Primary Market Research

Finding a customer: Primary Market Research

The purpose of primary market research is first of all to understand whether there is an opportunity at all for the new venture's idea and then to understand it in as much detail as possible. The understanding one gets from primary market research is qualitative.
What you need to know about a potential customer 
There are many things you need to learn about potential customers. This list is an overview of the key issues.
  • What is the environment?
  • What is the problem or need? How acute it it?
  • Does the customer have any alternatives? What are they and how good are they for this customer?
  • Are there other products or capabilities that would have to be in place for the customer to adopt the solution you have in mind?
  • What would have to change for the customer in order for the customer to adopt your solution? For example, would business processes or people's jobs change in the case where the customer is an organization? Or would some part of the customer's pattern of behavior change in the case of a consumer product?
  • How critical is the need and how important does the customer perceive it to be?
  • What is the potential value of your proposed solution?
  • How does this customer making a buying decision for the kind of product you have in mind? Who makes the ultimate decision? How is the money allocated? How long does this process take? Who influences the buying decision?

A more exhaustive list can be found at Market Opportunity (in the process section of this website).

The basic steps in primary market research are the following.

  1. Create a hypothesis about a problem or a need. This is the starting point, and will generally be based on observation. At this point it is only a conjecture (although you may be very confident that it is correct). The process of primary research is how you build support for your hypothesis and deepen your understanding of the problem/need, the customer and the environment.
  2. Bound the universe of potential customers. This will guide where you look to confirm your conjecture and also help later when you try to quantify your market opportunity.
  3. Deepen your understanding of a set of individual potential customers. This process should yield a set of customers that you can predict with high confidence that they will buy your product.
  4. Develop a customer profile, or set of customer profiles. A customer profile is a comprehesive characterization of a potential buyer. The attributes are those characteristics that pertain to your particular solution and will become the basis for your segmentation and also your sales and marketing plans.
The process of market research is iterative. It involves forming hypotheses, testing them (through dialog and experiment), revising and further testing. Many ventures have gone awry because this process was done poorly. Often the biggest problem is that entrepreneurs do not listen or they hear what they want to hear. Good primary market research involves getting at the potential buyers perceptions, beliefs and desires in as objective a manner as possible. 

The approaches to primary market research are observation, dialog and experimentation. The entrepreneur should try to find the best means for getting the necessary information and  will generally use all three approaches. This table summarizes some of the characteristics of these approaches.

  • The foundation for all future work
  • Reveals what is conscious and not conscious in a process or pattern of behavior
  • Allows for the formation of an initial hypothesis
  • The method for acquiring most of the detailed information, including the vital complementary information
  • Requires careful, objective listening and can be undermined by the biases of the entrepreneur
  • Allows the entrepreneur to probe not only problem and proposed solution, but also current alternatives, potential obstacles to adoption, organizational issues, value and price, buying process and various customer attributes that will become important in segmentation
  • Allows for gathering of information that the customer may not be able to provide directly - most often concerning whether a solution is acceptable, valuable, interesting, enjoyable
  • Often this is the only way to validate whether a product will actually be used (and bought)
  • This process allows the entrepreneur to revise product ideas early and come closer to hitting the mark with the actual product that is launched.

How to conduct a dialog with a potential customer

The objective of a dialog with a potential customer is to understand his/her perceptions, beliefs and desires as accurately as possible, not to get the customer to say what you want to hear.

The foundation for a good dialog is some level of familiarity with the customer as it relates to your area of interest. What topics you probe will depend a lot of what you really need to know, so there is not a generic one size fits all guide to a customer interview. Nonetheless, the following should serve as a rough guideline.

It is helpful to think of a dialog as consisting of three phases.

  1. Listen with as little prompting as possible: The first step is to get the customer to describe his/her environment, process, behavior, etc. in as much detail as possible without being guided. In this conversation, you should try to probe your area of interest and try to understand the context. Ideally, the customer will describe the need you are trying to address without prompting.
  2. Propose your product concept: Describe the problem or need you have identified and either get validation or not. If the need is validated, you can ask about desirable elements of a solution, current alternatives, value of a solution, etc. During this portion of the conversation, you should get some reaction to your proposed solution.
  3. Probe related issues: Finally, you should probe whether there are any obstacles to implementation/ adoption, buying process, organizational issues, etc. This is important because even when there is positive value in a solution to a particular problems, there may be many reasons why a customer will not buy. These need to be identified as early as possible as sometimes they can be circumvented. 
It is never the case that you can learn everything you need to know in one conversation, so it is important to leave the door open to further conversations as you end the interview.

How to create a customer profile

 A customer profile represents a "kind" of customer. It is a comprehensive description of the attributes that are relevant to your business opportunity. For consumer products, this will include some demographic information and some personal characteristics. For business solutions, it may include information about the customer's industry, size, business processes, etc. Ideally, a customer profile includes all the attributes that are relevant to buying your proposed solution, and will exclude everything else. Although this may sound simple, it is not.

A customer profile is the basis for quantifying your market opportunity. Simply stated, sizing your opportunity involves counting the customers who fit all of the profiles you intend to satisfy.

Having a good set of customer profiles is also the first step in crafting a strategy for your business, namely selecting a target customer.

The customer profile is also the first step in creating a market launch plan and all subsequent marketing plans.

A simple framework for primary market research


Qualitative understanding

Any business is well served by having a deep understanding of their customers. The primary dimensions of information are depicted in this picture.

Connection to planning

The information gather in qualitative market research should drive many elements of the ventures operating plan.

See our slides on Market Research (includes a Practical Guide to Primary Market Research).