Back in 1996, I had an idea for an audiocassette series (yes, well before iPods) sharing the stories of successful entrepreneurs. In retrospect, it was a dumb idea for many reasons, but when I asked my family and close friends whether they'd buy it, they all cheered me on. The business was a flop, and it taught me a good lesson: Out of love and loyalty, people will tell a white lie when asked about the viability of your business idea.
During the 11 years I spent building my market research business, which did new product concept testing for companies like American Express, Dell, Google, IBM and UPS, I learned a better way to ask questions about a new business idea.
Based on my own experience, here are three dumb questions you should never ask -- and some better ways to get an honest reaction to your concept.
Stupid question #1: What do you think of my new business idea? Most polite people will nod approvingly and smile at just the right moments as you describe your new business idea. Silently they're asking themselves, "Is this person nuts?" "What did he sniff this morning?" "Does she really think anyone is going to buy that?"
Market research is an art, not a science. When asking for opinions about a business idea you're contemplating, you need to nibble away at the edges of how the respondents feel about your idea.
For example, let's say you're thinking of coming out with a new sports drink for runners. It's a crowded market, with Gatorade and Powerade hogging most of the shelf space, but you're convinced there must be a niche to exploit.
If you tell a friend who's a runner that you're thinking of starting a sports drink company, he or she will probably smile and nod approvingly despite knowing that going head-to-head against Gatorade and Powerade is suicide.
Instead of asking people to react to your vague business idea, start by finding out what's lacking in the existing options on the market. You might ask your runner friend Jim how he stays hydrated before, during, and after exercising. What you're looking for is a signal of dissatisfaction.
The solution: The 5 why questions Let's say Jim reveals that he alternates between water and sports drinks during a long run to limit his intake of sports drinks. That signals some dissatisfaction with the sports drink, and it's your cue to dig further by asking five consecutive questions that start with the word why (yes, you will sound like an annoying six-year-old) to get to the root cause of Jim's discontent:
You: Why do you alternate between water and a sports drink on a long run?
Jim: Well, you know, it's not good to drink too much sports drink.
Jim: There are a lot of chemicals and sugar in them.
You: Why does that matter to you?
Jim: Because one of those chemicals is sodium.
You: Why would you want to avoid sodium?
Jim: My family has a history of high blood pressure, and my doctor has me on a low-sodium diet.
Bingo! A low-sodium sports drink would be a product this runner may well buy. It took five questions starting with why for you to get to the real reason Jim alternates between sports drinks and water, but now you have the kernel of an unmet need, which may be the basis for a new business idea. However, before you quit your job and start a line of low-sodium sports drinks, you need to know if anyone would actually buy it.
Stupid question #2: Would you buy it? Market researchers call the percentage of respondents who answer "yes" to the question "Would you buy this product?" the "projected take rate." Take rates are notoriously unreliable (usually wildly optimistic), again, because respondents don't want to hurt the feelings of the person asking the question.
As mentioned, good market research is less science and more art. If you ask a direct question, people will answer it the way they think you want them to answer it. To get real feedback, you need to be more subtle and piece together how people feel about your idea by getting one insight at a time.
The solution: The 5 how questions Instead of asking Jim if he would buy your product, focus on getting a qualitative read on just how dissatisfied he is with the current options available. Ask him five questions that start with the word how:
How has your low-sodium diet affected your running performance?
How does drinking just water make you feel during a run?
How important is it for you to stay hydrated while running?
How important is it to you that you reach your running goals?
How difficult is it to find low-sodium alternatives to the standard sports drinks?
If his response to the how questions elicits a muted response, you know his level of dissatisfaction is mild, and your product may not be viable. If you hear passionate responses, you know you're on to something. But before you start creating your new product, you need to figure out how much someone would pay for it.
Stupid question #3: How much would you pay for it? Anyone with a new business idea wants to know what customers would be willing to pay for their new mousetrap. Unfortunately, market research is just not that easy, and if you ask people what they would pay, you will likely get a much higher number than they would actually be willing to shell out -- again, often because a friendly audience wants to encourage you.
The solution: Ask about the comparison set
Instead, you want to ask respondents about similar products currently on the market.
In the case of the potentially hypertensive runner, you might propose the concept of a low-sodium sports drink and ask him what other products he'd consider using to reduce his sodium intake. If his alternative is free tap water, don't quit your day job.
If you hear he considers a traditional sports drink the alternative, you know you would be restricted to a pricing model similar to the way other sports drinks are priced.
If you hear he would think of a low-sodium sports drink in the context of other purchases he makes to control his blood pressure, you might fall into the category of higher-priced medicines and therapies, which would signal you could get away with pricing your low-sodium drink at a slight premium over the standard sports drinks.
So stop wasting your time -- and that of your friends -- by asking them if they like your business idea. They'll say your idea is wonderful whether you're sitting on the next Facebook or about to walk off a cliff. Instead, nibble away at the edges of your target market's feelings about your idea, and you'll get a less positive, but ultimately more reliable, measure of its viability.
(photo courtesy of Flickr/ obo-bobolina)
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