Market Research For Product Development: Steps With Examples

Most founders follow a flawed approach- 90% think they have a great product idea, develop it, and launch it to the market. Result? Crickets. People dislike their product because there was no market need.

This is why 42% of startups fail – their product solved nobody's problem. The better approach? If you want to get traction and develop a product that 1000 users love, start by talking to them. Understand their pain points, challenges, and unmet needs before building anything.

When you fall in love with solving your users' problems rather than your own ideas, everything changes. You get real feedback that shapes your initial version into something people actually want.

How? Market research helps in understanding customer needs.

In this blog, let's explore the role of market research in new product development, the exact steps to build a perfect product, and examples of companies who've successfully launched products that truly met their customers' needs.

What is Market Research in Product Development? 

Market research for a new product development means doing end-to-end research about consumers’ desires, market needs and evaluating the success of your product in the market.  

But market research is more than that. When it comes to identifying market trends and knowing your customers at the deepest level, market research is an answer for you. 

Market research involves knowing about your ideal customers by gathering information about target demographics and consumers so that the business can market its products/services effectively. 

It's not about what your customers say, it's about figuring out why they want it. Doing market research helps businesses to research market viability, estimate the demand for the product, and identify what features your target customers are looking for.  

Then, you make informed business decisions about the product’s positioning, setting the price of the product, and marketing your product to the target audience. 

Whether you are a startup or a top-notch brand, your ultimate objective is to make your product successful. Research studies suggest that businesses that conduct market research and understand their customer base are 60% more profitable.

Whether you are a startup or a top-notch brand, your ultimate objective is to make your product successful. Research studies suggest that businesses that conduct market research and understand their customer base are 60% more profitable.

Thus, market research is a blessing for your business as it brings your product idea to life. 

With the help of market research, you can fine-tune your product development by gaining various aspects, such as – what price and type of message sticks with them or what marketing channels would most likely work.

3 Examples of market research for product development

Netflix, being the largest streaming service provider in the world, wants to enhance the user experience on its streaming platform. So, they integrated AI in its product to personalize the user experience.

Integration of AI helps their product team to analyze huge amounts of data such as consumer viewing habits, market trends, watch history and then they can improve the product performance.

By understanding user behavior and patterns, they felt the need to provide different series for people based on their preferences.

For instance – if a person prefers watching romantic stuff, then Netflix AI's recommendation engine will show romantic related stuff.

For Netflix, their recommendation engine becomes a great source for researching about target audience needs and their preferences.

Dropbox has made a name in cloud storage solution, and it's now a home to 700 million registered users.

The company identified a major problem in the market – people used to rely on USB drives and used to send back and forth emails to transfer files.

The founders understood that transferring files manually wasted a lot of time and effort, and they thought of launching the product in the market which makes file storage, accessibility and transfer much easier.

Even when their product team was working on the development side, they didn't launch the product early and talked to customers instead for around 18 months. They simply wanted to understand what customers need and then iterate the product accordingly.

Instead of launching a fully-fledged product in the market, they launched an MVP to test their product and get feedback from early adopters.

They use a word-of-mouth approach to get more people involved in feedback phase before product launch. To get more user traction, they told their existing users to refer their products to closed ones. In return, they would get more cloud storage.

Amazon, the most renowned e-commerce company, tracks what customers say about their products, and uses text mining to read a bunch of reviews. This helps their product team to get an idea about how they can improve their product.

They even use recommendation engines in their online store to suggest relevant products based on customer preferences. This makes customers feel more satisfied and personalized with their shopping experience.

Read Also- Outsourced Product Development For Startups

Relationship Between Market Research and Product Development 

Market research for new product development establishes the viability of a product because it provides an overview to businesses about whether the market is open to a product or not, whether there is a need for a product in the market or not. 

Every company wants to launch new products to attract more customers. What if your product doesn’t turn out to be a game-changer? In such a case, you must conduct effective market research to find the right product market fit. 

This is where market research revolutionizes your product development game. So, before launching a product in the market, marketers and researchers analyze whether there is a need for a product in the market or not and what problems it can solve. 

• Doing effective competitor research helps your product development team to co-create marketing documents. It gives a fair idea about what improvements your existing products need etc. 
• Using market research for product development helps you identify the needs and requirements of your target audience. If anything is missed out, it could lead product development on the wrong trajectory, resulting in wastage of time and resources. 

In addition, gut checks are required to ensure that your product development team is going in the right direction and meeting all levels of consumer demand. 

With market research for product development, you get access to qualitative and quantitative data that helps you determine how many people are interested in your product/service, how much they are willing to spend on this product, etc. 

