Market Research That Saved $1.5M
Impact
Strategic market research revealed fundamental business model flaws before development began, saving the client $1.5 million in wasted investment and redirecting strategy toward a viable partnership model.
Overview
A mobile app startup developing a location-based, geofenced rewards platform for sports fans approached me to validate their small business partnership model. Through systematic qualitative research with 20 Seattle-area small business owners, I uncovered critical market realities that challenged the core business assumptions—ultimately saving the company from a costly strategic misstep.
Timeline: 4 weeks
Investment: Market research engagement
ROI: $1.5M in avoided costs + strategic pivot to viable model
The Challenge
The Business Model
The client had developed a sports fan rewards app with an innovative concept:
Sports fans would receive push notifications for exclusive discounts at nearby businesses
Small businesses would be geofenced, triggering alerts when users were in proximity
Fans could earn branded merchandise by engaging with partner businesses
The app would monetize through business partnerships and Facebook advertising
The Assumption
The founding team believed small business owners would eagerly partner to drive foot traffic through targeted discounts, especially in neighborhoods with high sports fan density.
What They Needed
Before investing $1.5M+ in:
Full app development and launch
Facebook advertising campaigns (their primary acquisition channel)
Business development and partner onboarding
Operational infrastructure
...they needed to validate whether small businesses would actually adopt this model.
The Research Question
Would small business owners in a target market (Queen Anne, Seattle) partner with a location-based discount platform to attract sports fans?
Our Approach
Research Design
I designed a systematic qualitative research study to understand small business owner perspectives, motivations, and barriers to partnership adoption.
Target Market Selection:
Queen Anne neighborhood (Seattle) - high density of small businesses and sports fans
Focus on Queen Anne Chamber of Commerce members for established, community-oriented businesses
Research Methodology:
Structured Interview Framework
Created a standardized matrix of questions and scenarios
Ensured consistent data collection across all interviews
Balanced open-ended exploration with specific scenario testing
Sample Selection
Recruited 20 small business owners across diverse categories:
Food & beverage (bakery, bagel shop, coffee)
Retail (children's furniture, specialty olive oil)
Services (nail salon, professional services)
Ensured variety in business model, customer base, and maturity
Interview Protocol
Scheduled individual 30-45 minute interviews
Presented the app concept and partnership model
Walked through specific scenarios of how the platform would work
Explored current marketing approaches and challenges
Tested receptivity to discount-based customer acquisition
Captured both explicit responses and behavioral cues
Data Analysis (Pre-AI Era)
Manually reviewed all interview notes and recordings
Identified patterns, themes, and outliers across responses
Coded responses by business type, size, and attitude
Synthesized findings into actionable insights
What Made This Research Effective
Standardization: The question matrix ensured every business owner was presented with consistent information and scenarios, making comparisons valid.
Diversity: By interviewing businesses across different categories (food, retail, services), I could identify whether objections were industry-specific or systemic.
Depth over breadth: 20 in-depth interviews provided richer insights than a survey of 200 could have delivered, especially for understanding the "why" behind resistance.
Scenario-based testing: Rather than asking hypothetically, I walked owners through specific examples of how the platform would work for their business, revealing practical objections.
The Results
Key Findings
The research revealed three critical insights that fundamentally challenged the business model:
1. Discount Aversion Among Small Businesses
Small business owners were strongly opposed to discount-based customer acquisition:
"Discounts train customers to only come when there's a deal"
"We built our business on quality and service, not cheap prices"
"Discount customers aren't loyal customers"
Owners feared devaluing their brand and attracting price-sensitive (vs. value-appreciating) customers
2. Marketing Sophistication Gap
Most small business owners had limited marketing knowledge or interest:
Focused almost exclusively on operations and product quality
"Word of mouth" was the primary (and often only) marketing strategy
Little understanding of customer acquisition costs, lifetime value, or digital marketing
No framework for evaluating partnership opportunities like the proposed app
3. Change Resistance and Risk Aversion
Business owners were not receptive to new, unproven marketing channels:
"We have a business plan and we stick to it"
Skepticism about technology platforms and their promises
Unwillingness to experiment with unfamiliar acquisition models
Preference for traditional, proven marketing (if any)
The Pattern
Across 20 diverse businesses, the response was remarkably consistent: Small business owners were not interested in partnering with a discount-based, location-triggered platform—regardless of the potential for increased foot traffic.
