In order to be successful, you must inspire the market to purchase what you’re selling. This becomes incredibly difficult if nobody has any use for your product! The importance of market research is critical as a startup. Too many businesses have failed to create anything of true value for the market. In an analysis by CB Insights, nearly half of all startup failures were due to lack of market need.
This is part of a 7-part series on reasons why businesses fail.
Importance Of Market Research
As confident as you may be in your idea or product, thorough market research is a must for any startup. There is simply no point in developing a product or service nobody will want. Market research must include establishing the need for your product, the competition, suppliers, relevant laws & regulations, information about the target demographic, etc.
You can’t assume people will want what you sell. Market research, feasibility studies, and focus group testing help to challenge your hypotheses. If you’re wrong about the market, it is absolutely crucial to find this out ASAP. If you’re on the right path, this data can also help tremendously in securing funding by demonstrating real demand for your product.
“The greatest tragedy of mankind is people holding on to wrong opinions… ” — Ray Dalio
So how do we get this right? Let’s start off by taking a look at a prime example of how to get it wrong by ignoring market need.
Case Study: Zune’d For Failure
Microsoft launched the Zune in 2006, the Zune HD in 2009, and by 2011 the brand was discontinued. Zune was launched as a direct competitor to Apple’s iPod. Despite the aggressive marketing efforts by Microsoft, it had little success. The problem with Zune was that it offered nothing new to customers. Apple was already miles ahead of Zune in terms of technology, and there was no need for an alternative MP3 player. The iPod was first to market and Zune was never able to convince consumers to make a switch.
Lack of market killed Zune, and Microsoft failed to anticipate this due to a lack of market research.
Don’t let good looks fool you…Microsoft is not cool or trendy. These two words are generally reserved to describe Apple. Thus, their marketing efforts were focused on people who didn’t identify with the iPod. However, at this time most consumers either had the iPod or wanted the iPod. Microsoft was left with a rather small pool of potential customers. Not so good.
All in all, market research wouldn’t have turned the Zune into an overnight success, but it could have revealed the Zune’s likely failure. Microsoft might’ve avoided wasting time and money, or at least have produced a product people wanted.
Now let’s look at a company whose market research paid off enormously.
Case Study: Finger-Lickin’ Good Market Research
Kentucky Fried Chicken, more affectionately known as KFC, found its biggest market quite a ways from home — China. After opening the first store in 1987, and now with more than 5,600 locations and $5 billion in revenue in 2017, it has been warmly embraced by the country’s new generation. Fun fact: no other foreign fast-food chain enjoys this kind of success. KFC grabbed an 11.6 percent share while McDonald holds only 5.6 percent. The key to KFC’s success? Quite literally, it’s menu!
Just like this guy, KFC knows what’s up. Before entering China, KFC knew their traditional menu loved by so many in the United States wouldn’t work at all in the new territory. So a complete overhaul was initiated, creating a menu unlike anything in the US. Options such as shrimp sandwiches, matcha ice cream, congee, and soy sauce wings allow KFC China to cater to the new audience’s tastes and preferences. In a country where others were struggling to find decent footing, KFC trumped them all, thanks to a deep understanding of the market need.