Market research is the strategic North Star for early stage startups. In a recent webinar hosted by our startup accelerator program, Martin Mbonu, a seasoned player in the startup game, shared a profound narrative of his journey with MFS Africa, the largest mobile money aggregator in Africa.
With over two hundred million dollars in funding, MFS Africa is a testament to Martin’s expertise as he played a pivotal role right from their inception. This comprehensive guide highlights his key insights, emphasizing the importance of market analysis in the journey from idea to viability.
What is Market Research?
Market research is collecting and analysing data about a particular market to understand customer needs and preferences, identify opportunities, and make informed business decisions. It is essential for all businesses but vital for early-stage startups as they must deeply understand their target market. Through thorough market research, startups can develop products and services that meet customer needs and compete effectively in their industry.
“Everything we discuss today regarding market research for early-stage startups culminates in conducting a market analysis and determining whether your product will be viable or not.
We started MFS Africa when we observed the emergence of mobile money operations in the telco industry. At that time, a major player, Homesend, dominated the continent’s remittance market. Despite being underfunded, we secured market share. How? The answer was simple: meticulous market research and strategic positioning.”
Why Market Research Matters for Early Stage Startups
Market research is not just a checkbox; it’s a strategic necessity for startups. Here’s why:
- Identifying Opportunities: Uncover new markets, products, and ways to connect with customers.
- Understanding the Competition: Gain insights into competitors’ strengths and weaknesses, paving the way for differentiation.
- Verifying Product-Market Fit: Validate your product ideas and ensure there’s a market waiting for your offerings.
- Informed Decision-Making: Market research guides every critical decision from product development to pricing.
Efficiently channelling limited resources is crucial for startups, whether funded by friends and family or seeking external investment. Reflecting on MFS Africa’s journey, they initially focused on providing financial services to mobile money users. However, they realized the need to pivot for scalability.
“We shifted our focus to remittances, a strategic move informed by observing consumer behavior and market trends. Post-research, we conducted competitor analysis to identify our advantages. So, what makes your product unique? Are you leveraging AI, or is there another distinguishing factor? This question is vital for standing out in a crowded market.”
“Every startup needs to answer: What makes you different? What makes you stand out?”
How to Conduct Market Research on a Budget
There are two main types of market research: primary and secondary.
- Primary research involves collecting data directly from customers or other stakeholders through surveys, interviews, focus groups, or usability testing.
- Secondary research utilises data from third-party sources, including industry reports, government agencies, and academic research.
Your target matter should determine the type of market research you carry out. Rather than trying to be everything to everyone, focus on a specific target market, and understand their needs and preferences better than anyone else.
For cash-strapped startups, cost-effective strategies are a lifeline:
- Start with Secondary Research: Tap into free or low-cost resources like industry reports and government data.
- Utilize Social Media: Engage with potential customers through surveys, polls, and contests on social platforms.
- Talk to Your Customers: Direct interaction remains a potent tool. In-person, phone, or online conversations yield invaluable insights.
- Embrace Free Tools: Leverage tools like Google Forms for surveys and Google Analytics for website traffic analysis.
Martin emphasizes not overlooking the effectiveness of a SWOT analysis. While some may consider it old-fashioned, it remains a valuable tool for analyzing your business’s strengths, weaknesses, opportunities, and threats.
“I want to emphasize the importance of organizational identity. Know who you are as a business. This self-awareness is crucial in crisis and differentiation, as understanding your identity guides your decisions.
While secondary research using sources like Stears and McKinsey is invaluable, there’s no substitute for on-the-ground experience. Take the example of Homesend, a company in Brookshales offering remittances in Africa. Despite their partnership with Mobile Money in Ghana, they were outpaced by MFS Africa. Why? Because we, as Africans living in the market, understood the nuances, the movement of money between countries, and the cultural intricacies they overlooked.”
“As a founder, you need to immerse yourself in the reality of your market. No amount of research papers can replace the firsthand understanding gained by being there. Whether it’s the chaos in Balogun Market or the dynamics of cross-border transactions, experiencing it personally is unmatched.”
Using Market Research Data for Business Decisions
Once you’ve collected the right data, the next step is identifying trends and patterns. The key is to use this information for making well-informed business decisions. This leads us to a pivotal point — ensuring your product aligns with your organization’s identity.
Ask yourself, “Does this product resonate with who we are? Do we genuinely believe in it?” For instance, if identity verification is your unique selling point (USP), as with Verified.africa, every aspect of your business must align with that core identity, from your pricing strategies to your branding and internal culture.
Founders should be avid readers, not just of popular LinkedIn articles but mind-bending books like “Thinking, Fast and Slow” which explores the psychology of human behaviour. Understanding how people think can profoundly influence the design of your products.
Paying attention to what customers do more than what they say is also essential. While conducting focus groups may yield numerous feature requests, accurate usage data often reveals that many users engage with only a fraction of the features. Don’t just listen to what customers say they want; observe what they actually use. Scrutinize the data generated from your market research.
“The market is constantly changing, so it’s important to be willing to pivot your business strategy as needed. Don’t be afraid to make changes based on your market research data.”
Tips for Early Stage Startups: Beyond Market Research
In the rush of fundraising news and competitors making strides, be focused on your unique path. While others may tout their funding achievements, investors are now paying closer attention to revenue numbers. So, stay true to your vision and concentrate on building products that genuinely matter. Start building relationships with investors early if raising money is on your horizon. It’s not just about asking for cash tomorrow; it’s about initiating the conversation today.
Undoubtedly, market research demands effort, but the investment is worthwhile in the long run as it significantly aids your chances of building a successful business. Remember, success isn’t solely about adhering to methodologies outlined in textbooks. It’s about the experiences, the on-the-ground knowledge, and the clarity of vision that genuinely shape a successful startup.
“Pay attention to data, stay true to your identity, and keep observing and learning. This, more than any systematic research, will guide you toward building a meaningful and scalable product.”
Join the Verified.Africa Startup Accelerator Program
Are you an early-stage startup looking to supercharge your growth? The Verified.Africa Accelerator Program is designed just for you. By joining, you’ll receive free verification usage credits for up to six months, including an initial grant of 100 verifications to kickstart your startup journey. These credits are your gateway to securing your business, onboarding genuine customers, and ensuring regulatory compliance effortlessly.
But that’s not all. The Accelerator Program goes beyond credits; it’s your ticket to a wealth of insights, mirroring the knowledge shared in this guide. To qualify, all you need is a working product with no more than four years in the market, along with active customers and revenue.
Joining is a breeze, and it’s free. Once your application is successful, you can access invaluable support, state-of-the-art verification tools, and personalized mentorship tailored to your startup’s unique needs. Sign up today to accelerate your growth and lay the foundation for a secure future for your startup.
Martin Mbonu is the Country Director of Sierra Leone and Head of Mobile Network Operators for Anglophone West Africa at MFS Africa. With over $200 million in funding, MFS Africa is Africa’s largest mobile money interoperability hub, connecting operators through a single API. Martin, a seasoned product development, project management, and strategy professional, drives innovative digital financial solutions.
Beyond his professional endeavours, he takes pride in being the ultimate girl dad. Martin’s commitment to financial inclusion and technological advancement makes him a dynamic force in digital finance. Connect with Martin Mbonu on Linkedin.