Properly conducted research helps your product development team get valuable insights about your customers’ needs and pain points. 

Lastly, another task of doing market research is to analyze the longevity of a product.

Importance of Market Research in Product Development

Market research in product development is crucial in assessing whether your new product idea is worth it. You can conduct market research in various ways- 

• By keeping a close eye on your competitor products, you can optimize your existing products  
• Dig deeper to read online reviews on your competitor sites and discover what features your customers want. 

Thus, market research means listening to your customers and hoping on market trends.  

You can become a frontrunner in making your product successful when you step outside your organization and ask your target audience about their affordability. 

More importantly, you cannot launch your product by connecting with designers and developers. Your business will become turmoil if you focus less on customer needs and wants and are more inclined towards what you want to deliver. 

So, when done right, market research makes the product shinier and stronger and helps you formulate an effective marketing and sales strategy. As a result, it puts your products in and turns those followers into loyal fans. 

Just talk to them aka your customers, and you’ll get an answer.

Market research is important for product development because of the following reasons-

1. Determines The Need 

Market research for new product development is important to determine whether there is an actual need for the product. Through effective market research, you learn that customers won't need such a product, or there is no demand in the market.

2. Finding Points of Improvement 

By researching similar products/ solutions, you will not only determine the need for a product, but also you will get ways to alter the prototype to suit the target market.

For Instance – By reading competitor reviews, you'll get an idea about what your target audience likes, what they don't like about the product, what things are lacking, and what needs to be improved.

So, market research and product development go hand in hand.

3. Formulate Marketing Strategies 

When you conduct pre-launch market research, you get various insights on how to adapt your product as per your target customers and later on decide how to advertise your product.

By doing market research effectively, you know how to sell your products, what works for your target audience, and what not to do and frame your marketing strategies accordingly.

4 methods of doing market research for product development

There are different ways of conducting research for product development which are as given below-

1. Quantitative market research

This type of market research provides data driven insights into consumer behavior, their preferences and current trends.

When researching for new product ideas, you need to do a little bit of number crunching to see how people show an interest in your product and focus on one parameter (how much or how many).

You can send surveys to the population that represents your target customers. Of course, it involves a large volume of data especially if you send a survey to 1000 respondents and all of them share their responses.

For instance – How many users like your product or how much they're willing to spend. Are they satisfied with your product/service? Such data driven insights help product managers improve product quality.

2. Qualitative market research

It focuses on one metric – why people are interested in products/services. It can be done by conducting focus group interviews where you ask a few participants about a certain topic.

Be specific about questions you ask like what made you switch from product A to product B?

What was the reason behind that – whether there was a significant change in price or was the quality not at par?

How was the customer feeling with product A vs product B?

Here, you understand the behavioral patterns of an individual.

You get in-depth qualitative insights about customers such as their opinions, perceptions, motivations etc.

Once you understand how customers behave and what their needs are, you can develop a product that truly solves their pain points. This way, you develop a final product that's built on customer needs and their insights.

3. Primary research

Primary market research is about doing all the groundwork, which means you're collecting original insights from the target customers. This can be done through surveys (talking to customers on a one-on-one basis) or conducting in-depth interviews.

The purpose behind this is to understand your customer's needs, what they care about, and you start thinking from their perspective.

By collecting unique insights from customers, you understand their situation, their needs and pain points especially when you're about to launch a new product or add new features.

Conducting primary research is a time-consuming process but it's the best way to know what's going on in your consumer's mind.

For doing a comprehensive market research, you need to know 4 things -

1. Who's my target audience?
2. What products/services do customers desire?
3. What are their problems?
4. Where do they reside?
5. How do they behave when they interact with a similar product to yours?

According to Chase McKee WF, Founder & CEO, Rocket Alumni Solutions - Wall of Fame

When I first started Rocket Alumni Solutions, primary research helped me a lot during product development phase. I wanted to know how to align our product with customer needs and preferences.

I keep on asking myself a zillion times - What's something that users struggle with currently?

That's through conducting interviews and interactive feedback sessions. Best part? One conversation with a customer provides us with real insights into product weakness.

For example, early discussions revealed that our initial display templates were too rigid, preventing schools from fully personalizing their Wall of Fame.

Based on this feedback, I developed a more flexible template system, empowering users to create custom backgrounds and layouts.

This adaptation tripled our active user community, as schools felt a sense of ownership over the displays. Our objective was to make the platform feel like their own, and listening to user feedback helped us achieve that.

4. Secondary research

Secondary research plays a vital role in product development. Unlike primary research, it relies on external sources to collect relevant insights about customers.

