Similarly, you shouldn’t do product discovery without starting with market research.
Thorough market research is key to a successful product discovery process and will help you decide how to market your product and if your product idea is even worth pursuing.
We’ve already identified market research as the essential first step in the discovery process in our 6-step guide to product discovery.
So, why exactly is market research so important for product discovery and how should you do it?
Let’s find out!
Table of Contents
What is market research?
Before diving deeper into why it’s important and how to conduct it, we first need to define and understand what market research is.
In simple terms, market research is the process of gathering and analyzing information about your target market, service or product with the intent of gathering insights into your customers, competitors and the market itself.
You can then use the insights you’ve gathered to decide if your product idea is worth pursuing further, if you should modify your initial idea or if you should pivot to another idea entirely.
Primary market research is the research you conduct yourself and it includes methods like:
Surveys
Customer interviews
Focus groups
Observation-based research
Questionnaires
Secondary market research, on the other hand, uses materials compiled by someone else like:
Whitepapers
Government-collected data
Industry reports
Company reports
We can differentiate between qualitative and quantitative market research, too.
Qualitative vs quantitive research
Qualitative market research includes methods such as:
In-depth customer interviews
Focus groups
Open-ended survey questions
Quantitative market research methods are, for example:
Surveys
Review scores
Social media statistics
Questionnaires
You should use both qualitative and quantitative methods in your research to get a comprehensive understanding of your market.
Why is market research important for product discovery?
Now that we’ve defined what market research is, let’s discuss how it fits in with the broader discovery process and why it’s important for its success.
To reiterate, market research is the essential first step in your product discovery process.
If you don’t conduct market research, your risk of failure rises tremendously.
Top reasons startups fail
CB Insights identified that having no market need for a product was the second-most common reason for startup failure behind only running out of money.
Thorough, high-quality market research will help you avoid the same fate as those failed startups.
The point of product discovery is to help you gain an understanding of your market, your users and their needs.
Without market research, gaining that understanding is a lot tougher if not downright impossible.
It will also provide you with a treasure trove of data you can use in the other phases of your product discovery process.
For example, when you’re creating your user persona you’ll use a lot of the information you’ve gathered during your market research to help you build the persona.
Also, you’ll create a relationship with the people who participated in your market research.
Not only are they potential future customers but they might be willing to participate in further user research you end up doing down the line.
Market research is the backbone of every well-thought out product discovery process and it’s essential to your future product’s successful development and launch.
How to conduct market research
We’ve covered the what and the why of market research, now it’s time to cover the how.
Market research is commonly done in 5 steps:
Identifying and analyzing your target market
Determining your target audience
Researching and engaging with the target audience
Analyzing your competition
Collating your findings and continuing with product discovery
Let’s explore every step in further detail.
Identify and analyze your target market
The first step of any market research process should be identifying and analyzing your target market on a broader macro level.
Some of the questions you should seek to answer should be:
What’s the size of the market?
Is the market growing, stagnating, or shrinking?
What are the top companies in the market?
What does the market share distribution look like?
Is the market oversaturated?
How is the market segmented?
Answering these questions will give you the essential information you’ll need to assess if a market is worth targeting or not.
It’ll also help you decide on how to approach the rest of your product discovery.
For example, if your target market is dominated by a small number of big companies it would be smart to corner a specific niche or market segment rather than taking them head-on.
If the market is composed of a bunch of smaller companies and startups then your goal should be to provide unique features to differentiate your product from the competition and focus on quality that will make you stand out from the crowd.
Market growth dynamics are very important to know, too – entering a market that’s shrinking requires an entirely different approach to entering a market that’s growing rapidly.
In any case, getting a macro-level overview should be the first step you take when doing market research.
Determine your target audience
Determining who’s your target audience is the most important step of your market research process.
Without doing that, you won’t be able to achieve a product-market fit or do more specific user research later in the product discovery process.
Target market vs target audience vs target personas
As pictured above, your target audience are the specific groups of people most likely to buy your products or use your services.
In simple terms, your target audience are your future customers.
