How to do market research for an online business idea

How to do market research for an online business idea

I’d like to share a quick and easy method I use, when I undertake market research for an online business idea.

It’s easy to get excited about a new idea or product you think will be the next big thing, but a bit of research up front is essential to avoid spending a lot of time and effort for little or no reward.

So what are the logical steps to undertake market research for an online business idea? Below is a quick method that I follow to break the task of market research into logical steps.

9 Steps To Market Research

  1. Describe the product or service
  2. What is the problem the product/service will solve?
  3. Who is the audience?
  4. What are they doing now?
  5. Who are my competition?
  6. What is my unique selling point?
  7. Do the numbers stack up?
  8. Is the idea scaleable?
  9. Stop, Go or Refine?

This list is not by any stretch an exhaustive dive into market research. However, it does enable me to collate a lot of information quickly, so that I can make a decision whether my idea/product or service is likely to be viable.

Step nine is all about deciding whether to abort the idea, refine it, or proceed full steam ahead. You see, sometimes, just through working through this exercise you may end up abandoning your original concept, or even discovering something that will better serve the needs of your target audience. That’s not necessarily a bad thing! I’d much rather do the research up front and decide NOT to proceed with an idea, than waste countless hours on a project that will never fly.

Applying The Technique

I thought it would be interesting to walk you through a case study example to show you how the 9 steps to market research can be applied in a practical sense. Using the nine steps outlined above, I have applied this to a market research example for reviewing books.

Case Study Example | Affiliate Marketing of eBooks through Reviews

1. Describe the product or service

What is the idea, and what is the end-to-end process of fulfilling the customers needs?

What is the idea? To offer eBook reviews to authors on the own author website and monetize those reviews through affiliate links to Amazon.

End-to-end process. I already read and review a LOT of eBooks. Over the years I have reviewed a number of books on Amazon, which has resulted in me receiving numerous offers from authors for a free copy of their latest eBook in exchange for a review. However, Amazon considers it completely unethical to accept any form of payment or gift in exchange for a review, and receiving a free book falls under that category.

So to be absolutely clear on this; I only ever review eBooks on topics that interest me, that I have purchased myself and have read.

My end-to-end process is simple.

  1. Purchase and read book
  2. Review book on Amazon
  3. Write a blog post about the book including the review and additional background information and include affiliate links to the book on Amazon
  4. Share through the social networks

2. What is the problem the product/service will solve?

How does the product/service or activity make the world a better place?

It’s a two fold benefit. Firstly, the book reviews can help inform potential buyers of that book whether it’s worth reading and gives them an overview of the book contents.

Secondly, it fits into the pay-it-forward mantra; by completing a completely unbiased review about a book that I have enjoyed. If I absolutely hate the book, I simply won’t review it… after all, a writer out there has spent valuable time to create it; just because I don’t like their ‘masterpiece’ doesn’t give me the right (IMHO) to damage their brand in any way.

Independent reviews are like little nuggets of gold for writers, and it’s a good feeling to be doing my part within the online writing community.

3. Who is the audience?

Whose my ideal customer and how big is my market?

My perfect customer trusts Amazon, loves their kindle (or e-reader) and has a voracious appetite for eBooks!

Given that I read a lot of age & gender specific self-improvement books, as well as rom-coms, I could also take that one step further and say that the ideal customer is … em 40 something, female, wants to be fitter, thinner, look fabulous in a bikini (or at least pull off a good one piece look) and is a hopeless romantic.

Whatever product or service you are researching, it’s worth taking the time to write a detailed description of who your ideal customer is and get a picture of him or her in your mind. It will definitely help you as you develop out your idea.

4. What are they doing now?

What insights can I learn through keyword research about the customers and their buying patterns.

I already know that there is a huge demand for independent book reviews, through the sheer number of emails I get on a daily basis from authors offering me their books to read. Often times those requests are politely declined, particularly if the topic is not of interest to me and my website visitors.

So how do I know whether a book will hold appeal for the readership base? This is where the use of keyword research comes in. I use a tool called Jaaxy for all my keyword research; it’s easy to use and I can quickly determine if an eBook is a topic people want to learn more about. It also helps me figure out what search terms people are typing when they are in ‘book buying’ mode – so I can write the reviews on the blog to incorporate relevant long tail keywords.

