Everyone talks about Market Validation and the importance of it, but it’s easy to say, and harder to do, if it’s done at all. When done well and early, it can determine if you even launch your product, or changes that need to be made to ensure it’s success. So, what exactly is Market Validation?
Put simply it’s finding potential customers, ensuring there’s enough of them to sustain a business, and getting specific feedback on the product or service you want to offer.
There’s no ‘plug and play’ way to go about this. Each market, each solution and each startup is different. We have detailed below some suggested approaches and tips and tricks to validate quickly at low cost.
Why do you need to validate your market?
Sadly stats show that 90% of all start-up businesses fail and 70% of all new products fail. Ouch.
Rob Adams of “If you build it, will they come” outlines why this is:
1. Companies focus on operational issues
2. Educated to manage, not create
3. Tendency to gravitate to data so it can be analyzed
4. Development is a process with an endpoint
5. Engineers work in the world of the tangible
6. None of the above issues are critical to product sales
7. Companies don’t focus on markets
8. Products fail because they don’t sell
9. 85% of product failure can be traced to market related issues
As we said earlier there’s no ‘plug and play’ way to go about this. Each market, each solution and each startup is different. We’ve tried to pull this into some easy steps but sorry to say, you’ll have to do the hard yards filling in the gaps and then getting out there. You can do eeeeeeeeet!
The essential components to completing market validation. Make sure you’re ready with these:
- A somewhat developed idea or prototype
- Clarity on the market you want to provide feedback or validation, and a plan on how to connect with them
- Pace — validate fast. 5 days not 5 years!
- An open mind to really hear what the market tells you
- A willingness to adapt as needed (the solution, the approach, pricing or the whole idea!)
Jim Semick of Product Plan suggests that, as business or product ideas develop, a lot of the key inputs are assumptions. Writing down a lean canvas or business plan is crucial, but a lot of the information, especially about the ‘problem it will solve’ and about the target customer base will be based on desktop research, some conversations and a lot of assumption. This is normal, and to be expected. Just don’t base the whole business on these. Get out and get the truth early! You can do so by talking with your target market, or key influencers in that market.
As market validation is subjective and people will often feel comfortable giving nice feedback and pointing out what they do like, Jim puts it perfectly “Liking Your Idea is not the Same as Buying Your Product”. Hence the need to really delve into the value, budget or price side of things. Asking ‘as an estimate, how much does this issue cost your business today’
“If your startup failed, it’s because it didn’t solve a tier 1 problem for a large enough audience” Mitchell Harper (Founder of Big Commerce)
He also says “Validating the demand for your product is more important than ANYTHING.”
Here’s a summary of his tips that require $0 to not only validate the solution but determine if there’s enough of a market for it:
1. Write down the problem (not the solution! You have to really understand the problem)
2. Determine if it’s a Tier 1 problem or not (Tier 1 means its one of your customers Top 5 problems) — find this out. Aim to connect with 20–50 people who are key decision makers that may have this problem)
3. Know what exists to meet that need/ solve that problem today — he says not to focus on asking product questions, instead ask “so how do you handle that today?”
4. Look for pain in existing solutions
5. Understand an indicative budget “So if we build something that solved the problem in a way that I just explained, what would your thoughts be around pricing?”
Essentials of how to ….
Hiding behind a computer won’t cut it. Yes you’ll need some stats and data and information. You may include a survey. There’s definitely a place for surveys and other tools but these alone are not enough.
You need to connect and listen to your market. Interviews, face (or phone/Skype) time is powerful. Plan ahead so the face time is valuable for you. Use this time time to get a really well rounded view of your market, and see the problem and solutions from your potential customer’s perspective.
Look to gain insights on their whole business, use the time to test your assumptions of all areas of their business and the market. It is important that you discover and discuss more than just product features, or your solution, as this can create a narrow view which may be misleading for your business.
The old saying ‘failing to plan is planning to fail’ always rings true, especially when investing valuable resources such as time! Know how much time you’re asking of those you’re connecting with and
have a master list of open questions ready to go. Be prepared to go off script to do a deeper dive. Treat every conversation like it is a major journey of discovery — be relentless in seeking to gain a deeper understanding of what you’re being told. Be confident to ask more and more to get clarity. Lots of politely asked ‘why’ and ‘how’ questions can lead to powerful new insights that set your business up for success.
Some questions to consider using for your interviews:
Start with the discovery questions …
What are the core focus areas for growth or improvement in your business?
What frustrations do you currently have when (insert the problem you believe your customer has here)?
How are you currently addressing this?
How do you see that playing out in your business in the medium-long term?
As an estimate, how much does this issue cost your business today
Why have you chosen to partner with (competitor) and what elements do they/their solution do really well? What could they improve?
When you’re ready to move onto the product, service or solution testing questions which can be more specific around application. Be sure to include some broader ones around alternative solutions too!
What alternatives can you see that may exist, instead of adopting a solution like this?
How would this solution add value or reduce risk or cost in your business?
What other factors can you see, that may affect the uptake of a solution like this within your industry?
What features or elements are most useful?
What areas do we need to simplify?
What value might this offer that we haven’t yet thought of?
Here’s the step by step guide
1. Determine your target market
2. Understand (or seek to) their pain point. Develop a compelling reason for them to test or try your solution. No pain, no reason to change.
3. Find your target market, connect, ask and listen.
4. Numbers — is the market sizeable, are they willing to pay (or pay enough) for your solution.
5. Evolve and adapt your solution. Market forces change, the competitive landscape or business environment changes. Keep an eye on this especially if you validate early and then spend 12 months building — stay close to your market and adapt following this validation feedback, and throughout the development (well, at all times really).
Now go, get that external validation (the only time we endorse this!). Go get your product into the hands of those whose opinions truly matter — your potential customers!