That’s why it’s so important you identify your target audience correctly as they’ll be who you’ll be building your product around.
Once you’ve identified who your future users are, you can build your user personas to help you even further nail down your product-market fit.
“The only thing that matters is getting to product/market fit. Product/market fit means being in a good market with a product that can satisfy that market.”
Knowing the target audience for your product is critical for the success of your product discovery process and consequently your product’s overall success, too.
Research and engage with your target audience
So, you’ve determined your target audience, now what?
Your next step is to conduct user research and engage with your target audience.
This’ll give you the necessary information and data about your product and help you identify any bugs, problems with user experience (UX) and features it would be wise to add to your product.
You’ll also find out your users’ pain points and frustrations which will be extremely helpful in the next stages of your product discovery process.
Some of the methods you’re most likely to use include:
Surveys
Questionnaires
Interviews
Focus groups
Social media listening
Review scores
Observation-based research
Notice how the above methods are a mix of qualitative and quantitative research methods – relying on just one or the other won’t give you the full picture.
For example, quantitative surveys like the one pictured above will, if designed well, give you a lot of actionable information but you’re unlikely to uncover your users’ deeper motivations and frustrations with only quantitative research.
That’s why a holistic approach will yield the best results, leaving you with a lot of quantifiable data as well as a deep understanding of your potential users’ needs and expectations.
One underrated result of researching and engaging with your target audience while doing market research is the relationship you’ve started building with your future users.
If you play your cards right, they just might become your first actual users by the time you finish discovery and launch your minimum viable product (MVP).
Analyze your competition
Another important element you need to thoroughly research and analyze is your competition.
Through competitor analysis you’ll be able to identify and evaluate the strengths and weaknesses of your competitors’ products and their position in the market.
This’ll give you an idea of how to position your own brand in the market and potential opportunities such as gaps in the market you can fill with your product.
So, what exactly should you be looking for when doing competitor analysis?
Some of the important questions you’ll need to answer are:
Which products/services do they offer?
How do they price their products?
How do they position themselves in the market?
What’s their marketing strategy and brand voice?
Which social media channels do they use and how?
Feel free to use classic dependable frameworks for competitive analysis like the SWOT analysis framework (Strengths/Weaknesses/Opportunities/Threats) or Porter’s five forces.
You can learn from competitive analysis:
Strengths and weaknesses
Your market
Industry trends
Bencmarks for growth
Some of the most important actionable insights you’ll get with competitor analysis include:
The strengths and weaknesses of both your competitors and your company
More in-depth information about your market
Industry trends that are popular right now
Benchmarks for growth you can set to overtake your competitors
Knowing your competitors’ products and how they position themselves will help you decide on the direction of the rest of your product discovery process and aid you in your own positioning efforts.
Collate your findings and continue with product discovery
After all the research is done, it’s time to collate and present your findings.
By the time you’ve finished your market research you’ll have learned:
Your target market’s size and growth dynamics
Who’s your target audience in the market
Whether or not you’ve achieved a product-market fit
Your users’ pain points, frustrations and expectations
How your competitors have positioned themselves in the market
The data you’ve gathered during your market research will inform your product discovery process going forward.
You’ll be able to use the information you’ve learned to create your user personas, to determine the features your product will need as well as which of your users’ needs should be most urgently met.
There’s a chance you’ll have to modify or even entirely discard your initial product idea, depending on the results of your market research.
Don’t get discouraged, though – you’ll have gathered a treasure trove of information about your market, potential customers and competitors which can help you in brainstorming another product idea.
Conclusion
Market research is the essential first step on the road to a successful product discovery process.
By doing market research you’ll gain valuable insights about your product, users and the market you’re targeting.
Ivan is truly passionate about what he does. In his role as Lead Product Manager, his strength is shaping products that not only meet market needs but also wow their users. And with over a decade of experience at software companies and startups, he knows all the ins and outs of building successful products.
In his spare time, he enjoys staying active, whether it's hitting the gym, playing sports, or hiking. His dream office? A terrace in Komiža on the island of Vis, taking in the warm Adriatic sun.
