Market Research

Overview

Systematic process for identifying, validating, and sizing market opportunities.

Steps

Step 1: Problem Identification

Define the problem you’re solving:

1. Who has this problem? (be specific)
2. How painful is it? (frequency, severity, willingness to pay)
3. How do they solve it now? (existing solutions)
4. What’s wrong with current solutions?

Step 2: Market Sizing

Estimate market size using TAM/SAM/SOM:

1. TAM (Total Addressable Market): Everyone who could possibly use this
2. SAM (Serviceable Addressable Market): Those you could realistically reach
3. SOM (Serviceable Obtainable Market): Realistic first-year target

Use bottom-up calculation when possible:

• Number of potential customers × Average revenue per customer

Step 3: Competition Analysis

Map the competitive landscape:

1. Direct competitors (same solution, same customer)
2. Indirect competitors (different solution, same problem)
3. Substitutes (customer does nothing or DIY)

For each competitor:

• What’s their positioning?
• What’s their pricing?
• What are their weaknesses?
• Why might customers leave them?

Step 4: Differentiation Discovery

Find your unique angle:

1. What can you do that competitors can’t/won’t?
2. What underserved segment exists?
3. What positioning is unclaimed?

Test differentiation ideas:

• Is it meaningful to customers?
• Is it defensible?
• Does it align with your strengths?

Step 5: Demand Validation

Test if real demand exists:

Low-effort signals:

• Search volume for problem terms
• Reddit/forum discussions of the problem
• Existing products with reviews

Medium-effort validation:

• Talk to 5-10 potential customers
• Ask about problem severity, current solutions, willingness to pay
• Don’t pitch your solution, understand their problem

High-effort validation:

• Landing page with signup
• Pre-sales or waitlist
• Paid ads to test messaging

Step 6: Unit Economics Check

Verify the business can work financially:

1. Estimated customer acquisition cost (CAC)
2. Estimated lifetime value (LTV)
3. LTV:CAC ratio (target >3:1)
4. Payback period
5. Gross margin

Red flags:

• LTV < CAC
• Very long payback
• Negative gross margin

Step 7: Go/No-Go Decision

Evaluate all evidence:

GO signals:

• Clear problem with validated demand
• Viable differentiation
• Acceptable unit economics
• Within your constraints

NO-GO signals:

• No evidence of demand
• Dominated by well-funded competitors
• Unit economics don’t work
• Outside your capability/interest

PIVOT signals:

• Adjacent opportunity discovered
• Different segment more promising
• Different positioning needed

When to Use

• Starting a new business or product
• Evaluating a niche opportunity
• Pivoting to a new market segment
• Validating assumptions about customer needs

Verification

• Talked to at least 5 potential customers
• Market size estimated with explicit assumptions
• At least one differentiation angle identified
• Unit economics roughly modeled

Input: $ARGUMENTS

Apply this procedure to the input provided.