For example: say I’m going to do a review on Steve Scott’s eBook My Blog Traffic Sucks. After a cut-and-paste of the extended book title from Amazon into Jaaxy, I was able to produce the following results;

As you can see, Jaaxy has suggested a great ‘long tail’ keyword being [steps to increase your blog traffic] which gets a load of traffic and has a low QSR (the number of competing websites ranked in google for this exact search phrase). This tells me that people are searching for this type of information. I will definitely use this exact keyword phrase when writing the blog post review.

By repeating this process each time I review a book, I can make sure I’m using search phrases that the potential readers are looking for. This is just one method I use, when investigate the buying patterns of the customers.

On Amazon.com alone, there are 1,064,000 eBook downloads every day.

5. Who are my competition?

Who else is in this sandpit and can we all play nicely?

Absolutely! With so many books being produced every day, there’s little wonder that book reviewers are in high demand. The lion’s share of reviews are on well-established sites like Amazon and Goodreads, but there’s certainly room for independent blog writers to focus on eBooks within a particular niche.

6. What is my unique selling point?

How will I stand out from the crowd?

The way I would approach this is to only publish reviews on the blog that are targeting the specific niche or topic. There’s no point using a scatter gun approach. Trying to be all things to all people never works – so I’d aim for a very narrow book review niche and own that space.

I would also clearly state that I do not receive any compensation for any of the reviews (apart from affiliate links to the eBook itself on Amazon), to ensure that the readers understand that they are reading an unbiased unpaid review from an independent blogger.

How to do market research for an online business idea7. Do the numbers stack up?

Crunching the numbers is essential to know whether an idea is even viable.

I would like to generate a passive income stream of $80 per day from affiliate sales through eBook reviews.

As mentioned, a quick online search revealed that on Amazon.com alone, there are an average of 1,064,000 eBooks purchased and downloaded each day. The actual revenue generated from those downloads varies from report to report, but it is somewhere in the vicinity of $5,755,000. That equates to an average price per eBook of $5.40.

Amazon pays 4% commission on eBook sales. On a $5.40 eBook, this amounts to 21c.

This is where some assumptions come in;

  • Let’s assume that every book review (post) I write generates 20 page views per day.
  • Of those 20 page views, 10% convert (eg.: viewer clicks affiliate link and buys the eBook on Amazon).
  • That would result in 2 sales x 21c commission = 42c commission per post day.
  • To get the blog generating anywhere near the desired $80 revenue per day I would need to write 190 book reviews.
  • If I published 3 book reviews every week, it would take me at around 63 weeks (14-15 months) to build the blog revenue stream up to the $80 per day mark (and that’s assuming I do everything right).

8. Is the idea scaleable?

What happens if my product or service takes off? Will I be able to efficiently keep up with customer demand?

For the book review idea, this doesn’t really matter too much, as I would be in the business of writing content. However, the success and growth of the revenue stream depends on the ability to complete and publish 3 book reviews every week.

Conversely, if I was in the business of hand painted wall art, scale-ability would definitely be a problem. Not only would there be the production of the actual product, but also the whole supply chain would need to be considered end to end, from manufacture, to storage and then shipping the final product to the customer.

8. Stop, Go or Refine?

Now that the research is complete, should I proceed?

On the face of it, the eBook review blog idea hardly seems worth the effort. Or is it?

  Cons

  • Unable to accept payment in any form from the author, so the only way I could monetize my eBook reviews would be from the affiliate links themselves.
  • It would take 14-15 months of serious reading, and writing & publishing reviews before I’d get anywhere near my revenue target of $80 per day.
  • It would be hard to achieve this goal any quicker because I’m limited by the amount of books I can read & review in a week. (3 books is already a stretched target).
  • I would be reliant on Amazon maintaining current terms and rates of affiliate commission (they have been known to change their commission rate payouts with little notice in the past).

