What is Market Validation?
Market Validation is a process by which an entrepreneur determines if there’s a need for his/her product, feature or service in your target market. It helps businesses/startups determine if there is a demand for the product and whether the business can turn profitable.
This process takes place early in the ideation phase, so as to ensure time and resources are not wasted to build a product/feature which might not be a good product-market fit. This may also help you convince investors/banks to invest in your startup.
By going through the Market Validation process, an entrepreneur can get a deeper understanding of the product, market and pain points of the target audience. Also, this could land you with leads for your potential first paying customers.
Why is Market Validation Important?
Every 11 out of 12 startups fail every year (Source: https://startupgenome.com/ - 2019 Report), mostly because they aren’t able to find a product market fit. One of the most important reasons for going through Market Validation is to verify TAM, SAM and SOM. Every idea seems to be a viable one until it’s too late, Market Validation can help identify the viability at the earliest.
How to do Market Validation?
Running Market Validation can vary differently depending on different factors like demographics of users, type of product and time and resources available.
The two most common types of Market Validation processes are:
- Sending out Surveys to user personas
- Taking 1-1 interviews with potential customers
Steps for Market Validation
The Market Validation process can be broken down into 5 small steps. Below, you can find a more detailed explanation about what each of these means.
- Preparing a clear explanation of the product, with Goals, Assumptions and Hypothesis listed.
- Find Ideal User Personas
- Create an Interview Questionnaire
- Conduct Survey/Interviews
- Analyze the Data
Preparing a clear explanation of the product, with Goals, Assumptions and Hypothesis listed.
Create a clear product brief, with all the details about the product, answering the following questions,
- What problem is the product solving?
- How would the product solve the problem?
- Who’s the target audience?
- How do you plan to make money out of this product (Business Model)
- What does the competitive landscape look like?
Answers to these questions can help you communicate the solution to the product better.
Find Ideal User Personas
During this step, you are supposed to create a user persona for your product. In simple terms, find the demographics for whom your product is best suited for. Now, build a list of people matching the user persona. It is a good practice to incentivize target personas to interviews, either by giving them early access or an extended free trial.
Create an Interview Questionnaire
This could be the most important step during the market validation process, the way you frame questions could have a strong influence on the Interviewee’s answers. Instead of focusing the questions on products, it is better to focus on the pain points of the potential customers. Use open ended questions.
If correct people are targeted, one can find useful results even with a low number of in-depth interviews. Although, the more the interview, the better. It is important to stick to the questionnaire, but if the conversation deviates, let the interviewee talk about his pain points. But make sure that interviewee reveals answers to the same questions, which will be helpful in analyzing the responses. It is recommended to let one Product manager lead all the interviews, mainly because he/she might have the deepest knowledge of the product.
Analyze the Data
After all the interviews have been completed, compile the results of all the interviews together. Try to find trends like, does your product solve the pain points of customers or is there any other product solving the same problem. If you are able to find a trend, summarize the data in a clear presentation. You have successfully validated your Product. If your product couldn’t find a strong market validity, try to improve the offerings and repeat the market validation process.
Many entrepreneurs are so enthusiastic about their ideas, they rush into building the product without validating the idea. This results in wastage of time and resources. To ensure this doesn’t happen, following the Market Validation process could lead to finding a product-market fit even before launching the product.