The objections weren't about the app's execution or features. They were about fundamental misalignment between the business model and how small business owners think about customer acquisition and brand positioning.
The Recommendation
Do not pursue the small business partnership model.
The market research revealed that:
The target customer (small business owners) did not want this solution
Education and persuasion costs would be prohibitively high
Even if businesses could be convinced, discount aversion meant poor partner engagement
The business model required enthusiastic partners, not reluctant ones
Alternative path recommended: Explore partnerships with larger organizations (corporate chains, franchises, or aggregators) that have centralized marketing decision-making and existing discount strategies.
Business Impact
The client agreed with the findings and pivoted strategy:
Avoided $1.5M+ in wasted investment:
Full app development and launch: ~$500K
Facebook advertising campaigns: ~$700K
Business development team and operations: ~$300K
Redirected to viable model:
Partnered with an established Facebook-based rewards platform
Leveraged existing infrastructure and business relationships
Focused development resources on differentiated features
Preserved company runway:
Months of development time saved
Capital preserved for validated opportunities
Team morale maintained (avoided post-launch failure)
What This Demonstrated
Strategic research is an investment, not a cost.
Spending modest resources on market validation before committing to full development:
Identified fatal business model flaws
Saved 30x+ the research investment
Enabled informed strategic pivot
Demonstrated the value of talking to customers before building solutions
Sometimes the most valuable insight is what NOT to build.
Client Testimonial
"Kate's research saved us from making a million-dollar mistake. We were sure that small businesses would jump at our opportunity, but her systematic interviews revealed the opposite. The findings were undeniable and clear. We pivoted strategy and avoided a costly failure. Money well spent."
— Founder, Sports Fan Rewards App (Name withheld for confidentiality)
What You Can Learn From This
For Startups & Product Teams:
Validate assumptions before you build.
This company was ready to invest $1.5M based on founder intuition. Strategic research revealed the market that they wanted to partner with didn't want what they were building.
Talk to your actual target customer.
Not investors, not advisors, not other founders—the people who would actually need to say yes.
Be willing to hear "no."
The most valuable research finding isn't always confirmation—sometimes it's contradiction that saves you.
Small sample, big insights.
20 in-depth conversations revealed more than a survey of 2,000 would have. Quality > quantity for exploratory research.
For Established Companies:
Test new initiatives before full commitment.
Even with resources, validate market receptivity before scaling new programs or products.
Understand your customer's worldview.
Small business owners weren't rejecting the app—they were operating from a completely different mental model about customer acquisition.
Research is risk mitigation.
Spending 5-10% of a project budget on validation research can prevent 90% losses from misguided execution.
How I Can Help You
This case study demonstrates my approach to strategic market research:
Systematic methodology ensuring valid, comparable insights
Qualitative depth understanding the "why" behind behaviors
Objective analysis even when findings challenge client assumptions
Business-focused recommendations connecting insights to strategic decisions
Clear communication translating research into actionable guidance
Services I Offer:
Market Research & Validation
Customer discovery interviews
Competitive landscape analysis
Market opportunity assessment
Business model validation
Brand Strategy & Positioning
Strategic positioning research
Messaging and narrative development
Go-to-market strategy
Fractional Chief Brand Officer
Ongoing strategic guidance
Research-driven decision making
Team mentorship and capability building
Ready to Validate Your Strategy?
Whether you're launching something new or repositioning something existing, strategic research ensures you're building what the market actually wants.
Let's talk about how research can de-risk your next big bet.
Schedule a Discovery Call
This case study has been anonymized to protect client confidentiality while demonstrating research methodology and business impact.