It can be about doing competitor research, referring to already existing information available on internet such as industry reports, or data shared in newspapers and magazines.

You can find out what your competitors are doing in industry by using competitor tracking tools such as SEMrush, Google trends, answer the public etc.

This way, you get an inside scoop of what customers are thinking about competitor products and then you can create your product development strategy accordingly.

How do we conduct market research for new product development? (6 simple steps to do that)

Every company approaches market research differently. However, when developing a new product, we took inspiration from Eric Ries' The Lean Startup.

This book highlights the importance of defining a vision and testing hypotheses through validated learning.

Here are the six simple steps we followed in conducting market research, using the example of a LegalTech platform called DigiLawyer-

Step 1: Define Vision & Metrics

The foundation of every product development begins with a clear vision. It starts with identifying the problems you aim to solve, formulating the hypotheses you want to test, and defining the success metrics to help you measure progress and validate learning.

For instance, DigiLawyer's vision is "affordable justice for all." Their most crucial metric was to ensure that underprivileged individuals can get affordable legal services on the go.

Step 2: Identify Your Target Audience & Problems

The product research process becomes successful when you know your customers and understand their needs.

To create a product market fit, you must understand your customers' pain points and frustrations, as well as their behavior and decision process.

For instance, Digilawyer focused on individuals who spent a lot of money on legal services to understand the following things-

1. Why are users paying a lot for the legal services?
2. Which part of legal services are seen as expensive or inaccessible?

Step 3: Formulate Hypothesis

Based on your understanding of the market and user problems, create assumptions about what problems exist and how your product might solve them. These hypotheses will guide your research and early development.

For example, Digilawyer's hypothesis was-

If we build AI-powered legal agents trained on specific laws and enable legally vetted online documentation, we can reduce the dependency on expensive lawyers & democratize legal access.

Step 4: Define Validation Criteria

Instead of relying on surveys used in standard market research, you need to define your validation criteria or metrics to determine whether your assumptions are correct.

To test Digilawyer's hypothesis, we looked at measurable outcomes such as -

1. Reduction in legal expenses reported by the user
2. Better adoption of AI-based legal help over traditional services

Step 5: Measure and Learn

The problem with surveys is that they are not action-oriented and cannot be reliably measured or improved upon. A better approach is data-backed market research that helps you continuously learn and iterate.

For example, DigiLawyer implemented behavioral analysis using Posthog to learn directly from users based on how they interacted with the product. These insights guided product iterations and helped validate core assumptions.

Step 6: Competitor Research (Optional)

In addition to the above five steps, many companies also perform competitor research, primarily when the product addresses a well-known problem already being solved by competitors.

Competitor research involves analyzing: -

1. Similar products in the market
2. Pricing strategies
3. Business models
4. Target demographics
5. Unique Selling Propositions (USPs)

For example, DigiLawyer studied other LegalTech platforms to understand their pricing models, go-to-market strategies, and how they positioned themselves.

Benefits of Market Research For Product Development

Here are the benefits of market research for product development- 

1. Minimize Business Risks 

You can reduce the potential business risk once you know your product inside out. As you know, product development is an expensive and time-consuming process. Investing in those products your target audience doesn’t need leads to the failure of your business. 

In such a case, you need to do adequate market research to find out the actual needs of your customers and then come up with the perfect product market fit. 

2. It Helps You in Launching The Right Products 

You can build a successful empire once you do effective market research. Through market research, you know what your customers need, what they want, and when they want. 

3. Facilitates Effective Marketing

With the help of market research, you can formulate marketing strategies that contribute to developing successful products, such as segmenting customers, mapping their needs, etc.  

4. Provides a Competitive Edge

In-depth market research is important for you to leverage new opportunities or tap those market segments which competitors do not yet cover. 

So, researching about the market conditions before creating a product helps you gain a competitive advantage in that niche. 

How BigOhTech can help you with product development?

To launch a product in the market, you need to be clear about who your target audience is and understand their pain points. Meet those people, talk to them and then iterate your product accordingly.

If you've developed a product already, ask yourself whether the product is solving the problem of people or not, if it doesn't, then you've made the WRONG product.

Of course, there's no backward going approach, but you need to ensure that you've developed a product that's a market fit.

Result = positive response Then, develop a fully-fledged product and launch it in market

Result = Users are not satisfied with product

Then, note their preferences, see what experiences they share and what features to include and ignore. And there comes a good starting point for you to build a new product.

Do you need help in converting your product idea into reality? Then, our software developers are here to help you at each stage of product development, from product ideation to testing the product and finding the right product market fit.

We create digital products for startups and businesses that generate value for customers.