Who remembers New Coke? How about Heinz EZ Squirt Ketchup? Or Bic For Her pens? These three consumer products surprisingly have one thing in common. They all failed! Now, you may be wondering how multinational corporations like The Coca-Cola Company, the Kraft Heinz Company, & Société Bic could make a product that would flop after so many years of success? It’s an all too common mistake that can have long-term effects on start-up businesses and mature organizations alike. The problem we are discussing here is market validation. But, what is market validation? What does it really mean to validate a market? Why is it important to entrepreneurs, founders, business owners, and companies both big and small? And what are the steps to validating your business idea? Let’s dive in!
What Is Market Validation?
Here at Vertical Motion Inc., we define market validation as the process of bringing your dream project or product to your target market and seeing if it sparks any interest. It doesn’t matter if it’s mobile app development, a custom software solution, a web-based application, or some other creative software widget – there’s always a step where you need to get it in front of the people who might buy and use it.
Up until this point, you, your co-founders, and business partners have most likely brainstormed ideas, conducted secondary research, and talked with family members and friends. These are all great things, but they don’t compare to having real conversations with prospective customers who may buy your product in the near future.
The primary objective in this customer interaction is to learn more about your buyers, what delights them, if there are enough of them, and ultimately whether your novel idea is worth pursuing.
Why Is It Important?
So why does this matter? Isn’t it enough to have a beautiful user interface (UI), superior user experience (UX), and countless product features? Well…No. This may have worked in the post WWII Golden Age of Capitalism, but in 2021 a pretty design and unique concept isn’t enough to attract buyers to your business.
Let’s look at the mobile app industry for example. The Apple App Store has approximately 1.9 million apps available for download, with the Google Play Store reaching roughly 2.8 million. Even if 25% are poorly designed, cheaply made, and barely function, that still leaves a combined total of 3.5 million apps that have a beautiful UI, a superior UX, and countless product features just like yours. In a highly competitive and highly saturated market, product design and development is no longer a competitive advantage but a customer requirement.
This is where market validation comes into play. Instead of investing human capital, financial resources, and sweat equity into your idea and hoping it sells, market validation takes your concept to your future buyers first to see what they think. This precious time with your customer allows you to gain valuable insight into their needs and will point you in one of three directions.
One, your product serves a big need that is worth pursuing, your customers like your business concept and would choose it over existing solutions. This outcome happens roughly 5-10% of the time and should be the sign you are looking for to continue down the product development life cycle.
Two, your product serves a big enough need that is worth pursuing, your customers like certain aspects of your business concept, but they have identified areas of improvement. This outcome happens 80-85% of the time and should be a sign that you are on the right track, but need to go back to the drawing board with your customer feedback and adapt your value proposition in order to effectively meet this more clearly identified need.
Three, your product either doesn’t serve a big enough need to warrant pursuit or your product doesn’t meet your customer’s needs. This outcome results 5-10% of the time and is a tough pill to swallow. If there isn’t a big enough need to serve, your idea is either too niche or the problem isn’t as bad as you initially thought. In this case, you can look at potentially expanding your market to make it more viable or move on to the next great idea you think of (trust us there will always be more). As for the other outcome, a wise entrepreneur will seek first to understand why their product doesn’t meet their customer’s needs. This can provide a road map on what to pivot your business to. However, after pivoting you will need to seek market validation once more. If this isn’t an option, once again it’s time to move on to your next best idea.
How Do I Validate A Market Before I Go All-In On My Idea?
You now understand the concept of market validation. You know why market validation is important to your business. But, how do you actually validate a market before going all-in?
Step One: Write Down Your Product Concept & Assumptions
The more information and assumptions you can identify early, the more information you can confirm or deny with your customers. List information like:
- What problem am I solving?
- What pain does my customer experience?
- How important is it to my customer that they find a solution to this problem?
- What existing solutions are available?
- Where are my competitors failing?
- How will my solution better meet the customer’s needs?
Step Two: Identify Your Target Market
After you have identified and written out your product concept and assumptions it’s time to clearly define your primary target market. Important information to identify includes:
- Age range
- Income
- Geographic location
- Lifestyle
This will give you a more clear idea on who you need to target as you seek to validate the market for your product. If you find there are very few individuals to connect with in the next step, revisit this step as you may have too finely defined your target market and you may need to expand your parameters.
Step Three: Test
There are many ways to facilitate market validation testing. The most common method is to communicate with your target market. The best option is face-to-face conversation, however, if your target market is outside of your geographic boundaries, video conferencing and phone conversations can be effective tools.
It’s beneficial to come prepared with starting questions to ensure this time is used wisely, however, be flexible and allow the conversation to deviate as you learn more about your customer. The objective is to gain as much information as you can in this short time, so dive deeper into customer responses by asking “why” to get to the root of their answer.
Step Four: Analyze & Evaluate
After you’ve spent time with your customers and recorded their responses, review their responses for commonality. Where is there overlap in customer responses? This will help you to identify areas you need to improve upon as you continue product development.
Step Five: Rinse & Repeat
After making the changes you have identified in Step Four, go back to your target market and test again. Continue this process until you have identified a basic product that your market is prepared to purchase and utilize. This is when you will begin the development of your Minimum Viable Product (MVP). For a step-by-step breakdown on how to build and deploy a MVP take a read through our blog article Your Guide To MVP App Development.
Want to Stay Connected?
Vertical Motion Inc. is a Calgary & Kelowna-based business supporting the needs of entrepreneurs and business owners since 2006. Our team of expert business specialists, project managers, front and back-end developers, marketers, graphic designers, and professional advisors support the needs of both B2B and B2C businesses in all industries including Blockchain, Cryptocurrency, Clean Technology, Augmented and Virtual Reality (AR/VR), Sports and Recreation, Real Estate, and Health Care. We specialize in creating custom Web, iPhone, Android, and Windows solutions for businesses of all sizes including startups, small businesses, not-for-profit organizations, and large corporations. Ready to take your idea to new heights? Drop us a line
Not quite ready yet? Sign up for our monthly newsletter for relevant business articles, Vertical Motion blogs, and our business Q & A. Have no fear we are spam clear! 🚀
Written By Tyler Mikitka, communications officer on the bridge at Vertical Motion.