How to conduct proper market research for your online marketplace idea

Thorough and well-conducted market research is crucial when starting any business…

… And potential investors usually require you to complete such a task before investing money into your idea. Depending on the sector of your startup, this requires different techniques in order to achieve representative results. Oftentimes, a business will hire a professional to complete this job. However, this article assumes you are currently on a low budget and are looking for low-cost solutions, as you are just starting up. In your early stage, out-of-house market research is usually not only cost-prohibitive but also not necessary. In the following, I will point out the most important aspects you should take into consideration to conduct thorough market research for your online marketplace idea.

Start as soon as possible

First of all, there is no need to wait for the right point in time to start your research. In previous articles, we pointed out the importance of an early start. As soon as you come up with your idea and checked if it fulfills the requirements of a good idea (Check “How to come up with new ideas for online marketplaces”), you can dive into the market research for your online marketplace.

Define the questions you need answers to

The questions you will want to answer vary based on your current situation. Assuming you are trying to first set up your new online marketplace with a Minimum Viable Product (MVP) to then thoroughly validate your idea, the following questions are important to consider:

1- What type of person benefits from your idea and where can you find these people? In other words, this means you are aiming to define your target group.

2- What do people who benefit from your idea expect from your online marketplace? This includes learning about the industry standards and the niche your marketplace will be placed in.

3- Who are my competitors and what are they doing right/wrong?

Answering these questions in efficient ways might sound easier than it is. Surveys, Google searches, calls, and conventions…. The options on how exactly to conduct your market research are endless. And, it’s easy to invest a lot of money into it. Knowing that you are just starting on what is most likely a low budget, I present here the aspects that we at VQ Labs found to be the most valuable.

Collect information online and in personal conversations

Talk to experts at hubs that focus on helping startups.

All over Europe, there are hubs which focus on helping entrepreneurs to get on their feet and successfully start their business. In Germany, these hubs are called “Gründerzentren” or “Innovationszentren”. You can easily find a hub that fits your sector and contacts someone in your area. Generally, these experts are willing to meet for a personal conversation. They can give valuable advice on how to adapt to the market demand and to industry standards. When communicating with these experts, make sure to keep your initial questions in mind. Usually, you can receive important information about your target group as well as their expectations. To receive the best answers, it is better to ask open questions, rather than selling your business idea. Try to learn about your target group’s pain points and focus on them instead of yourself. Here, I strongly suggest this book, from which you can learn more about “customer conversation” in the process of validating your idea.

Use the internet.

Your business will be placed online. Consequently, that’s also where you can find a lot of valuable information to conduct market research for your online marketplace. You probably started your research here already by searching terms related to your idea. To further improve your insights try using the Google Keyword Planner. The tool allows you to find trending keywords and those that might be related to them. This helps to decide if there is any demand for your idea.

Existing platforms such as Craigslist or eBay can give you additional hints concerning categories in which people trade online. To find information about your target group and where to find them, utilize social media channels such as Facebook, Quora or Instagram to collect data. On Facebook, joining groups related to your idea and participating in their discussions reveals information about the market you will be operating in.

Know your competition

It is crucial to know who your competitors are and what they are doing. This will help you to define your advantages in comparison to them and to discover the kind of demand that they cover already. When you searched the web with terms related to your idea, you probably came across important competitors. Them being there doesn’t mean your online marketplace idea has no potential. In contrast, it shows that there is, in fact, valid demand for your idea. From now on, you should always keep an eye on what your competition is doing. Competitors can either be companies that offer the same solution as you do or someone your users could go to instead of your platform to solve their issue.

Competitive Analysis

To analyse these companies effectively, it is often referred to SWOT. Using the aspects strengths, weaknesses, opportunities and threats as a guideline for your research, the analysis allows you to define where exactly you want to place yourself in comparison to your competition. When reading through their website, social media feeds, blog or customer reviews, make sure to always wear your “consumers hat” and identify gaps in their system. What demand can you fill that they don’t attend to?

The following questions guide the market research for your online marketplace concerning the competitive analysis:

1-What characteristics does the target group of their company have?

2-In which geographical area do they operate?

3-Which topics and marketing concepts do they use to be visible to their customers?

4-How do they reach their customers?

5-Do they have any special deals or pricing strategies to grow their market share?

Once you have some information to answer these questions, it will be easier to steer your business in the right direction.

Get to know your target group

Finally, you can start getting to know your target group based on the market research for your online marketplace.

At this point, your web search allowed you to find out if there is a demand for your idea and collect first impressions of your potential target group. Talking to experts helped you to not only learn about the market, but also further increased your understanding of industry standards and the characteristics of your target group. Continuously analysing the competition will steer your idea in the right direction and enable you to define your unique place on the market.

Based on your results, you will most likely have to make changes to your idea and possibly take a new direction. But you have a big advantage. You already know your idea is not only a good one, but also understand how to fit your MVP to your target group and the competition.

Did you start your market research already? We’d be happy to hear about your experiences. And if you find this article helpful, we’d appreciate if you click the “clap” button below.