What Is Market Validation?
Market Validation Definition:
Market validation refers to the process of studying potential customers of a new product or feature to evaluate whether the product is viable in the target market.
Hundreds of start-up ideas see their birth and death in the same year. While there are many reasons some products fail, the most prominent one is the lack of market validation.
Market validation is the process of validating your product or service by your target audience before putting it on the market.
By conducting market validation, you can better understand if there is a place for your idea or if you need to alter it.
Let’s understand what market validation is and how you can do it.
Market validation is, at its core, the process of determining whether the market has room for your idea before investing money and time into it.
Between ideation and development, market validation is a critical step in the product development process.
With market validation, you aim to learn two things-
- Does your target market like your product?
- Is your target market willing to buy or pay for your product?
Businesses run market validations for new or existing products.
What Is the Importance of Market Validation?
Validation is the process of getting feedback from potential customers to determine if there is a demand for your product or service. Without market validation, you’re just guessing whether people will actually pay for what you’re selling.
Companies that take market validation seriously also have a competitive advantage.
Market validation is essential because it helps you to-
- Understand your market better.
- Avoid huge failures.
- Determine your business model.
- Secure and justify product funding,
Understand Your Market Better
When you conduct market validation research, you may not get a clear yes or no for your product. However, you may get to know your customers better in the process.
Developing customer empathy in the pre-development stage itself is crucial. It helps provide value through your product.
You may learn the size of your potential market and the reception your idea is getting. Moreover, you can also understand what your product is missing with user research methods.
Carrying out market validation and connecting the dots early can help your product idea in the long run.
Avoid Huge Failure
Product development takes a lot of time and money. As a result, the sunk cost can be high if you develop and launch those products but fail to attract market users.
Market validation can help you avoid these problems by ensuring that you understand your users and aren’t creating a product that no one wants or needs.
Market validation is the difference between failed start-ups and ground-breaking start-ups.
Determine Your Business Model
When you do market validation, you get insights about your target market. But you will learn about more than just your customer.
Market validation provides insights into business decisions through user feedback.
For example, suppose your test audience likes your product idea but is hesitant to buy it. Perhaps they are willing to buy your product after a free trial.
This suggests that a freemium model might be suitable for your product initially.
Secure and Justify Product Funding
You’re going to need funding for any product to begin development. And investors like to put their money where it grows.
So, conducting market validation and gauging the reception of your product along with its predicted success will help you pitch better.
What Is Your Market Validation Plan?
Look around. There’s tons of competition. Having an ‘idea’ is not enough. It has to be viable.
Most groups understand the importance and need for market validation. However, not everyone has a solid market validation plan.
You can not just dive into the process and wing it. It has to be fool-proof. So, what’s your market validation plan?
Here are some things you should consider while designing your market validation plan:
- Do you have a target audience yet, or do you have to find one?
- Which team will handle market validation for you? (Tip- Cross-functional teams work best.)
- At which stage of development are you going to conduct market validation?
- What market validation methods are you going to use?
- What is your desired result?
- What metrics would indicate the viability of your product or service?
- How will you proceed with development?
You can chalk out your market validation plan once you know more about the methods.
What Are the Market Validation Methods?
Here are some of the most common market validation methods you can use-
- Search Engine Research.
- Interviews and Surveys.
- Minimum Viable Product (MVP).
- Prototype Test.
- A/B Test.
Search Engine Research
Initial quick market validation is right at your fingertips. You may conduct a simple Google search about your idea and see if people are talking about it.
You may search for your market size as well. Perhaps you may learn more about the problem you are trying to solve.
For example, if you want to build a mobile feature for blind people, you can check the search volume of that keyword on sites like Semrush.
Interviews and Surveys
Interviews and surveys are the most effective and popular methods of market validation tests. This allows for more qualitative data at hand.
These market validation research methods are incredibly adaptable, allowing you to learn about your customers from various perspectives.
A survey or questionnaire provides you with many responses. In contrast, interviews allow you to delve deeper into people’s feedback and uncover their real issues.
Minimum Viable Product
A minimum viable product (MVP) is the simplest version of your intended product that is capable of providing value to customers.
Market validation tests frequently use MVPs to gauge the users’ interest level and how they may interact with the product itself.
If users continue to use the MVP, it justifies investing in developing a full-fledged version of the product. It also enables you to obtain feedback from your target audience and identify any significant issues with their usage.
Having test users interact with a prototype version of your product can reveal more information about what works and what doesn’t.
It implies that people don’t have to imagine an idea or product anymore. They get to use the product for real and relate to it outside of the test.
Do we have two versions of the same idea? Let’s test them both.
With A/B testing, you put out both versions of your idea to your users and gauge which gets better reception.
For example, suppose you get more subscribers through the freemium model than the pay-per-use model. You can use this to develop your product marketing strategy.
How To Do Market Validation?
Market validation is a step-by-step process. We recommend you don’t wing it.
Irrespective of your industry or product, a market validation plan has the following basic steps-
Build Your Hypothesis
You can only begin the market validation process with a goal and a hypothesis. After all, this process aims to validate market viability assumptions with actual customers.
Some examples of critical assumptions are-
- “This product has market demand.”
- “The product will solve the needs of its users.”
- “Our pricing strategy is appropriate for our target market.”
With that, you can then create your test.
Design Your Test
Here’s where you design the primary test itself. You will have to pick one or more of the market validation methods covered earlier.
You should ensure to ask the right questions. Use the SMART goal-setting technique for your test.
It’s best to conduct a dry-run and reiterate your test before exposing it to your representative sample.
Fetch Research Participants
Recruiting research participants is an essential aspect of any type of study.
First and foremost, these participants must represent the user persona for your product.
Secondly, be prepared to offer incentives or other compensation for the effort involved.
Thirdly, diversify your recruitment efforts. You can also use your social circle, the social media network, professional network, university students, and online portals.
Run and Review the Test
Now, you can conduct your test. The results may not always be favorable. But you must assess them from every pre-defined criteria and make your product decision.
Being incorrect does not imply failure. Product teams should never assume they know exactly what users require.
Always listen to the customer while maintaining a humble mindset and assuming you never know the answer.
And that should set you up for success!
What Are the Examples of Market Validation?
Here’s a simple example of market validation-
You’re a travel agency named TravelCo.
Consider running ads for your new product. You’re not sure if a particular product feature is viable. You want to know if providing a free cancellation option on bookings will help gain and retain customers.
Now, your first step would be to build your hypothesis. Say, “Free cancellations result in higher customer conversion rates.”
Next, you design two ads to run. One that mentions free cancellation and another that doesn’t.
Try this on a specific target audience network.
You can use Google and Facebook analytics to see which ad had a greater click-through rate. This will help you decide on adding the new feature.
Some great tools for quick market validation are Google Suite, Unbounce, FiveSecondTest, Zintro, and AskYourTargetMarket for various functions of market validation.