Effective Market Research Strategies for Entrepreneurship in Computer Science
Conducting effective market research is crucial for the success of any startup in the field of computer science entrepreneurship. Explore multi-dimensionality and continuity in research to understand target customers better and adapt to changing markets over time.
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Entrepreneurship for Computer Science Entrepreneurship for Computer Science CS 15-390 How to Research a Market? Lecture 4, August 30, 2023 Mohammad Hammoud
Today Last session: How to identify a market? The power of location Principle 2: Be Where the Heat of the Action Is Principle 3: Go In Through the Side Door or the Vast Gate Today s session: How to research a market? Effective market research Principle 4: Don t Ask, but Show People What they Want Announcements: Quiz I will be on Monday, September 04 Project presentations will be on Wednesday, September 06 Project report 1 (mission, vision, idea, & team) is due on Wednesday, September 06 by midnight
Entrepreneurship Paradigm A System of Functions Paradigm: Functions Identify & Research a Market Found or Co-found a Company Build a Business Model Identify a Problem Build a Prototype Bootstrap and/or Raise Angle Fund Raise Market & Operate Build a Culture Build an MVP Professional Money Scale Exit
Entrepreneurship Paradigm A System of Functions Paradigm: Functions Identify & Research a Market Found or Co-found a Company Build a Business Model Identify a Problem Build a Prototype Bootstrap and/or Raise Angle Fund Raise Market & Operate Build a Culture Build an MVP Professional Money Scale Exit
Outline How to Identify Your Market? How to Research Your Market?
Effective Market Research Now that you identified your location, you need to conduct effective market research, which is a fundamental skill that underlies the entire process of starting a company What makes market research effective? 1. Multi-dimensionality: It should speak to various target customer s dimensions like the rational, emotional, economical, social, and cultural ones, among others 2. Continuity: It shall inform existing and every stage in starting and running your company (thus, it shall be conducted at every stage) Customers and markets change over time, so what is true today might be invalid tomorrow (check the Innovator s Dilemma by Clayton Christensen)
Effective Market Research What makes market research effective? 4. Non-tradability: It is dangerous to outsource market research, especially if it involves direct interactions with target customers 5. Hypothesis Validation: It should play a critical role in validating or invalidating your hypothesis, especially before you proceed with product development (more on this under Principle 4) 6. Hypothesis Generation: It may serve in generating new hypotheses, along the way!
Types of Market Research Type Type Type Type Definition Definition Definition Definition Primary Market Research Primary Market Research Primary Market Research Primary Market Research Involves direct interaction with target customers to understand their situations and gain knowledge specific to your (potential) new venture situations and gain knowledge specific to your (potential) new venture situations and gain knowledge specific to your (potential) new venture situations and gain knowledge specific to your (potential) new venture Involves direct interaction with target customers to understand their Involves direct interaction with target customers to understand their Involves direct interaction with target customers to understand their Secondary Market Research Secondary Market Research Secondary Market Research Secondary Market Research Involves indirect investigations, especially via collecting information from reputable sources (e.g., standard industry and government reports) reputable sources (e.g., standard industry and government reports) reputable sources (e.g., standard industry and government reports) reputable sources (e.g., standard industry and government reports) Involves indirect investigations, especially via collecting information from Involves indirect investigations, especially via collecting information from Involves indirect investigations, especially via collecting information from Qualitative Market Research Qualitative Market Research Qualitative Market Research Qualitative Market Research An exploratory process that helps understanding qualitatively a subject matter, which might lead to new testable hypotheses (can be used in primary and secondary types of researches) and secondary types of researches) and secondary types of researches) and secondary types of researches) An exploratory process that helps understanding qualitatively a subject matter, which might lead to new testable hypotheses (can be used in primary matter, which might lead to new testable hypotheses (can be used in primary matter, which might lead to new testable hypotheses (can be used in primary An exploratory process that helps understanding qualitatively a subject An exploratory process that helps understanding qualitatively a subject Quantitative Market Research Quantitative Market Research Quantitative Market Research Quantitative Market Research Focuses on gathering specific data, which may prove or disprove a certain hypothesis hypothesis hypothesis hypothesis Focuses on gathering specific data, which may prove or disprove a certain Focuses on gathering specific data, which may prove or disprove a certain Focuses on gathering specific data, which may prove or disprove a certain
Case Study: Away Away is an American luggage and travel accessories (online) retailer Started in 2015 by Jen Robio and Steph Korey Considered one of the highest funded female-backed startups (raised so far more than $181Million) Has an estimated post-money valuation in the range of $1B to $10B as of Jun 24, 2020
How Did Away Start? In early 2015, Jen Rubio (the former head of social media at Warby Parker, the online eyewear retailer that disrupted eyeglasses) was skiing in the Swiss Alps In her way back to New York, her bag broke: I m leaving a trail of my underwear behind me as I m running through the [Zurich] airport. It was so embarrassing. When she was back, she tried to buy a new bag, but all that she could find are either a Tumi (expensive!) or an American Tourist (cheap!) bag Jen Rubio observed a market gap!
