Traditional market research techniques like customer interviews and competitor analysis are a great way for businesses to discover valuable gaps in the market and develop new ideas for products and services.
But once you’ve got these great ideas, what can you do to validate them?
With the availability of crowdsourcing, it’s never been easier to validate your market research and test new ideas using the power of the crowd.
In this article, we’ll explain the relationship between market research and crowdsourcing, and show you how they can work together. By using the best parts of each of these innovation techniques, you can discover and validate new ideas quickly and efficiently.
Let’s begin with a couple of definitions.
What is market research?
Market research consists of any action or activity aimed at gathering information about consumer needs and preferences.
This can include something as simple as handing out free product samples and asking customers for their feedback, or as complicated as conducting in-depth focus studies with detailed statistical analytics.
Traditional market research is a technique that businesses have used for centuries. It includes:
- Customer interviews: Businesses can simply ask customers (either in groups or individually) what they think of specific products or services, and any improvements (if any) that could be made.
- User testing: During the product development phase, companies can test out new products with select groups of users. This provides valuable information, and lets customers participate in the product development process.
- Focus groups: To take a deeper dive on what customers are looking for in a particular product experience, companies can convene dedicated focus groups. This is common in the film industry, where focus groups help a company finesse its final product.
- Competitor analysis: Market research isn’t just about customers – it also involves taking a hard look at the products and services offered by competitors. This can help companies bridge the gap between their products and their competitors’.
- Trend identification: Identifying and tracking trends in sales, profitability, and emerging technologies helps companies stay ahead of the game and remain competitive. Trend identification allows companies to better match consumer demand.
Then there’s the emergence of 360 degree market research, where companies don’t just research how customers are using and interacting with their products, but look at how their products interact with other products owned by users.
Market research pros and cons
Traditional market research techniques offer a lot of benefits for businesses:
- Gathering new ideas: Customers and users are often happy to contribute their thoughts and experiences, as well as their suggestions for potentially valuable products. All a company has to do is ask, and the solutions come pouring in.
- Comparing and contrasting products: Market research allows companies to match their products against those of their competitors, examining their strengths and weaknesses in a private setting.
- Safe way to test concepts: Focus groups are a low-risk place for companies to test out potential new directions in products and services. Rather than rolling out a product to the public, a company can introduce it to select groups on a confidential basis.
- Combination of research techniques: Market research offers a way for companies to combine qualitative research (e.g. deep focus groups, customer ethnography) and quantitative research (e.g. survey results, big data analysis).
However, these market research techniques also involve the following considerations:
- Resource requirements: Market research isn’t cheap. In order to attract customers to participate in interviews and focus groups, companies typically have to offer some kind of incentive. Then there’s the time and effort spent in analyzing the results.
- Limited pool of ideas: Market research is only as good as the customers participating. While market research can result in the discovery of valuable ideas, the process is by definition limited, as only a select group of people can participate.
- Time commitment: Besides the financial commitment, market research can also take a significant amount of time to get right. Even if a company outsources its market research to a dedicated firm, the process still takes a lot of effort.
Given these limitations, a lot of companies are now looking to crowdsourcing as an alternative to traditional market research.
What is crowdsourcing?
Crowdsourcing is the practice of engaging a large group of people in responding to a defined problem. Typically, crowdsourcing occurs via online communities, though not always.
Crowdsourcing is a form of open innovation, and shares similarities with co-creation. By inviting a large group of thinkers to contribute ideas and solutions in response to a defined problem, companies can use crowdsourcing to discover unexpected ideas and solutions.
In practice, crowdsourcing involves the following techniques:
- Idea competitions: Here, companies invite customers and users to compete against each other by contributing proposals for new products, services, or solutions. This is a great way to source new ideas and entertain core fans.
- Mobile app data collection: Some companies build a feedback loop into their apps, meaning crowdsourced information is constantly improving the user experience. Google Maps is a great example, with every user helping to make the app more accurate.
