Breaking news: running a startup is hard work. Long hours spent planning and formulating, working with co-founders and vendors, learning about finances and fulfillment, and much more. If you’re an entrepreneur, you already know this. And while I’m hesitant to add something to your epic to-do list, you also need to be thinking about research.
As you navigate the startup world, you’re going to have questions. Some can be answered by mentors or Google and other questions will rely on your entrepreneurial instincts, but many will require research. Doing the work to understand your market, your customers, and your product positioning is essential to getting funded and scaling successfully.
This is especially true for startups in the meat and dairy alternative space, where the market is rapidly expanding and evolving. Fortunately, research for startups can be done without investing huge amounts of time and money, and the return on that investment can be massive. When you need some help, Cultivate Insights and experts at places like GFI are here to help you succeed.
This blog provides an overview of consumer and market research for startups, with tips and examples for young companies involved in creating plant-based, cell-based, and cruelty-free products and services. It begins with an overview of types of research and then describes some common research usage scenarios. If you spend a few minutes reading, you’ll be better prepared to use research to take your new business to new heights.
Research Types and Uses
You’ve probably heard of quantitative and qualitative research. They are different without being mutually exclusive and the most valuable projects usually employ a mix of both.
Generally speaking, qualitative research involves fewer participants and collecting their open-ended answers (or observational data), and then analyzing the results for any overarching themes. A qualitative-focused approach often provides rich information and helps uncover new insights or unforeseen problems, but the results are not always easily understood.
Examples of qualitative research include in-depth interviews, focus groups, and many observational studies. Some forms of qualitative research can be relatively straightforward for startups to conduct themselves, but designing good questions and making sense of the results usually requires having some relevant expertise.
In contrast, quantitative research generally involves more participants answering relatively specific, closed-end questions. This results in structured data that you can summarize numerically, making it easier to interpret. You can also analyze this data for significance, which lends confidence to the results that can be especially useful for big decisions.
Examples of quantitative research include simple surveys, more complicated experiments, and randomized controlled trials. Many startups can and should do their own surveys, for instance to get customer feedback and gauge satisfaction. But more complicated quantitative methods require expertise in survey design, implementation, and analysis.
The most valuable projects often employ both qualitative and quantitative research. For example, if you’re designing packaging for a new product, you may want to start with a larger set of prototypes and use qualitative research to understand how people perceive and react to them. You could then use that feedback to choose and refine 3-4 prototypes and run a quantitative experiment with your target customers to see which packaging results in more purchase interest.
Research Trade-offs and Investment
Many startups choose to forego doing consumer or market research, mainly due to limited budget. However, they also may not know how research can help them or have the expertise to implement research projects. These are good reasons and it’s certainly understandable that startups have to invest in research selectively. But for many young companies, that investment might actually be what makes or breaks them.
For both startups and established companies, the difference between success and stagnation can come down to a few percentage points. Slightly better packaging, improved marketing to Millennials, or marginally better sell-through at Whole Foods. These tiny advantages are what help a startup compete against others and make it through the lean months (or years). And research is the key to finding and taking advantage of those small differences.
Like operating a startup on a small budget, doing research involves priorities and tradeoffs. Most people reading this blog have probably seen some version of the graphic below. It was originally used to describe technology development, but it also applies to research projects. The six-step process we describe in the next section includes finding the right balance between low cost, high quality, and rapid results. You may want all three for your research project, but in most cases that won’t be possible.
Let’s take a look at each of the three factors (time, cost, quality) and think about how they apply to research for startups, specifically.
Time: In the alternative meat and dairy startup world, things move quickly. When needed, there are certainly opportunities to conduct high-quality research quickly (e.g., in less than a couple weeks), but it often comes at a higher cost and may be limited to simple research questions. At Cultivate Insights, we advise startups not to rush their research projects because ill-conceived goals or a poor design choice can derail the rest of the study. For most one-off quantitative and qualitative projects, expect a timeline of 2-4 months from design to results.
Cost: The cost of research obviously varies a lot by project, but we find it useful for startup companies to have some ballpark estimates. A nationally representative survey of 1,000 people with basic descriptive statistics will likely cost about $7,000 to $8,000 using an external panel company like Ipsos or Nielsen. The same study using Positly or mTurk would cost $4,000 to $5,000, but representativeness might be compromised. Costs for experiments or discrete choice studies vary widely, but start at around $10,000 to $15,000.
Quality: It is challenging for companies of all size to gauge how much to trade off quality for cost and speed, especially for people who are unfamiliar with research. This is where many startups falter because they have neither the budget to outsource research nor the expertise to do it in-house. It may be possible to undertake some research yourself (see examples below), but if you don’t have the right knowledge (or time to learn) and you are undertaking a complicated study, you would be well-advised to get outside help.