How Did Away Conduct Research? Jen partnered with her colleague from the time at Warby Parker, Steph Korey They both did not have experience in making luggage They were outsiders; had no subject matter expertise, institutional knowledge, or industry experience (potentially a blessing at times!) Jen said: The first few weeks were just like our intense version of market research We went shopping every single day. We went to everydepartment store. We went to every luggage store We compared all the experiences and all the prices. We kept very meticulous notes on what was out there. (a technique known as the immersion technique )
How Did Away Conduct Research? Jen and Steph also researched and visited factories to figure out what it would take to cut out the department and all the weird wholesale and retail and licensing markups This was how Warby Parker managed to make something really high quality at a much more affordable price! They created a survey asking what consumers wanted and sent it out to around 100 friends The survey included a list of every feature imaginable based on what we knew from our research. Smart, right?
How Did Away Conduct Research? Jen said about this survey: It was the stupidest idea ever if you have a survey that says what would you like to see in your luggage? everything gets checked. It s not indicative Jen and Steph quickly figured out that they had to narrow the universe of potential features from what could go into their luggage to what should go into it To do that, they had to identify how people actually use their luggage
How Did Away Conduct Research? For a few months, they talked to nearly 800 people and asked them: How do you pack? What do you do right when you get to the hotel? What do you do with your luggage? What do you put in it? What are your biggest pain points when you re traveling? This is known as the open- ended interview technique , which involves only open- ended questions They went over to the houses of some people whom they knew and watched them pack! (this is known as the observation technique ) And that s is how we figured out all the things we needed to make our one perfect suitcase. Jen said
Results of Effective Market Research When Jen and Steph introduced their first bag, it had or involved: A USB charger A removable laundry bag An indestructible outer shell 360-degree wheels A tag price of $225 Direct-to-consumer delivery The results were undeniable In the first year, Away sold 55,000 suitcases Within 3 years, Away sold a million pieces!
Techniques for Effective Market Research Technique Technique Technique Technique Description Description Description Description By and large, the most common technique. It is essential for qualitative research By and large, the most common technique. It is essential for qualitative research By and large, the most common technique. It is essential for qualitative research By and large, the most common technique. It is essential for qualitative research Open-ended Interviews Interviews Interviews Interviews Open-ended Open-ended Open-ended Watch target customers in your target industry Watch target customers in your target industry Watch target customers in your target industry Watch target customers in your target industry Observation Observation Observation Observation Do the target customer s work and experience it in full Do the target customer s work and experience it in full Do the target customer s work and experience it in full Do the target customer s work and experience it in full Immersion Immersion Immersion Immersion Apply A/B testing: Divide target customers into two similar groups Perform different ideas/tests on the two groups and observe how they affect behaviors and responses behaviors and responses behaviors and responses behaviors and responses Apply A/B testing: Divide target customers into two similar groups Perform different ideas/tests on the two groups and observe how they affect Perform different ideas/tests on the two groups and observe how they affect Perform different ideas/tests on the two groups and observe how they affect Apply A/B testing: Divide target customers into two similar groups Divide target customers into two similar groups Apply A/B testing: User Tests User Tests User Tests User Tests
Principle 4: Dont Ask, but Show People What they Want Don t ask people exactly what they want because they do not know Do your effective research, it is important! But keep your questions open-ended to figure out the pain points of people Then use your creativity to address these pain points The creative process cannot be outsourced Steve Jobs once said: Some people say, Give the customers what they want. But that s not my approach People don t know what they want until you show it to them Henry Ford once said: If I had asked people what they wanted, they would have said faster horses.
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