White

White paper
paper

Market Research 101 for Startups:

Essential practices for avoiding the dead pool.

1 Ask
|Your
Ask Your
Target
Market
2010
Umongous
Target
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aytm.com
Umongous
2010 2010
AskYourTargetMarket.com
aytm.com
Umongous

Market Research 101 for Startups:

Essential practices for avoiding the dead pool
Introduction
Why Should Startups Do Market Research?
We entrepreneurs building startups are possessed by the ideas weve channeled into this world. Were convinced that our latest vision is the next killer
XYZ. Yet, we all have to face our demons and stare the same abyss in the
face: Will anyone want to buy what Im building?, Will they pay for it, how
much?, Did I pick the right domain name, product name, logo, tagline, color
palette, etc? and a myriad of other questions from the great unknown. We
are all in uncharted territory, especially if we are
doing something original. Hopefully we have identified a real pain point of our target customers and
conceived the solution that they will be willing
to buy. We all know that, beyond luck, execution
is the largest ingredient in the recipe of success.
But the fact is, not all of our ideas are killer; some
are lame but were married to them and blinded
by our love. How can we afford to risk our time
and money to execute before obtaining any real
market validation? Yet, thats exactly what the
vast majority of startups do. And, in the end, most
startups end up in the dead pool.
Businesses of every size or age can benefit from market research. Its far less
expensive to test before you build, invest or buy than to make a major business error and suffer the lost resources and time. Startups can benefit from
market research even more than established businesses. For one thing, with
startups, there is less room for error. Cash reserves and opportunities for
access to capital are typically far less in startups than established successful
companies. In some cases we have investors watching every decision that we
make. With a startup, everything we are doing is unproven. Every assumption
is just that. Do we have a market fit? Does our product or service have ready
customers? Does our branding send a message that resonates with our target
market? Does our pricing maximize our revenues and profitability? Are we
leaving too much on the table?

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Many founders of startups act like market research doesnt exist. It may be ignorance in some cases but with some founders, its the fear of being told that
your baby is ugly. Ignorance is not only devoid of bliss, it can send you right
into the dead pool.
If you are looking for funding, your mission will be far easier if you can lay
objective market research data on the table to show that you have done your
homework and arent simply flying by your gut intuition.
What techniques can startups living on ramen employ to get some validation
in the real world? A major part of building startups is a lot about managing
and reducing risks. Wouldnt it be awesome if we could identify our target
market and go ask them our most important questions before we invest any
time and capital building anything, before the first line of code is written or a
die is cast and name is found? Well, we can.
In this white paper, we are going to review the ways that scrappy startup
founders just like you have performed market research on the cheap and
teach you newer approaches to getting the business intelligence you need to
survive and achieve the success of your dreams.

SOLUTIONS
Guerilla market research
Aaron Patzer, who founded Mint.com and took it in a few years to a $170 MM
exit, surveyed his target market, face to face, at the Mountain View Train Station. It may be challenging for you to define your target market. Well address
that subject a little later but for now, If your target market is simply normal
people, as Patzer states in his case, then his method of guerilla market research costs you only your time and enables you to get opinions from your
target market.

Home-made research
Another technique you can use to research before
you build is to use one of the many online survey
tools such as Survey Monkey. These tools have a gazillion features but generally have the drawback that
they require you to round up the respondents. This
can be a pain in the butt. It may be especially difficult
to get the opinions of the right segment of people
that represents your target market. If you have a mail3

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ing list, already comprised of your target market,

then youre good-to-go so long as they wont
feel spammed by your request to have them fill
out a survey. You can also post your survey on
your blog or spread it through your social graph.
But, be careful because you may not be getting
opinions from your future customers. Friends
and family may skew results since their opinions
may more reflect their best wishes for your success rather than the real opinions of people who
might purchase your product or service someday.
In any event, if you havent identified your target
market and obtained their opinions, then you
mission has not been accomplished.

Traditional Quantitative Market Research

Its not exactly a scrappy technique, but has to be mentioned in case you
have a large budget and the time to spare. Traditional market research is very
expensive and it isnt agile. You can hire professional researchers to write and
analyze your survey. They will rent respondents from a traditional consumer
panel company such as eRewards. Be prepared to pay at least $5-15 per
respondent plus professional fees that will push the project into the several
$1000s or much higher. Also, expect the process to easily take several weeks
or longer. Thats millennia in startup time.

