How to Understand Your Market and Customers: A Beginner's Guide

Do you know that Netflix originally started as as a company renting DVDs by post mail? As years passed and technology evolved, the company made a revolutionary decision to stream movies in the internet. This decision changed how the majority of people watch TV now. Understanding customer needs and slightly predicting the future made Netflix one of the largest media streaming giants with around 269.6 million paid subscribers worldwide as of the first quarter of 2024. They don’t rent DVDs anymore.

Of course this process wasn’t smooth. The company had ups and downs, as well as dealt with the consequences of its mistakes. For example, they invested millions of dollars in TV shows that didn’t have enough audience. Therefore, understanding your market and customers is the foundation of any successful product, and it's not a one-time activity, but an ongoing process that can lead to adaptability and long-term success.

Conducting Market Research

Market research is a process of investigating the target market or its segment to understand if there is a fit between your (planned) product and the market. Market research helps you get answers to the following questions and uncertainties:

• Is there a market for my product? In some cases the market does not exist yet, and innovative products form the market by being pioneers in their niche. Think about Netflix with their streaming service. In other cases market already exists as well as competitors.

• How big is the market? Everyone likes to eat sweet ice cream, but few of us will probably eat the salty one, even if you think you have the greatest recipe in the world.

• Who are my competitors? For popular products, competition is very high. Remember to consider both direct competitors (like Coca-Cola vs. Pepsi) and indirect competitors (Coca-Cola vs. Dr. Pepper or bottled water).

• What other factors might impact my product's success? Market research extends beyond just your competitors. Consider external factors like government regulations (ex: Google in China vs. TikTok in the US), changing consumer preferences, and economic conditions.

There are primary and secondary methods of conducting market research. The primary method assumes collecting data directly from target market using surveys, interviews or focus groups. The secondary method lies in reading industry reports, market statistics, doing competitor analysis or analysing online trends.

James Dyson grew frustrated with the declining performance of traditional bagged vacuum cleaners. Extensive research, including interviews, home-use tests, and analysis of dust samples revealed the problem of suction loss due to clogging pores. This sparked the invention of the bagless cyclonic technology behind Dyson vacuums.

Making Customer Research

Customer research is extremely important for the success of your product. It's a set of actions that helps you understand whether your expected customers will need the product or service you are going to offer. The best part is that you can do this before investing heavily in development and marketing. All you need is a group of people to perform research.

Customer research answers many questions, but the most important ones are who your target customers are, what their problems and pain points are, and how you are going to solve them with your product. Additionally, customer research can lead to better customer targeting, feature alignment, compelling messaging, and even uncover new opportunities within your market.

Same as market research, there are two types of customer research - primary research and secondary research. Primary research focuses on interviews, surveys and focus groups, while secondary research is about market reports, industry data and competitor analysis.

Useful tips about conducting user interviews

1. Always talk to your assumed target audience. You won’t ask single males on their opinion about new revolutionary child diapers.

2. Prepare right open-ended questions before the interview. They must encourage users to tell stories and provide detailed insights about their pain points, motivations, and goals.

3. Actively listen. Fully concentrate on the responder, understand their message, answer thoughtfully, and right down what was said. Don’t hesitate to ask questions!

Creating User Personas

User persona is a fictional character that represents your ideal customer. Each product may have one or more user personas. Make a simple exercise - imagine you want to open a breakfast bar, and you are thinking if there will be enough visitors to make it profitable. Think over, who could be your ideal customers.

Think of your user personas as characters that do represent real customers. Thinking about their needs and goals regularly throughout the product lifecycle, you can make informed decisions. This means using personas during menu development (e.g., healthy options for Sarah) or designing the breakfast bar layout (comfortable booths for Alex's weekend gatherings). Ultimately, user personas become a compass, ensuring your breakfast offerings fit your your target audience.

Identifying Pain Points

Products solve problems. To build successful products, you must clearly define those problems. Otherwise you will build just-one-more stupid product that fails and vanishes. The statistics says that around 90% fail to succeed for various reasons, where inability to identify a real problem I think takes the decisive place.

Working full-time in sales, Tope Awotona has grown frustrated with the long email exchanges leading to setting up calls with prospects. This has led him to a six-month journey of research for a product that would solve his problem and ended up getting a flight ticket to Kyiv, Ukraine to develop Calendly, the fastest growing company in scheduling automation.

This is an example of a real pain point - lack of productive online scheduling tools. Now Calendly is one of the world leaders in online scheduling tools.

Pain points can be identified through customer research techniques like probing questions and observing users in their natural environment.

Types of Probing Questions

• Clarifying Questions: "Could you explain that in more detail?" "Can you give me an example?".

• Exploratory Questions: "What happens before/after that?" Help understand the context of the pain point.

• Challenging Questions (use sparingly): "Why do you think that's a problem?" These probe for the genuine impact of the issue.

• 5 Whys: A technique of repeatedly asking "why" to get to the core cause rather than just symptoms.

Instead of Conclusion

Understanding your market and your customers is an important. It's a continuous journey that differs successful products from those that just vanish in the history. Companies like Netflix, Dyson, and Calendly show the power of ongoing research to constantly bring innovation and adapt to user needs. Remember, the insights you get through market and customer research are your roadmap.

Whether you're a startup founder with a revolutionary idea or an established business looking to improve, these key actions will drive your product strategy:

• Never stop asking questions: Probing interviews, surveys, and observation techniques are key tools to unlock those invaluable customer insights

• Analyze the Landscape: Identify market trends, competitors, and external factors that can impact your success.

• Build Detailed User Personas: Go beyond basic demographics and truly understand your customers' motivations.

Successful products aren't built on guesswork. Unleash the power of market research and customer research - they will help you to create products and services that are really needed by your customers.

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