- Paid freelancing: Crowdsourcing isn’t always free. Sometimes, companies need the valuable expertise of a wider group, and the best way to get this is to pay for freelancers through a platform like Upwork, Fiverr, or 99designs.
- Online reviews: In today’s world, people write and submit online reviews of almost anything: restaurants, gyms, venues, even natural landmarks. With this activity being so commonplace, it’s easy to miss the fact that it’s actually a form of crowdsourcing.
Social media has radically changed the way companies crowdsource new ideas, with platforms like Twitter and Facebook giving businesses around the world direct access to their communities of fans and users.
Now, crowdsourcing is being used to find solutions to problems from human genome sequencing through to concert locations, chip flavors, and even town hall debate questions for political candidates.
However, before you race off and start crowdsourcing new ideas, there are a few other considerations you should know about.
Crowdsourcing pros and cons
Crowdsourcing ideas and solutions offers some amazing benefits for companies:
- Faster idea generation: By inviting a larger pool of people to contribute their knowledge and ideas, companies can find solutions and solve problems at a much greater speed. For time-sensitive projects, this makes all the difference.
- Wider pool of expertise: Crowdsourcing allows companies to access a wider pool of talent, experience, and expertise in solving problems. This means companies can break out of their traditional status quo thinking and find innovative ways of doing things.
- Less management burden: Because crowdsourcing is a little more hands-off than other innovation techniques, it also involves a reduced management burden for companies. For startups and emerging businesses, this is a real lifesaver.
- Unexpected ideas: Crowdsourcing can result in some truly unexpected ideas. Often, these can be the most lucrative. For example, without the ‘My Starbucks Idea’ platform, Starbucks may never have discovered the humble cake pop.
- Marketing buzz: By including a competitive element, crowdsourcing becomes an instantly engaging exercise, helping companies to drum up marketing buzz for new products. For a great example, just look at MobCraft’s crowdsourced beer campaign.
Despite all of these great benefits, crowdsourcing also involves juggling a few other factors:
- A clear problem definition: To get the most out of crowdsourcing, a company needs to have a clear problem definition. Without getting this right from the start, customers and users won’t know how to contribute their best ideas.
- Commercial disclosure: Crowdsourcing involves giving information away. For example, before Unilever can crowdsource manufacturing solutions, it needs to describe the problem it’s trying to solve. That’s why crowdsourcing isn’t appropriate for projects involving intellectual property or sensitive commercial information.
- Risk of unsuitable outcomes: With crowdsourcing, there’s no way to predict where the process will go. With the wrong problem definition or incomplete rules, companies can end up with undesirable solutions. Don’t believe us? Just ask Boaty McBoatface.
- Commercial analysis: Even the best crowdsourced suggestions still require a layer of independent commercial analysis to be tested and verified. Without this analysis, you’d be at risk of selecting an unprofitable product.
Which of these two innovation techniques is best for you?
Market research and crowdsourcing are both great techniques for companies to boost their innovation and discover the next world-changing product.
The main difference between these two techniques comes down to a question of scale. Companies undertake traditional market research on a smaller and more contained scale, whereas crowdsourcing involves inviting fans and users to contribute ideas by the thousands.
Given the pros and cons we’ve discussed above, the question of whether to use market research or crowdsourcing to find new ideas comes down to the following factors:
- Project scope: Are you looking for feedback on existing products or services, or do you want to discover the next transformative idea out there in the crowd? Are you looking for ways to improve the status quo, or are you open to radical and unexpected new ideas?
- Commercial sensitivity: Are you searching for a solution to a commercially sensitive problem, or a problem involving valuable intellectual property? Or are you just asking for ideas for how to give your customers more of what they like the most?
- Management style: Do you prefer to source ideas in a contained, tightly-defined group, or are you willing to be a little more hands-off and turn the question over to an undefined pool of thinkers?
No matter how you answered these questions, don’t despair: you don’t need to choose between market research or crowdsourcing.
Instead, you can draw from the best of both of these techniques by combining market research with crowdsourcing.
Next, we’ll show you how.