Traditional Qualitative Market Research

Talking to your target market is important because they can gives you fresh
insights that are more difficult to obtain through quantitative studies. Aaron
Patzer did just that. More traditional techniques of qualitative research such
as telephone interviews and focus groups can be powerful tools but also are
generally expensive options. Focus groups typically are composed of 10 or
more potential target customers who have been carefully recruited and gathered in a room for a discussion session with a professional moderator present. The moderator guides the discussion using a script and keeps everyone
focused on the predetermined issues about which you want opinions. The
data is the transcript and video that comes out of the session. The revelations
can be excellent but interpretation can be challenging and a big part of the
budget. Expect to pay at least $5-10,000 per focus group session or more. The
things you learn from qualitative research can provide a good source of direction for follow-up quantitative studies.

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Secondary Market Research:

Social Media, Google, The Census Bureau and Your Public Library
People talk, tweet, blog, chat and buzz all the time in the social networks. And
yes, chances are they are already discussing the very idea or at least the pain
that you have discovered is going unaddressed. There are many tools to tune
in and listen to the global crowd discussions and fish for the trends or answers that you are looking for. A great example is Google Alerts - a no-brainer
to use. There is a world of secondary research data available on line and can
easily be sleuthed with the new Google Instant search. Your local research librarian can introduce you to an array of printed resources that compile every
kind of demographic data. For instance, if your target market is women in the
Denver metro area with household incomes over $50,000, you should calculate the exact size of your market. That data is available from the US census
bureau and other sources. The problem with secondary market research is
that its not customized for you exact situation. Youre not going to read out
in the world whether your solution solves a pain or if your brand portrays the
right image to resonate with your target market. Well, you wont discover that
by listening to the buzz until youve launched. And, at that point and for all
time, you better listen.

Lean Startup Model: Build, Test, Iterate

Building a minimum viable product (MVP) is another alternative to flatout market research testing before you build. MVP has been defined as
that version of a new product which allows a team to collect the maximum
amount of validated learning about customers with the least effort. The MVP
approach reduces risks because sometimes you can commit very limited
resources, and potentially develop a minimalist prototype that you can then
test. Because, sometimes it can be as skeletal as a landing page combined
with testing consumer response using Google Adwords, its a scrappy approach every startup might consider in order to seek some market validation.
But, the MVP approach is not simply about building a minimal product; its
more about a strategy for testing your ideas with potential real customers as
you build. Then, as Eric Ries teaches, you need to rapidly iterate, test and pivot. Learning from your customers is essential. Just the same, you might not be
building and iterating for your ultimate target market; real customers, ready
and willing to pay for your product or service at a price and volume that will
leave you with a sustainable business. However, to use it you still do need to
produce something semi-presentable - more than an idea in your head. And
then there is always this annoying perfectionist voice in your head: Would
they love it more if I designed it better, added few more features before doing
the first test?
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Finally, Market Research 2.0

The good news is that you can take advantage of market research without
leaving your office, blowing your budget, asking your mom/friends opinion, listening to the buzz, waiting a few weeks or even building a prototype.
Newer market research alternatives combine the survey tool and the consumer panel into one integrated experience so that you can DIY, pay a lot less and
get results far faster than ever before (sometimes within a few minutes after
launching your survey). Examples include, Ask500people.com and Linkedin
Polls. Both allow you to ask a single question to a group of people. The pros
of these options is the cost and fast results. They significant have limitations,
not the least being the single question inability to ask more than one question. Nonetheless, Linkedin is an excellent option if you only need to ask one
question and your target market is comprised of professionals and businessto-business.

Wed like to introduce you to AskYourTargetMarket.com (AYTM)

AYTM is the webs first full-fledged target market research platform with a
built-in US consumer panel. What does that mouthful mean? First, you define your target market (the respondents you want to answer your survey).
Then you write your survey. You launch it. Then within minutes, results come
streaming back into your account for review and analysis.

