Start-ups and secondary research; a mis(sed)understanding

After you have identified a problem worth solving (that’s right, after you have confirmed problem / solution fit through a series of validated learning cycles), you need to extrapolate the market potential of your idea by using secondary research. Sometimes funders ask for the market potential of your idea before you achieve either problem / solution fit or product / market fit, so give it to them with this caveat; don’t believe your own magical thinking, because that’s all it is.

However, here are 4 things you do need to do (and not do) when sourcing and utilizing secondary research information.

Know the difference: primary vs. secondary market research

When you source market data from already existing sources, that’s secondary research. If you conduct a survey of your customers, that’s primary research. If you quote survey findings from another source, that’s secondary research. If you use numbers from Statistics Canada or the US Bureau of Statistics, you are using secondary research. Online focus groups of your customers? Primary research. UX testing? Primary research. You need to use both types of market research to achieve a successful product launch and business. Seriously.

How to extrapolate market share

Secondary research is used successfully to extrapolate future market potential once you have conducted a primary market research study. Here’s an example. If you know 21% of small and medium sized businesses in Canada use CRMs (a finding you located from a legitimate secondary research source) and you conduct a survey of 200 businesses in Canada and pitch them your mafia offer and 41% say “yes, I will buy it” then you use both primary research numbers and the secondary research finding to extrapolate the potential market share of your offer in Canada. But using one without the other won’t tell you much. You need both.

Get it for free

There are many free sources of secondary research — US Census and Statistics Canada being the MOST legitimate of any. These two sources alone can give you immense amounts of legitimate data. BUT you need to know what you want before you go digging because it can be overwhelming. When in doubt, ask specifically for what you want. If it doesn’t exist, it doesn’t exist.

There are many companies that specialize in conducting market research for specific industries and sectors. These “sector experts” make money by conducting survey research with businesses in their sector and generating specific “specialized sector reports”. These reports often cost $3 to $5K. But the great news is that you don’t need such in-depth specialized market research. In fact, what you likely need is one or two big numbers. You can frequently glean these high-level market numbers from published magazine articles quoting big numbers for that sector or even from the syllabus or preview of the research report itself. Failing that, call the market research company who authors the report, explain you are a startup, and you need to know one number only. Ask for it. I have been more successful than not in asking for one statistic from these companies. They understand you can’t buy it for $5K and that you aren’t their customer right now. Ask, ask, ask.

Legitimate versus big talkers

We live in a world of influencers and big talkers — people making big statements and even bigger conjectures that end up sounding like fact. Media interviews end up in articles and quotes become statistics. So, locate the source of every secondary research number you intend to use to extrapolate market share or any other key metric. Sadly, you will likely find a number quoted in an industry article that doesn’t have a source or the number is derived from 10 interviews with industry experts. That’s not fact. That’s opinion. Don’t use it. Always look for the methodology section of any research report. See how many surveys were undertaken, where and how. And learn about margin of error (think Stats 101). If the survey was done online, and respondents were paid to respond, then it is not a random sample and likely highly unreliable. If the research is qualitative (a series of expert interviews), then use the quotations from the research to punctuate something you are communicating, but don’t glean any statistics from it.

Secondary research is an important tool for your business; make every effort to understand it, to embrace it, and use it to your advantage.After you have identified a problem worth solving (that’s right, after you have confirmed problem / solution fit through a series of validated learning cycles), you need to extrapolate the market potential of your idea by using secondary research. Sometimes funders ask for the market potential of your idea before you achieve either problem / solution fit or product / market fit, so give it to them with this caveat; don’t believe your own magical thinking, because that’s all it is.

However, here are 4 things you do need to do (and not do) when sourcing and utilizing secondary research information.

Know the difference: primary vs. secondary market research

When you source market data from already existing sources, that’s secondary research. If you conduct a survey of your customers, that’s primary research. If you quote survey findings from another source, that’s secondary research. If you use numbers from Statistics Canada or the US Bureau of Statistics, you are using secondary research. Online focus groups of your customers? Primary research. UX testing? Primary research. You need to use both types of market research to achieve a successful product launch and business. Seriously.

How to extrapolate market share

Secondary research is used successfully to extrapolate future market potential once you have conducted a primary market research study. Here’s an example. If you know 21% of small and medium sized businesses in Canada use CRMs (a finding you located from a legitimate secondary research source) and you conduct a survey of 200 businesses in Canada and pitch them your mafia offer and 41% say “yes, I will buy it” then you use both primary research numbers and the secondary research finding to extrapolate the potential market share of your offer in Canada. But using one without the other won’t tell you much. You need both.

Get it for free

There are many free sources of secondary research — US Census and Statistics Canada being the MOST legitimate of any. These two sources alone can give you immense amounts of legitimate data. BUT you need to know what you want before you go digging because it can be overwhelming. When in doubt, ask specifically for what you want. If it doesn’t exist, it doesn’t exist.

There are many companies that specialize in conducting market research for specific industries and sectors. These “sector experts” make money by conducting survey research with businesses in their sector and generating specific “specialized sector reports”. These reports often cost $3 to $5K. But the great news is that you don’t need such in-depth specialized market research. In fact, what you likely need is one or two big numbers. You can frequently glean these high-level market numbers from published magazine articles quoting big numbers for that sector or even from the syllabus or preview of the research report itself. Failing that, call the market research company who authors the report, explain you are a startup, and you need to know one number only. Ask for it. I have been more successful than not in asking for one statistic from these companies. They understand you can’t buy it for $5K and that you aren’t their customer right now. Ask, ask, ask.

Legitimate versus big talkers

We live in a world of influencers and big talkers — people making big statements and even bigger conjectures that end up sounding like fact. Media interviews end up in articles and quotes become statistics. So, locate the source of every secondary research number you intend to use to extrapolate market share or any other key metric. Sadly, you will likely find a number quoted in an industry article that doesn’t have a source or the number is derived from 10 interviews with industry experts. That’s not fact. That’s opinion. Don’t use it. Always look for the methodology section of any research report. See how many surveys were undertaken, where and how. And learn about margin of error (think Stats 101). If the survey was done online, and respondents were paid to respond, then it is not a random sample and likely highly unreliable. If the research is qualitative (a series of expert interviews), then use the quotations from the research to punctuate something you are communicating, but don’t glean any statistics from it.

Secondary research is an important tool for your business; make every effort to understand it, to embrace it, and use it to your advantage.

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Entrepreneur, Leanstack mentor, new product development professional and market research analyst who builds products and services that someone wants to buy.

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Katherine Devine

Katherine Devine

Entrepreneur, Leanstack mentor, new product development professional and market research analyst who builds products and services that someone wants to buy.

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