Understanding customer needs: what buyers want, not what you assume

1. A business that guesses what people want is betting its start-up money on one person's opinion, and research replaces that opinion with what real buyers say and do.
2. Identify and understand customer needs: research shows which features buyers care about, the quality they expect and the price they are ready to pay.
   1. A clothing start-up that questions 100 shoppers may find that fit and delivery speed matter more than a printed logo, so it spends its budget on sizing and postage instead of branding.
3. Building the product around what customers actually said means a larger share of each batch sells at full price, so less stock is marked down and cash returns to the business sooner.

Gaps in the market: a group of customers nobody is serving well

1. Identify gaps in the market: research looks for what people say they cannot get and for what rivals do not sell, because a gap is a group of customers rather than a missing object.
   1. A town whose three coffee shops all close at 4pm has a gap if the local shift workers finish at 6pm and want somewhere warm to sit.
2. A business that fills a gap faces little direct competition at first, so it can charge a higher price and build a loyal customer base before larger firms copy the idea.

Reducing risk: evidence before the money is committed

1. Reduce risk: research tests whether enough people will buy at your price while the money for a lease, a fit-out and a first order of stock can still be held back.
   1. Order 500 units when the evidence pointed to 150 and the other 350 sit unsold, tying up cash the business still needs for rent and wages.
2. Research is cheap next to the loss it prevents, so £400 spent questioning shoppers is money well spent if it stops a £20,000 launch nobody wanted.
3. Research lowers the chance of failure without removing it, because a sample can be small, out of date or full of people who say one thing and then buy another.

Informing decisions: product, price, place and promotion

1. Inform business decisions: the findings feed straight into four choices that are expensive to reverse once they are made.
   1. What to sell: which sizes, flavours or features to stock, and which slow-selling lines to drop.
   2. What to charge: the price customers accept before they walk to the shop next door, which is why Aldi and Lidl watch rivals' prices so closely on their narrower range.
   3. Where to locate: which town, which end of the high street, or whether to sell online rather than rent a unit at all.
   4. How to promote: which channel reaches the buyers the research found, such as social media for an audience of 16 to 24 year olds.
2. Getting these four right first time saves the cost of moving premises, reprinting packaging or cutting a price that was set too high, so more of the start-up budget survives to fund trading.