So, AYTM is an online survey tool. But, it is so much more. You can write
surveys and utilize sophisticated features such a embedding images into any
question or answer. You can upload an introductory video that respondents
must watch before they answer your survey. Thats a perfect opportunity to
demo your product, service, website, TV commercial or movie trailer. There
are advanced survey-building features such as skip logic. But, what really sets
AYTM apart is the built-in US consumer panel. You can define your target
market, the respondents you wish to answer your survey, by setting a combination of 9 different demographic parameters. You can get even more precise
by adding a psychographic prescreening question so that only the people
you are really interested in surveying become your respondents. Say you only
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want women 25-50 years old who love sushi

to answer your survey no problem. Need to
survey iPhone 4 owners, no problem. Survey
results start streaming back into your account
within minutes where you can slice and dice
the results to analyze them from any angle.
AYTM is easy and fun to use. Its available
24X7. But, is AYTM affordable? Absolutely.
Surveys start for as little as $29.95 to ask 50
US consumers 3 questions. You can ask up to
1000 consumers surveys as long as 25 questions. AYTM owns and manages its US consumer panel and utilizes quality assurance techniques not found anywhere else.
AYTM also has qualitative market research. You can
pitch your product or service by webcam or upload any
video and get webcam recorded responses from your
target respondents.

Special Considerations
How to Discover Your Target Market
When You Dont Yet Know Who They Are.

AYTM is perhaps the most affordable and scalable option for helping you
identify and find your target market. Maybe you have a winning idea. But often your target market isnt whom you think. You can wait for your real target
market to discover you. Lots of outbound marketing may eventually reach the
ears of your target market and bring them to you. Thats an expensive process
and takes a lot of time to develop. Again, time and money is a luxury few of us
can afford. What if you could survey a large sample of US consumers and then
retrospectively discover the demographics of those who are poised to be
your target market customers ready to buy? The AYTM survey results pages
includes tools for retrospectively segmenting how different subsets of the
respondents answered. It also includes tools for ferreting out survey answer
patterns. By performing a large sample survey with questions designed to determine consumer interest in your product/service, you can utilize the AYTM
toolset to find and discover your target market.

| Ask Your Target Market aytm.com Umongous 2010

Using Market Research Surveys to Determine Pricing

Many businesses use market research to help them explore and test set their
pricing. Establishing optimal pricing is a real challenge for all startups. Entrepreneurs want to maximize growth, profitability and never leave any more
on the table than is necessary. This is a complex topic and cannot be fully
addressed in this whitepaper. But its worthy of some discussion since pricing questions are very common in surveys launched by startups on the AYTM
platform.
There are a number of techniques for performing price sensitivity market
research. There are lots of pros and cons for each strategy and youll find lots
of debate about which approach to use and when. Here we will review some
of the most popular approaches.

Conjoint Analysis
Many experts consider conjoint analysis to be the gold standard for breaking down how consumers value a product or services individual features as a
contributor to overall value and price. Conjoint Analysis comes in several variations and the design and analysis of these types of studies is fairly rigorous
and probably beyond the scope of non-professionals. Nonetheless, conjoint
analysis is not always the ideal approach to studying pricing: If your product/
services features are already set, the features dont have a range of variance
or you simply want to test the overall price. Remember that conjoint analysis
is used to look at the inter-relationship of variable attributes of a product/service as contributors to the overall perceived value.

Direct Open-Ended Questioning

Simply asking the respondents How much are you willing to pay? or How
much would you expect to pay? arises a straightforward approach and worthy of consideration. Make sure the respondents fully understand your product or service before asking this question. If they understand and have a need
for a product/service, consumers are often capable of establishing its dollar
value to them. Measuring their need for a product is critical, If they dont have
a need for the product they wont be willing to pay nearly as much for it.

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Monadic Pricing Surveys

Monadic pricing studies are one of the purest techniques for testing what
people will pay for something. Respondents are shown a single price for each
product version and asked to rate the likelihood they would purchase. In
order to test different price points, the survey must be run to different sets of
respondents. That way, each respondent sees only one price point. Monadic
studies have weaknesses and its critically important to minimize any psychographic and demographic variations between the respondent groups.