However, there are a few positive spin-offs from proceeding:

  Pros

  • Once a review is published on the site – it will always be there working for me – especially if I have done the SEO keyword research properly.
  • By the time I have published 190 reviews on the website, I’ll have a huge amount of traffic on the website – potentially 3,800 visitors each and every day.
  • I could promote higher value products to the website visitors.
  • If one of the website visitors clicks on an affiliate link to view an eBook on Amazon and then goes on to purchase other products (within a 24-hour period of clicking that link), I would also receive commissions from those purchases.

Conclusion: Is this a Stop, Go or Refine? Whilst I still like the idea in theory, there is a huge amount of work required before any real reward is seen. In this instance, I would be inclined to say this idea is a REFINE. I plan to head back to the drawing board on this one and see if there’s another approach which could achieve a better outcome. I also plan to explore more profitable niche opportunities with Amazon.

Summary

As you can see, this quick and easy nine step process can be used to research any business idea you have, whether it’s selling a physical product (eg. clothing or goods from a physical location), a time based service (eg. legal advice or technical support), or content (eg. developing eBooks or developing content for blogs/websites).

For any business idea, I urge you to take the time to do your homework up front – as you see from the case study example I’ve used here, you could end up doing a huge amount of work for very little initial reward; at least if you know this before you start will save a lot of angst and frustration further down the track.

Get in touch

If you found this article interesting, I’d love to hear from you.

What is your process for completing market research? If you’ve got some additions to this process, please drop me a comment below or contact me at Wealthy Affiliate via the profile here.

20 Responses so far.

  1. Agnes says:

    That was fantastic, great way of breaking it down to analyze your plan. You certainly got me thinking …. “keyword research about the customers and their buying patterns” is a great way for research on a particular neche and it works. I learned a few things reading your post, will definitely use your steps for research in the future.
    Thank you,
    Agnes

  2. Sam says:

    Great post, I will be saving this as the first nine points really stood out to me. Those points give an easy and approachable plan to attack the way you develop your new product. Do you think if you could, you would add any more points like the nine you have listed? I suppose there would be some extras for certain niches etc.

    Thanks,

    Sam

    • KD Forsman says:

      Absolutely Sam. This is just my list for completing quick research, if I get to the end of the list and think the idea has merit, then I’d go on to do a much deeper investigation of it. I’ve also found the Wealthy Affiliate Training program to be a fantastic resource for developing my online business – there’s so many ways to approach the development of an online business and their program steps you through a logical pathway for success. It’s one of the best platforms and training programs for online marketers that I’ve seen in a long time. All the best for your online journey. Kind regards, Karen

  3. Vince says:

    Brilliant summary of how to do market research. The case study you have provided really helps me understand the process and logic you have used in your approach.

    I can’t wait to use this technique on my next idea.

    I do a lot of my market research at night and one thing that I like to do after my evaluation is to sleep on the idea. If there is a slight issue or something I’m not sure about, I normally get clarity about it the next morning.

    Thanks for sharing.

    • KD Forsman says:

      Hi Vince – that’s awesome! Perhaps I need to add a 10th step: Sleep on it! You are right though, sometimes it’s best to do your homework, then take a decent break away from your research to mull an idea over and just let your brain freewheel for a while, it’s amazing what else can spring to mind and sometimes the idea will take even better shape. All the very best, Cheers, Karen

  4. Dave says:

    Hey there,

    I love your strategic approach to doing market research. I will be using it today.

    One quick question though, I have seen you recommend telling the readers that you receive an affiliate commission off of the products they will buy through your links.

    Won’t that make them not want to buy from you? As they may think you just want to sell the the product just to make money?

    • KD Forsman says:

      Hi Dave and thanks very much for your question. I think it’s really important to be up front with my website visitors, however in this example, I’d probably just include a page on my website which covered off any affiliate relationship I had with Amazon or other Affiliate programs. The point I was trying to get across, is that being paid by the author to review their book and post that review on Amazon is a big no-no – it doesn’t do the author any favors and it certainly wouldn’t take long for perspective readers to be put off by this type of activity. Hope that helps? Glad to hear that you can put this approach to good use, and all the very best with your online business venture – whatever that may be 🙂 Cheers, Karen

  5. Kourtney says:

    Hey great post! You really broke it down and answered every question I had when reading through this article. I love writing book reviews myself and I will personally only do ones that I believed have benefitted me and will benefit other people. Thanks for the knowledge I will be applying this!

