180 Days to Startup #2
Series of entrepreneurial journey of Will Chen, penned by himself. In case you want to start from the beginning, please click HERE to the first article. This write-up is about market research & prototype development, it goes here:
While there maybe some startups hitting the jackpot without any market research, most new companies don’t have that luxury. nodis.io is in the same situation. We had to do the market research to know if we actually have a problem worth solving and if our proposed solution actually solves it. For this article, I am looking to share our two part initial research result and what we learned. These efforts had tremendous impact on setting a foundation of our prototype development.
Market Trend Research
When I am doing a market research, I always prefer to first look at the big picture for trends, opportunities, and threats. It’s common knowledge that survival for the brick and mortar retail industry is becoming more and more difficult. We see the bankruptcy of Zellers, Sears, Toys R Us, and Target’s brief existence in Canada. We see empty retail spaces in strip malls, plazas or smaller indoor malls. The competition against e-commerce businesses is getting more intense. IBISWorld forecasts that the contracting of retail industry is likely to continue.
As an example of the difficult situation faced by the retailers, below is a map of all the big-box retailers closing in 2018 across the United States (Canada is not doing much better with Zellers, Target Canada, Sears and other brands):
That being said, these challenges and high profile closures do not necessary translate to the end of retail stores. However, it will require learning, understanding and adapting to the changing consumer behaviors to thrive.
According to a number of published researches (click here to see our whitepaper for more detail), even though 84% of young shoppers are influenced by social media before purchasing, only 55% of small businesses in Canada have any social media presence. This means that 45% of small businesses (or over half a million) in Canada have little-to-none social media profile. Meanwhile, Canada has the astounding statistics of 30% death rate for small businesses within 5 years of startup and 7000 small enterprises are going bankrupt every year. Top reasons for their failures include financial reasons (not enough sales/margin to cover overhead) or market fit problems (lack of knowledge or unable to connect with their customers).
To help this group, we need to first evaluate why people still shop at a retail store. 40% of the consumers believe that knowledgeable personnel will enhance their shopping experience, 27% feel that in-store purchases will have better after-purchase service, and 25% like the personalized touch. However, just having a store is not enough. Retailers need to combine an effective online marketing strategy along with an engaging in-store experience to stay relevant. Creating higher online awareness to drive traffic into stores is a critical path to not just survival, but also long term success.
Unfortunately, online marketing is a daunting task for most small business owners/managers. 69% of businesses said that creating a compelling content is extremely difficult, over 28% said it is challenging to attract audiences, and 25% said that they lack the time to constantly update and manage website content. These marketing difficulties cause independent retailers to lag behind bigger companies when it comes to having an impactful online presence.
A third party social media marketing company may ask for thousands of dollars monthly and not many small businesses have that kind of budget. They could consider Groupons or other similar coupon-related services for exposure, but they usually charge a big commission on the revenue (that’s a significant cost on top of the steep discount they are already giving). There needs to be a solution specializing in helping the mom and pop shops to adapt to this fast changing world without the additional burden to their overhead.
Target Market Research
As a platform solution, we have to understand 2 different groups of customers. The business users that will use this service and the general users that will engage with the businesses. Through our market research, it resulted into 2 personas:
- “David” the owner/manager who makes strategic decisions for the business — his main marketing method is through traditional print/digital media. While he believes in the power of social media marketing, he may not have invested heavily in it, yet. He is willing to give away free products/services/coupons in return for measurable incremental traffic and revenue. While he is cost-conscious, he is willing to pay for marketing solutions if the return is satisfactory. He seems to be on the fence with cryptocurrency.
- “Calvin” the millennial shopper— he loves to get involved with the world and always finds ways to connect with others via online/offline methods. He often shops at places due to convenience and familiarity but he can be adventurous sometimes. Social media is more likely to get his attention than traditional media. He often gravitates towards things he feels personally connected to, whether it is proximity, lifestyle, or culture. Since he is just starting out, he may be interested in side gigs if the benefits outweigh the cost.He loves discounts and would find ways to save money. “Calvin” would love to get some cryptocurrency but doesn’t have any due to the high cost and steep learning curve.
