Yes, it's often viewed as a painful and laborious task, but it must be done - you can either take the time and find your niche soon or go through years of refinement before you hit the jackpot. Finding your niche doesn't always happen on the first go round either, even with all the research in the world. There are some people who have become millionaires because they invented a great product by accident. Always remember that your product may have an entirely different use than what it was intended for, which could open up another thousand customers to your business. This thinking is crucial when looking to expand your market share.
Slight improvements can take away the things that gave people reason to buy in the first place.
One of the largest makers of paper clips, the type seen on the left, was looking for a new type of paper clip to market. They wanted a clip that could be slipped onto a stack of papers from either end. This company thought they had a great hit, but received a very poor response on these clips. They later found out that many people don't use paper clips for attaching papers but often unfold the clip into a straight piece of metal. This story goes to show you that sometimes people use your product in ways that you would never fathom.