market research for idea validation
When validating a new business idea, it’s crucial to analyze the market. How exactly? Read this article to learn the market research method we use with new concepts.


Daniella Varga

The Market Research Process to Help You Validate Your Idea

In my previous article, I shared the customer validation process we use to map out user needs. Now let’s move on to the next step of the idea validation process: market research. During market research, your main focus will be to examine the competitive landscape and find the communication channels which you can use to reach your target audience.

Why is market research important during validation?

Market research is essential when you try to validate an idea. It gives you feedback and insight on the market you are trying to enter.

Keep in mind that this is not a typical market research which you do as part of developing your business strategy. Your goal here is to check competitors and look for trends in the messages, keywords, channels, and marketing tactics that they use. 

When I do market research for a new idea, I usually focus on three areas: 

  • Competitor analysis
  • Communication channel mix
  • Keyword research

Now let’s dive into each category.

Competitor analysis

I often hear idea owners say that they don’t have competitors, because no one else is doing the same thing as them. However, that’s rarely true. In a broad sense, every company that serves the needs of your potential target group is your competitor. To be a bit more precise,  you should consider your competition to be whatever solution your target audience currently uses to solve the problem you are trying to solve.

Another way to define is to separate direct and indirect competitors. Direct competitors serve the same target group as you with a product or service similar to yours.

Indirect competitors serve the same target group as you with a different service or product. Or they serve another target group with a product or service similar to yours.

Why is competitor analysis important?

Simply knowing who your competitors are and what they offer is not enough. Knowing as much as you can will help you to choose your future goals, channels, and marketing tactics. 

Running a competitor analysis will:

  • Indicate the intensity of your competition
  • Help identify areas where you can stand out

How do you identify your competitors?

Now let’s see what methods you can use to identify your competitors. 

Use the customer validation data

In my experience, the best place to identify competitors is by asking your target audience. Since the first step of the idea validation process is customer validation, you should already have this data. 

Go through your interview material and survey results and look for the solutions, brands, and tools your target audience mentioned. Whatever they currently use to solve their problems or reach their goals will be your competition.

Conduct a Google search 

This method will help us identify competitors who are strong in SEO. This is mainly manual, but usually worth the time. Let’s walk through the steps:

  1. Define keywords that are related to your idea and industry.
  2. Research keywords in Google and collect the competitors it shows. (It’s usually enough to go through the first 2-3 pages.)
  3. Check if these are really competitors.

Use online tools

If you identified one or two competitors with the previous methods, you can use online tools to find other similar sites. However, these tools only work with high-traffic websites, so if your competitors’ website traffic is low, they won’t give you further options. 

The product I usually use is SimilarWeb. Just add the website of your competitor in the upper left corner then go to the ‘Competitors & Similar Sites’ section. If your competitor’s traffic is high enough, you will find a list of similar sites. 

use similar to find competitorsduring market research

There are other tools like SimilarWeb that are worth a try to identify competitors:

If the competitor’s traffic is low, you most likely won’t get suggestions from these tools. In this case, you have to rely even more on user data and Google search results.

It’s also important to note that these tools provide estimated data. Without access to your competitors’ analytics (which you probably don’t have), you won’t know the real numbers. This is perfectly okay. To understand a competitor and their strategy you only need approximate numbers. Knowing if and how much they rely on search, paid, or social channels is already valuable without knowing the exact traffic they are getting through them.

What data should you compare?

The answer to this is quite simple: whatever is important to you. With today’s software and technology, you have the ability to know more about your competition than ever before.

Usually when I analyze competitors I go by the following categories:

  • Background information: Company name, Website, Country, Services/Products/Features, Team size, Mobile Apps
  • Marketing strategy and communication: Unique Value Proposition, marketing messages, benefits, communication channels, active social media channels, blog, etc.
  • Traffic overview: Website traffic, traffic by country, traffic by source, traffic from social media channels
  • Organic traffic: Monthly organic traffic, number of Referring domains, TOP10 referring domains, most popular pages, TOP10 keywords, backlink mix, domain rating, URL rating

You can check out the competitor analysis template I usually use here: Competitor Analysis Template

These competitor metrics can be used as benchmarks for your own business. They can help you set data-driven business goals.

To collect this data you need to use a mix of desktop research and online tools. For each category, I use the following tools or methods:

Out of these, only Ahrefs doesn’t have a free version; with the other tools, you’ll be just fine.

How many competitors should you compare?

This also comes down to how much time you have for it. The general answer is as many as possible to help you map out the competition and the market. The more practical answer is to analyze a minimum of 3 to 5 of your competitors. That should give you enough insight to move forward.

How to use the results?

After you’re done with the analysis, don’t just pat yourself on the back and close the file. Take a close look at your findings. Look for similarities in communication channels, patterns in messaging, and room for improvement.

For example: If you see that all of your competitors use LinkedIn but nobody uses Twitter, that can indicate that Twitter is not an efficient channel for reaching customers. Or if all of your competitors are strong in search traffic, that can mean that SEO can be a good marketing tactic although the competition will probably be high.

Write down these findings and insights as the summary of your competitor analysis, and you can use it in the future when developing your marketing strategy.