In the end, your company’s investment in research should be in-line with the importance of the answers you need. Make-or-break business decisions that depend on understanding consumers or your market require research. This is just as true for cash-strapped startups as it is for Fortune 500 companies. If you’re at this stage, then investing in research is probably the smartest thing you can do and should be your first priority.
So what is “make-or-break?” It differs for every startup, of course, but think about how much the results might influence your business decisions and impact your bottom line. If the difference is nominal, skip the research this time. If the difference is expected to be more than nominal but not huge, maybe do the project yourself to save funds. But if it’s a big decision that will impact your business substantially, research is worth the investment now.
6-Step Research Process
Whether you’re using qualitative or quantitative methods, or a mix of the two, there is a general research process that we suggest companies follow. The six steps shown and described below will help you navigate the research process without missing anything too important. Of course, this is just a framework; it should be adapted as warranted and doesn’t need to be followed for every research project.
1. Like all things in life and business, step one is to identify your goals. You will need to clearly define your research objectives and be as specific as possible. For instance, instead of asking, “What is the best name for my product?” it would be better to ask, “Does Name A or Name B lead to more purchase interest among my target customers.” Having clear goals makes all of the remaining steps of the research process easier.
2. For many research projects, step two often takes the longest because nailing down the research design is a critical phase. This is where you choose your mix of quantitative and qualitative research, think through how many participants you will need, and come up with your specific approach to both collecting and analyzing the data. For simple research questions, your startup may be able to do this with in-house skills, but for complicated projects you may need help to conduct power analyses, run experiments, analyze results, etc.
3. The third step is to create your research instruments based on the design from step two. For qualitative research this might include a discussion or observation guide and a coding scheme for analyzing themes from the data. For quantitative research, this usually involves designing one or more questionnaires and experiments. This is another area where outside help may be needed if your design calls for complicated (or sensitive) research.
4. In step four, you collect your data. This is the obviously essential phase where you make your observations, ask your questions, and run your experiments. Data collection involves its own series of steps that vary substantially by research method and can become quite complicated. For this reason, many startups outsource the data collection phase even if they handle all other phases in-house, especially for quantitative studies.
5. Once you’ve collected your data, the fifth step is to clean and organize the data and conduct your analyses. For qualitative research, this often involves coding answers to identify themes or compiling verbatim comments. For quantitative research, this involves summary statistics and tests for significance, bias, etc. In both cases, the analysis may be iterative as you uncover interesting results and then revisit the data.
6. The sixth and last step is to present the results to stakeholders and decision-makers and then to take actions based on the study’s findings. Research must never be gratuitous… it should always be done with clear goals and in support of a specific action or decision. The presentation itself can take many forms — a slide deck; a PDF; an oral overview, etc. — but the content should be focused on how research affects business decisions.
Market Sizing Research
Now we get to the really fun stuff! In this section and those that follow, we’ll explore some research usage scenarios tailored to businesses selling meat and dairy alternatives. The scenarios can apply to companies both small and large, but our main focus for this blog is on startups and we describe low-cost or do-it-yourself options where possible.
First up: sizing your market. As an entrepreneur, you’ve undoubtedly given a lot of thought to market size, whether measured in dollars you might capture or consumers you might reach. In some cases, you can find this information through third parties like GFI, but you will probably need to take it further, both for your own planning and to satisfy potential investors.
Let’s briefly look at four ways to measure market size: industry estimates; internal data; consumer surveys; and retail scanner data.
Industry Estimates from Experts
A solid way to size a market is to start with macro-level industry data provided by experts and then narrow your way down to the category or space that interests you. This works especially well for broad categories like seafood or salad dressing because those market sizes are often made public. For instance, an Allied Market Research report says the seafood industry will be valued at $155 billion by 2023 and an IBISWorld study says the market for salad dressing (and mayonnaise) will be $3.3 billion in 2020.
If available for your specific market, an external report typically costs between $2,000 and $10,000. But this data is usually too general for most startups. For more detailed and/or segmented estimates of market size (for sub-categories like cell-based prawns or plant-based caesar dressing), you will probably need to provide your own estimates. What percent of that seafood market is likely to go plant-based in the next few years and how much of that can your vegan prawns really capture?
With this approach, you’ll need to use some combination of external data and your best guesses to find the answer for your specific market.
Internal Sales Data
Another approach to sizing your market involves using your internal data and projections to estimate market potential. For example, you could use your average revenue per unit and the total number of potential customers you could reach if your company had unlimited capacity. The latter might be estimated using actual sell-through data for different customer segments. Multiply the two figures and the result is your market size (“total addressable market”). All of this is tricky to do well, but if your assumptions are backed up with reliable data, then this approach can be a reasonable method of estimating your company’s potential market size. Otherwise it can just seem like a bunch of wild guesses.
