I wish I had a dollar for every time we are told that the market really wants this product or service. For most startup companies conducting well designed and professional market research is a non-starter. In addition getting even limited access market research reports can also be very expensive. Scouring free online news reports can be helpful but generally they only report a snippet of the actual data in a market research report and very seldom question the validity of the study. Some startups conduct informal surveys that can be helpful but probably not conclusive based on who they pick for the study.
So what is a startup to do to validate that there is a market need for their product or service? Here is the one burning question entrepreneurs should ask themselves to help solve that problem:
How big is this problem I'm trying to solve?
Let me give a simple example: when the auto was first built it required the owner to hand crank the engine until it started. Not only was this difficult (especially in rain, snow, cold, etc.) but it was dangerous (a backfire would cause the crank to be ripped from the person's hand). The invention of the electric starter filled an important market need and people gladly paid more for this new device.
Now let's talk about one of today's startups: eFuneral. This company, which just won a $95,000 award from the Innovation Fund, has developed an online service to help families find a funeral provider and to help them compare costs for various services. The number of people dying each year within a region is fairly easy to calculate, as is the number of funeral homes.
But the real challenging part is answering the follow-up questions, most of which revolve around their competitive advantage. With eFuneral, its founders needed to determine what segment of a region's population would use online service for their funeral needs. In certain communities, ethnic or religious elements might point families to just one funeral provider. In other communities, where the population is more transient there may not be preferable funeral providers. How do you then find out the potential market for your product? Could it be different in different parts of the country? As a result do you need different marketing strategies for different communities?
Without finger-tip access to market research, a founder needs to ask him/herself if this new product is a must-have or a nice-to-have. From this, they'll need to demonstrate that a large multi-demographic set of the population will reach into their pockets for this product or service.