These research results and persona analyses helped us to understand a few critical premises. First, businesses are always looking for ways to get more exposure and have more traffic. They are even willing to sacrifice margin to do so. On the other hand, millennial shoppers enjoy convenience, familiarity, but also willing to be adventurous. Lastly, they are both open to the idea of cryptocurrency but it needs to be useful, valuable, and easy to obtain.
Market and Customer Understanding are Critical to Prototype Development
The research was critical to prove our assumptions. They helped us to understand the struggles and trends of small businesses. Demographically, we refined our focus on who we should pitch to. Understanding who they are is foundational to our design, user experience, and message.
As an example, we realized that even though Blockchain and Cryptocurrency are buzz words, they are generally big taboos when speaking to most business owners/managers. Even if they see potential, most of them neither understand it enough to incorporate it into their business model nor do they care enough to spend time on researching the subject. Essentially, we really didn’t need to talk about blockchain/crypto with this particular group of people. Businesses only care how we can bring them higher exposure and traffic
On the other hand, our target general users who are aged between 18 and 30 are totally OK with the techy words, even if they don’t understand them. They are adaptable to new technology and are adventurous enough to invest. However, we need to solve the technological steep learning curve road block in order to have wide market adaptation. So if they could get crypto in non-techy ways while receiving value (not strictly just the value of the token), then it may really help push crypto to the next level of global adaptation.
What Did I Learn?
As a team, we learned so much when going through this process. Some of my top lessons include:
- For a survey-type of market research, planning is 50% of the work itself — every question matters. People don’t like surveys, so it’s best to keep the questionnaire short, relevant, and sweet. I had to 80/20 my questions from 20 down to 7. I want quality research and not just a bunch of meaningless data that I think I need.
- Never let hard earned research go to waste — it was critical that we bridge macro market trends and the micro target audience behavior so we could see a bigger picture. Knowing what to research and find out the best way to analyze the data helped turning market research into action. I have done a lot of research in my career and seen even more surveys. More often than not people sit on a pile of data that they don’t know what to do with.
- Message is 95% of the selling itself — knowing who I should talk to gives me a better focus on what message to develop. Understanding the audience is the best way to develop an effective message. I will actually be writing an in-depth article about this in the future.
- Always find the most effective way to market research a target market — visiting actual customers to get feedback is a great way to understand them. However, if you are like us when we were at the beginning stages and just needed some initial research to start with, there is SurveyMonkey’s paid response service. It doesn’t cost very much and it has a crazy amount of criteria options to help you focus on your market research. You can pick by country, region, habits, political affiliate, industries, type of pets you own (no kidding), and a bunch other criteria to help you focus your research. When I first used it, I was completely stunned by the speed of response. Within 5 minutes of my submission, I got my first response. By the end of our one hour business meeting, we went from knowing very little about our target market to knowing enough to have action items. (Note that I am simply just sharing my experience and I am not affiliated with SurveyMonkey)
- Be detailed when conducting a paid research — when I was using SurveyMonkey, I got so excited from the response of the first paid research, I just rushed to the second one without thinking of the criteria thoroughly. Needless to say, I spent about $200 and then realized that there was a critical criteria that I didn’t include. I had to spend another $200 so that we could have a more accurate data. In the end, it was all worth it but I could have saved that second $200 on some other project-related things.
These market research results are the foundation of nodis.io’s product, user experience design, and message. The difficulties experienced by small businesses are just the type of problems that I want to build a business on. In fact, it is a problem very close to my heart. In my next article, I will share my experience 20 years ago, which influenced me to become a marketer and ultimately working on nodis.io.
This is a series write-up by Will Chen, you can read 3rd chapter of this series here. Meanwhile, you can visit nodis.io to see what they have built so far. You can comment your feedback regarding this write-up or his startup product in the comment section.