Price Laddering surveys

With price laddering, respondents are initially shown a single version of the
product/service and tested with a single price for likelihood to purchase as
in the monadic strategy. But, those respondents who express a lower than
desired purchase intent are asked in follow-up to reconsider if they would
purchase at a lower price now put before them. The process can be repeated
through a few iterations, typically three. Price laddering has the obvious
advantages of reusing the same set of respondents. That reduces survey cost
and eliminates the issue of having to minimize psychographic and demographic variations since the same respondent group is used. Technically such
method could be easily programmed using the Skip logic.

The Van Westerdorp Price Sensitivity Meter

The Van Westerdorp technique is one of the most commonly used pricing
tools and involves based upon asking the respondents four questions about
a product/service and requires them to rank each price on a scale from too
cheap to too expensive.
1. At what price would you consider this product/service to be cheap?
(good value)
2. At what price would you consider this product/service to be too expensive? (too expensive)
3. At what price on the scale would you consider this product/service to be
priced so cheaply that you would worry about its quality? (too cheap)
4. At what price would you consider this product/service to be too expensive to consider buying it? (too expensive)

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The results are then plotted as frequency curves and analyzed to find the
optimal price point.
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Pricing research is only one of the many reasons that entrepreneurs come to
AYTM.

Using Market Research Surveys to Pick The Best Logo, Product,

Package or Site Design
Branding is important. When it comes to spending money and deciding between several similar offerings, branding is all you have to win the first set of
the match.
Compare apples to apples. If you are comparing logos or other designs,
make sure that you show respondents variants with a very similar treatment.
For example, if all variants are black & white and one is in color, it adds
a considerable bias and increases the chance that the color logo will be
chosen, regardless of its other qualities. Make sure that all logos have
same background color, or that the background color is brand element
you are testing as well.
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Another classic mistake: some logos are designed to fit in a header and
have horizontal proportions which makes them very readable with minimum height and others are perfectly fit in a square. Most professionally
designed logos include a few layout modifications to fit well in different
applications. When testing a logo, make sure that the different artwork fits
nicely into the preview frame and has similar layout/readability qualities.

Avoid adding long taglines that will make text too small for the respondents, and which might steal their attention away from the emblem itself.
You are better off testing the tagline as text in a different question.
Upload high-resolution graphics to make sure that the respondent has a
chance to see your images at full quality. You dont want them to be rated
low due to a small size or bad compression.
When you are trying to find the best set of icons for your
app GUI or Website, and you want to show them in the context of the entire page. Make sure that the respondents
attention is not distracted by other graphics and elements.
Its better to show icons separately by putting sets sideby-side. You can also shade down the rest of the screen to
draw their attention to the element being researched and
then test the visual context in a separate question.

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Using Video in the survey.

Want to go even further than testing still images? Use video illustration and
show respondents an interaction with your Websites prototype, showcase
your product, test a commercial, or simply get some feedback regarding your
elevator pitch to make sure your points are getting across. Open your survey
with a video that will be mandatory to view in full. Then, the respondent will
be able to see your first question.
Use such great tools as www.Screentoaster.com, www.jing.com, or Camtasia Studio to record your screen. You can showcase your site mockup or a
give a brief PowerPoint presentation.
You can use your Web cam to record your pitch or present your product
(see an example).
With a video explanation, you can give respondents context to a complex
study, when otherwise you would have had to write a couple of pages
with description and explanations. Remember, nobody likes to read long
text passages of text on the Web, but watching a couple of minutes of
video is fun.

Final Words
Market research is a fundamental tool for marking smarter business decisions.
Until recently, the costs and lack of access placed it out of reach for startups
and small businesses. Besides price and access issues, traditional market
research is too slow a process for startups. Startups require rapid feedback
mechanisms in order to use their agility as an advantage larger competitors.
Without agility, startups have no chance for survival.
For startups, market research offers the opportunity to validate their ideas
before expending capital and human resources and build a product or service
that has no market of willing customers. But, market research is not just for
initial validation. It should be utilized throughout the life of the business to
help guide strategic and tactical decisions.
With the advent of the AskYourTargetMarket.com self-service target market
research platform, startups and businesses of any size can afford high quality,
target market, quantitative and qualitative market research.
AskYourTargetMarket.com, Serious market research at silly prices.

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