For startups still in the exploratory or pre-revenue stages (or larger businesses entering new markets), your actual revenue per unit and your sell-through rates are unknown. However, you can fill in these blanks with surveys of potential customers to gauge how often people purchase a product, how much they typically spend, and so on. You can use those and other results from surveys to estimate your specific market size.
This can be a useful approach, especially for niche markets or when comparing specific product categories. This is the approach we used in the Cultivate Insights report, which covers eight plant-based product categories and 15 leading brands. But this method is also limited in some important ways, notably the reliance on self-reported purchase data, which isn’t always accurate. For this reason, it often requires some expertise to reliably interpret survey results about consumer behavior, willingness to pay, and other factors.
Retail Scanner Data
Perhaps the “gold standard” of sizing a market is to collect retail scanner data for your industry. These figures typically provide the most accurate market size estimates, but they’re also out of reach for many companies, especially startups. The data are provided by very few companies (e.g., Nielsen, SPINS) and are usually very expensive. Retail scanner data are reliable, but may not capture the full market for all products and some channels like natural foods and big box retailers may require making estimates.
Fortunately, startups in the plant-based industry don’t have to reinvent this particular wheel. The Good Food Institute and the Plant Based Foods Association now work with SPINS to produce annual market size estimates for plant-based foods and many subcategories. They estimate total sales of about $5.0 billion in 2019, which represents 11% growth over 2018 ($4.5 billion). They also provide specific estimates and growth rates for categories like (plant-based) meat, milk, yogurt, butter, condiments, and eggs.
Your startup won’t go very far without customers. To scale successfully, you need to figure out which consumers are most interested in your product or service, how often they’ll buy it, what they will pay, and how you can reach them. You can use consumer research to identify potentially fruitful target markets and learn about their attitudes, behaviors, and demographics. First we’ll explore general consumer research and then we’ll look at examples that are specific to brand and product research.
The simplest form of consumer research, a descriptive survey will give you topline results about the attitudes, behavior, demographics, and psychographics of an audience. For instance, it can tell you what proportion of Millennials say they’re interested in plant-based eggs or, alternatively, what proportion of egg buyers are Millennials. These surveys are very useful tools for startups and any company looking to better understand consumers.
How should you use descriptive surveys? First off, if your startup has launched, then we encourage you to get feedback from existing customers regularly. Integrate getting customer feedback into your process, including a way to harness and put that feedback into action. Your current customers may not represent your future customers, but you can still gain important insights to shape your marketing and product innovation.
Most startups will want to use research to identify target audiences and new customers, so let’s look at an example. Let’s say you’re building a plant-based food company but you’re not sure of your specific product. You could start by conducting a consumer survey to gauge relative interest in a select number of products that you’re considering. Let’s say, for instance, that you find there is especially strong interest in plant-based meal kits.
You could then conduct a follow-up survey and filter respondents to include only those people who are interested in meal kits, specifically. This survey would delve into things like the characteristics of this particular audience. You might also pair this with qualitative research for even deeper insights about meal kit buyers or observational research on how they prepare the kits at home. Using this approach, startup companies can identify their audiences and figure out what messages and methods will best reach them.
Descriptive surveys may be basic, but the results can be a revelation for many startups.
If you’ve studied marketing, you may have heard of STP — segmentation, targeting, and positioning. When it comes to marketing, segmentation is step one. This allows you to go from a generic, mass marketing approach to a more targeted approach that is tailored to the segments that your startup cares about the most. For startups with limited marketing resources, this is an essential approach to narrow your focus.
Segmentation studies take descriptive surveys to the next level by providing comparative breakdowns of characteristics for different audiences. A segmentation study generally includes a broad spectrum of consumers and uses a blend of art and science to identify high-potential clusters — or segments — of consumers. It is one of the most common and useful types of quantitative consumer research, but it can be challenging.
As shown in the image above, segments can be based on behavior, product usage, satisfaction, interest areas, or other factors. The key is to figure out the types of segments that are most meaningful to your company and that are also practical to reach in the marketplace. Some segments will be obvious and easy to analyze, like those for age, income level, or geography. In other cases, you will need a skilled analyst to cluster respondents based on common characteristics and identify previously unknown segments.
For instance, using our fictional plant-based meal kit startup, a segmentation study could prove very useful. Since everyone is focused on Millennials these days, the study might simply verify that they are interested in meal kits. But it could also uncover relatively “hidden” segments, like single parents wanting to spend more time with adolescent children, or Boomers in retirement communities sharing healthy meal kits with neighbors.
To reveal these insights, segmentation studies often require larger sample sizes to have sufficient respondents for each key segment. While descriptive surveys may have as few as 300 people, most segmentation studies have more than 1,000 respondents. This is because you want at least 200-300 people per segment to have confidence in the results. Of course, this means that segmentation studies can be expensive, but you get a trove of useful data.
