point of view has not been taken into consideration.
Another reason that some start-ups do not focus on the market research is that they are often coming out with products that are completely new, thus no benchmark or existing market research for them. That being said, the start-ups with such products can still find the product closest in the market and get opinions from customers via surveys and other research forms. Talking to the consumers will enable the company to add or remove features in the product, help them understand how much people are willing to pay for such a product or if you need to drop the idea because it is perceived as useless by the target audience.
This article was prepared by Data Collection & Analysis, a business research firm. Feedback or inquiries can be relayed to 767 406 58