Channel mix research

Channel mix refers to the set of marketing channels you use to promote your business to your target audience. Your goal at this step is to identify the marketing channels that will be the most effective in reaching your target audience.

How do you define marketing channels?

Now let’s see how you can detect the potential marketing channels. I usually use a combination of these methods:

Use customer validation data

The result of your user research is the best way to go. No other channel will work better than the ones that your potential users say they’re using. So make sure to include questions about where your users consume content, what websites they regularly visit, what social media channels they’re using, etc.

Use online tools

Similarweb can be your sidekick with scouting marketing channels too. Choose a competitor and add its website to SimilarWeb. You can learn information about various channels this way.

  • Scroll to “Traffic Sources”. Here you will see which are the main traffic sources on desktop for the competitor. 
    • Direct: Visitors that type in the URL or a use bookmark to visit the page
    • Referral: Visitors coming from referral pages due to off-page SEO activity
    • Search: Visitors coming from organic search 
    • Social: Visitors coming from social channels
    • Mail: Visitors coming from email marketing
    • Display: Visitors from paid and display ads

channel mix research by similarweb traffic sources

  • Scroll to “Social”. Here you will see which social networks are sending traffic to the website. This will help you identify the social channels that work best for your competitors. 

Channel mix, social traffic sources

  • Scroll to “Display Advertising”. Here you will see where your competitor is advertising itself, which can give you a good idea of what ad platform you should use.

channel mix research, display ads

Desktop research

If your competitors’ website traffic is low, SimilarWeb won’t help you with identifying channels. In this case, you can use good, old-fashioned desktop research:

  • Research forums related to your idea
  • See where people ask questions about topics related to your idea
  • Research social media channels and groups, and look for discussions related to your business

Marketing channel mix vs. idea validation channel mix

During these steps, you’ll most likely identify various types of channels. But we need to make a distinction between marketing channels and channels for validation.

Channels for validation won’t necessarily be the same ones that you’ll use for marketing reasons, but they can indicate what will work in the future. To be able to use a marketing channel for idea validation, it should meet two requirements:

  • It has to provide fast response, meaning you need the feedback from the users within a few days or weeks.
  • It has to include a high number from your target audience so that your sample user group is large enough.

Based on my previous experience, the channels that comply with these terms are:

  • Paid Ads: Facebook, Instagram, LinkedIn, Snapchat, Quora, Adwords, Bing Ads
  • Forums: Reddit, Quora, domain-specific forums
  • Social Groups: Facebook, LinkedIn, Slack groups

Keyword research

We’ve arrived at the last step of market research: the keyword analysis. When I say keyword research, it’s not the usual SEO-purposed research. The goal of this step is to get a grasp of the wording the target audience uses when they talk about your solution. 

Apart from that, keyword research at the idea stage helps with:

  • Indicating the presence and rate of market need: the higher the search volume, the bigger the market need is
  • Drafting copies: the right word usage can directly affect the success of your emails, ads, and landing page conversion
  • Forecasting the intensity of your competition: the higher the CPC, the fiercer the competition

How to define your keywords?

Use the customer validation data

If you couldn’t tell by now, your customer validation data is a goldmine. If you do it right, you basically have the answer to all of the above-mentioned steps. So once again, dig into your research and search frequent wordings and phrases that are connected to your idea. Collect these phrases in a doc to have a list of keywords you can use later in your copies.

Research forums and social media

Forums, Q&A sites, and social media groups can be a great source for finding the typical words that your target audience uses. Head to a platform, insert keywords related to your idea, and check the questions and discussion about them. Then collect the phrases in your keywords doc. 

Such platforms can be Reddit, Quora, Hackernews, ProductHunt, or domain-specific forums. With social media, try to find related groups on LinkedIn and Facebook, and check how people talk about the topic. This way is quite time-consuming, but you can find hidden gems if you dig deep.

Analyze your competitors

You can also check what keywords and phrases your competitors are using. If you see words pop up often then it’s a good chance that if you use those users will understand your offer. 

Conduct Google research

If none of the above worked or you just feel you need more keywords, you can still do Google research. Go to Google and research the keywords that you think are related to your idea. Then scan through the content on the first few pages:

  • Check the first 10-20 hits: is the content related to your idea? Is the search intent related to your idea?
  • Rate the keywords based on relevance, and focus on the ones that are the most relevant

How to use the collected keywords?

Now that you have a list of keywords, what should you do with them? You can go in several directions:

  • Use keywords when crafting your marketing messages: Include the keywords in your value proposition, your landing page copy, and your ads and emails. This way your users will see familiar phrases and will understand your offer easier.
  • Analyze the keywords from an SEO point of view: check search volume, competition, and other metrics. I usually use the Keyword Planner (you need a free Adwords account to use that) or any other SEO tool like SemRush.

Next Steps

This concludes the market research phase of the idea validation process. This step helps you understand your competition better, gives you guidance on the channels you should use, and helps you clarify the language your target audience is using to describe your idea. In the next and final part of this blog series, I will show you how to put your research in practice and test your value proposition on the market with real users. If you have any questions or thoughts to share, leave a comment or drop us a line.

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