How you can combine market research with crowdsourcing
At first, these two techniques might seem like completely separate processes. However, there are a lot of synergies between market research and crowdsourcing:
- Both techniques seek to strengthen a company’s competitive advantage through offering innovative new products and services.
- Both techniques involve collecting and studying competitor behaviour, including through comparing and analyzing product information.
- Both techniques search for commercially useful information, though one uses a pre-defined group, and one turns the question over to a wider, less defined group.
In reality, businesses can combine these two techniques by using crowdsourcing to validate the results of existing market research.
Market research and crowdsourcing combined
As a practical example, let’s say you’re running a beverage company. You decide to launch a new flavour of hot chocolate to celebrate the winter holiday.
First, you could conduct market research through focus groups and customer interviews to find out what people enjoy the most about your existing products, their consumption habits over the winter period, and any other relevant factors.
Then, you could use this research to develop a shortlist of potentially viable new products and submit these new products to a public vote, with the winner being unveiled in time for the holiday season.
Not only would this two-step process result in a greater depth of customer understanding, but it would also drum up fan interest and build an existing pool of customers ready to purchase the new product.
The benefits of combining market research with crowdsourcing
Combining market research with crowdsourcing lets companies draw from the best parts of these two techniques, resulting in quality ideas and a wide pool of expertise.
By sourcing ideas with market research and then validating them with the wisdom of the crowd, companies can orientate crowdsourcing towards specific, high-potential topics. This way, crowdsourcing efforts are more focused and effective, and don’t waste anyone’s time.
Using this two-step process, companies can also make sure there is a proven need for a new product or service before they launch. Drawing from market research and crowdsourcing makes it more likely that a new idea will resonate with customers and users.
For companies, combining these two techniques also means:
- Faster product development: In-depth research takes time, but using the crowd to validate shortlisted ideas can make it easier and faster to get new products to market. That’s because crowdsourcing helps to finesse product development.
- Easier data collection: By submitting a shortlist of products to a crowd, a company can access a wider and more accurate pool of data from fans and customers. This is easier than conducting customer interviews or focus groups.
- Real-time idea validation: Crowdsourcing is an excellent way to test and validate ideas in real time. Rather than submitting a shortlist of new products to focus groups, companies can get a quick gut reaction from online users.
- Lower ideation costs: A lot of companies don’t have the resources to pay for in-depth focus groups or long-term studies. By harnessing the power of the crowd, companies can get the same input at a much lower cost.
A real-world example: DeWalt’s Insight Community
The DeWalt Insight Community is a great example of a company combining in-depth market research with crowdsourced expertise to come up with popular new products.
DeWalt’s Insight Community offers a place for the power tool company to engage with its most dedicated fans: professional builders and DIY enthusiasts. By cultivating this community of users and rewarding them for their input, DeWalt has created a huge competitive asset.
When developing ideas, DeWalt uses its online Insight Community as a place to test and validate shortlisted products identified through market research. This way, the company saves time and effort by gauging customer reaction on a smaller, more manageable scale.
This two-step process helps the company get the most out of its market research. By validating shortlisted product ideas through the crowdsourced evaluation of thousands of die-hard fans, DeWalt can finesse new products before they hit the shelves.
Use the crowd to validate your market research
In business, having access to the best ideas is a question of survival.
Whether you’re sourcing these ideas through traditional forms of market research like customer interviews and focus groups, or harnessing the power of the crowds through idea contests or open innovation, you need a way to give your fans more of what they want the most.
However, you don’t need to choose between market research or crowdsourcing. Instead, you can develop a shortlist of the most promising ideas through market research, then validate these ideas with online crowdsourcing.
Not only does this help speed up the innovation process – it also helps you to focus on viable options for new products and services and build up an existing market for these products before you release them to the world.
By using this two-step approach, your market research becomes a lot more useful, and your crowdsourcing becomes a lot more focused. For you and your customers, it’s a win-win.
So, the next time you’re tossing up between market research and crowdsourcing, remember: you don’t have to choose one or the other. Instead, you can do both.