    • KD Forsman says:

      Hi Kourtney – thanks for leaving a comment. Great to hear you enjoy doing book reviews, I do too, for my own enjoyment as much as anything 🙂 If you can tie it in with some keyword research using a SEO tool like Jaaxy then at least you may be able to generate some good traffic for your blog out of your reviews. Best of luck, Cheers, Karen

  6. Robert says:

    A very nice lesson on how and what to research when considering a new business idea. I liked that you included a real example using affiliate marketing of books from Amazon that you have read. Your process is very well thought out and I will use these steps as a checklist to formalize my research efforts.

    • KD Forsman says:

      Hi Robert, thanks so much for taking the time to leave a comment – I’m glad that you found this article useful. It’s by no means an exhaustive checklist for researching a potential business idea, but I’ve found it has served me well to make relatively quick decisions without wasting too much time. If you are interested in learning more about how to launch and grow an online business, please do check out my article about the Wealthy Affiliate training – it’s absolutely one of the best courses I’ve seen online for a long time. All the best, Cheers, Karen

  7. Lance says:

    Karen,
    Great article!!!! For someone wanting to start an online business can be a daunting task. So many people may know what they want to do but not how to go about it. I believe that this may be the biggest reason why people fail with their online ventures. Your article lays out an excellent plan to help ensure success. Kudos to you.

    • KD Forsman says:

      Hi Lance, I agree – there’s so many people who start with a blog/product idea with all guns blazing, only to find that they quickly run out of steam once they realise it’s simply not going to make any money. I’ve always like the book review idea and I hope to revisit it in a different format in the future, but when I crunched the numbers on my original idea – it didn’t stack up. Following these 9 steps has saved me a lot of time for little return. All the best, cheers, Karen

  8. Ramandeep says:

    wow simply awesome! What a detailed research of your niche. I am definitely bookmarking this page! I learnt enough from this post and realize that I need to do some more homework on my niche. Thank you for sharing.

    Best Regards,
    Raman

    • KD Forsman says:

      Hi Raman, Thanks very much for your feedback. Yes this was a niche idea I have been considering for a while, but after running it through my 9 steps I have decided to park the idea for the time being and focus on more profitable opportunities. Great to hear you found it of value, and all the best with your writing online 🙂 Cheers, Karen

  9. Brendan says:

    This is a very relevant article to me even though I am not in your target market. I am starting affiliate marketing and I hope that I can find the same success that you have just judging by your comments.

    I’ve been going at it for about a month and haven’t seen results yet but I am going to keep going! I am also a member of WA just like you.
    I just have one question:
    So I have only been involved in affiliate marketing for a month and haven’t had results nor am I feeling as passionate about my niche as I thought and am thinking about changing it. What do you think? Do you think that I should continue with this niche (since I already bought the website) until I find out how to do it before starting a new one or should I change it now?

    • KD Forsman says:

      Hi Brendan, thanks for dropping by and thanks for your question. I know that feeling of uncertainty you are talking about when you’re only a month into affiliate marketing and you’re wondering whether you’ve chosen the right niche. Are you following a training course (like Wealthy Affiliate)? If it’s just a case of not being sure, I would encourage you to stick with your current niche and use the certification course to learn as much as you can to get your website up and running. However, if are certain that your chosen niche topic is not right for you, then change it now. But just work on one website at a time, to avoid being spread to thin. You may be interested in my post How Long Does It Take To Make Money Online?. All the very best with your online business. Kind regards, Karen

  10. Netta says:

    Hey KD:

    A very interesting post, this. One worth further study and trial.

    As venture capitalist Marc Andreessen once said, “Markets that don’t exist don’t care how smart you are.” Uh-huh….

    This post helps get my mind clear about whether there really is a market out there for my own stuff. I’ll run it through your filters and mind-games, I think. It’ll be an interesting exercise. Passion meets reality-check.

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