Descriptive surveys and segmentations studies will tell you “what” an audience looks like and “how” segments differ from each other. But they’re limited in their ability to tell you “why” people respond the way they do. This is where experiments come in, allowing researchers to determine cause and effect by seeing how responses change when variables are changed. It’s a valuable approach for comparing a small number of specific options.
For example, let’s say you’re getting ready to market your plant-based meal kit and you want to refine your message. You could create three different messages focused on healthfulness, convenience, and meal-sharing. You might also have a “control” message that includes all three. If you keep everything else constant, the results of the experiment will tell you which messages result in more purchase interest among people in your target audiences.
Most people understand experiments on an intuitive level, but they can be difficult to implement correctly. For this reason, most startups will not be able to run experiments themselves unless they have the skills in-house. If you need to know precisely how changing your approach affects customers, however, experiments are clearly the best option and it may be worth looking for outside support for your startup’s next experiment.
Although it’s another variety of consumer research, brand-related studies deserve separate mention. Many startups wrestle with branding issues early and often, and strong branding can be the difference between success or failure at retail. Consumer insights are important for all stages of brand development and rollout. You can use research to develop your new brand, to gauge awareness and usage, and to track your brand versus competitors.
For brand development, using research typically means getting potential customer feedback on your name, logo, key messages, and maybe your elevator pitch. In the early stages, Cultivate Insights recommends a heavy dose of qualitative research to identify the most important brand traits and get feedback on a first round of brand options. Qualitative research is especially useful for identifying potential red flags that you might not see yourself.
Once your startup’s brand becomes public, it can be very useful to know the awareness, usage, and perceptions of your brand. This might include things like Net Promoter Score, a measure of how much people would recommend your brand to others. The graphic below is an example of the kinds of information a competitive branding study would provide. Once your brand is more established, consider investing in brand tracking studies to evaluate those same factors over time and relative to your key competitors.
One option for startups on a budget is to examine research on brands for the leading companies in your space or your competitors. The exclusive Cultivate Insights report published a few months ago provides perceptions of 15 leading plant-based meat, dairy, and cheese brands and how they compare when it comes to perceptions of taste, availability, cost, and packaging, as well as Net Promoter Score.
Lastly, let’s take a look at product-specific consumer research. Whether your startup is currently focused on product innovation and development, testing specific products or formulas, or determining your packaging or marketing materials, research can help. In fact, research to get feedback from current and potential customers is arguably more important for product (and brand) research than it is for other areas.
How can you use research for product innovation and development? We’ve already touched on some of these methods previously. For instance, consumer surveys are useful to explore the relative interest for product categories and potential new directions for product innovation. Similar to brand development research, though, it is often a good idea to first get some qualitative data for product development as well.
For example, a solid product innovation study might involve starting with qualitative research with your startup’s existing customers (and maybe distributors) to generate ideas. This could be followed by a quantitative survey to validate the best of those ideas and gauge interest among your target audience and potential customers. Your young company can then repeat this cycle, if needed, to continue narrowing your focus.
One particular method worth mentioning for product development is a conjoint or discrete choice study. These types of surveys are complex to implement and analyze, but can yield wonderful insights about consumer preferences. You might use these to evaluate different price points with varying product features. After presenting respondents with a variety of different price-feature combinations, you can determine which combinations perform best and which features are most important to consumers.
When you have an actual product in hand, whether it’s a prototype or has been on the market for years, research can yield valuable insights. The charts below are from a Food System Innovations study where they tested a variety of alternative beef and chicken products and collected consumer feedback. Getting this kind of feedback on how your product rates is actionable information for your product development team, especially when paired with information about your competitors.
Of course, if your startup is focused on consumer goods, packaging is hugely important. Similar to brand and product development, packaging is an area that lends itself to research. For example, you can use qualitative research to help identify a discrete number of packaging options to test quantitatively and pick your winner. Ideally, if resources permit, you would use an experimental design to show which packaging option leads to more purchase intent.
Go Forth, Do Great Research
That’s a wrap for Research 101 for Startups, but we have a few parting thoughts. Obviously, there is much more to consumer and market research than we have covered in this blog, but hopefully you now have a better understanding of the tools available and how they can benefit your young company. Wherever you start, we urge you to start somewhere, because research is essential to maximize your startup’s potential.
Research has many different uses and benefits and an important role to play throughout the company and product lifecycle. Pretty much all business decisions would benefit from original research, but that’s impractical and you need to be selective about the research you undertake. You also need to pick and choose when you will do research on your own or whether your business decision warrants getting some expert help.
As part of a startup, your world is already complicated. If you need help navigating research priorities or managing your next research project, contact Cultivate Insights and we’ll either help you ourselves or point you in the right direction. We are a mission-driven consultancy that wants to help your young company disrupt the food system.