Could market research help high-tech businesses get ahead in the recession?

Absolutely, argues Marketwise Strategies managing director Jacquie Potts.

FOR technology businesses, the need to win investment can dominate the months (and even years) leading up to market entry.

That can mean that the business planning phase focuses on generating the kind of statistics and projected accounts to make investors sit up and take notice.

Unfortunately, it can also mean that not enough attention is paid to the real nuts and bolts issues, such as how warm is the market to the benefits of this product? And what possible barriers exist to successful market penetration?.

Thats why most marketing-savvy investors insist on detailed proof of concept market research, at the earliest stages of product development and then more research before market entry.

After the University of Sunderland came up with the idea for a groundbreaking new software tool to tackle financial fraud, it invested in rigorous proof of concept research.

Researchers there are working on smart computer software that they believe will be able to detect insider trading within the stock exchange.

Called CASSANDRA (Computerised Analysis of Stocks and Shares for Novelty Detection of Radical Activities), the project was awarded 90,000 by Northstar Equity Investors to investigate the feasibility of combining Artificial Intelligence technologies with analysis of news stories to track suspicious share dealing.

The University used a proportion of that funding to buy-in independent market research. Entrepreneurs, on the other hand, can sometimes be reluctant to have their ideas properly researched, as there’s always the risk it will throw up answers they don’t want to hear.

Research, however, is all about minimising risk. In this case, the risk that the entrepreneur’s time, and the investors’ money, will be squandered.

Effective research will produce the kind of market insights that help to shape product development. And ensure it really meets market needs.

It will go beyond an entrepreneur’s current understanding of the market. It will dig deeper and produce more than just statistics. It will produce actionable insights and new perspectives on customer needs and wants. And become valuable information that can inform the business model and give confidence when going to market. In recent months, access to business investment and to loan funding for pre-start and early stage businesses has tightened. There is more competition for money and more emphasis on reducing risk. For technology-based businesses, the need for funding is just as great, but the hurdles seem to have grown taller.

Which brings me back to my earlier point about hard-hitting statistics. When the emphasis is on numbers, it is easy to lose sight of the real objective to enter the market successfully and build market share. Or, in other words, to develop and take to market a product or service that people or organisations will buy. That means truly understanding your market – and the factors driving it.

In gaining that understanding, the latest online research methods can have a place but we need to remember they are just some of the options in a good researcher’s toolbox. They can be cost effective, in some markets and in some situations, but they are not a panacea. They are just as prone to garbage-in-garbage-out as any other method if the panel of respondents ‘fit the customer profile or if there is bias in the wording of questions, then the results are likely to mislead.

The key to minimising risk is well-designed research. This means posing the right questions to the right people in the right ways, then analysing the results with a healthy degree of caution.

My tip for 2009’s tech-focused new starts is to truly understand your market the customers, the possible competition, and all of the factors that surround it – first, then build the numbers for your business plan.