Taking that step to launch your new venture is exciting, but it can also be nerve-wrecking. After all, you want to make sure you have considered every possible factor and bulletproofed your strategy from unforeseen circumstances.
For that, it’s important to validate the market before you launch your product. But how do you do that?
In this article, we’ll cover:
- What Is Market Validation
- Important Things To Keep Ready Before Validating The Market
- What Happens When You Skip Market Validation And Attempt To Launch Your Product
- How To Conduct Market Validation Exercise For Your Product
- Message Testing Methods
- Best Tools And Resources for Market Validation
- A Quick Guide For Designing Your Market Validation Surveys
So, stick to the end and be assured of your product’s demand before investing a lot of your resources.
What is Market Validation?
Market validation is the process of determining whether there’s a demand for a product or service in your target market. It involves getting feedback from your potential customers. By validating a business idea in your early entrepreneurial stage, you can learn more about how your product meets or fails to meet the needs of your target market. This helps ensure you don’t waste your resources creating a product that doesn’t fit your intended market.
Market validation comes between ideation and development and is a crucial stage in the creation of new products.
Why Is Market Validation Important?
Market validation helps anticipate the demand for your product in the market, enabling you to understand whether your business will be profitable.
Below are the reasons why market validation is important:
1. Avoiding big product failures
It takes a lot of effort and resources to develop products. If those products are developed and launched – but do not succeed in drawing customers from the market, the sunk cost can be substantial.
Market validation helps you avoid these undesirable situations by ensuring you understand your customers and that you are not developing a product that doesn’t have a demand in the market. Similarly, product validation helps evaluate whether or not a product addresses the needs and pain points of its current and potential customers.
2. Creating a better product
Market validation gives you the ability to assess whether there are any flaws in your product. These insights will help you build a product that brings the best value to the users or addresses their pain points.
3. Minimizing costs
Validating your business idea cannot ensure your startup's success. However, during the validation process, you can evaluate whether your product will be a success by spending minimum costs. And if you predict less demand for it, you can avoid wasting your resources. By using a landing page for idea validation, you can evaluate if you should move forward with the idea.
4. Checking if the demand for the product is real
Conducting market research can help forecast whether there is demand for your product in the market. This will enable you to develop products that your potential customers actually want, by providing you ideas for new features or suggestions based on the pricing, packaging, etc. Customer validation helps you avoid building products that no one wants.
5. Securing funding
Market validation is performed to accurately determine the possibility of the success of your product. The process makes it easier to justify the development in the eyes of the stakeholders and potential investors.
Why Should You (Always) Validate The Market Before Even Starting To Build Your Product?
Validating the market can be hugely beneficial for an entrepreneur. Below are the reasons why you should do it before building a product.
- Market validation helps you understand your market better. For example, Spotify analyzed how Asia’s market is different from the rest of the world and figured out that serving India was like serving 28 different countries because of differences in cultures and languages.
- You can avoid huge failures by not building products nobody wants.
- It helps you understand what and how your potential customers react to your product and enable you to serve better. For example, eDreams got to learn that their customers did not find “flexible ticket cancellation” as an important feature initially because they did not understand the concept. So it was unlikely going to be successful – the way they planned it.
- It allows you to determine your business model by learning more about your potential customers’ willingness to pay.
- You can justify and secure product funding because a well-researched market is always attractive to stakeholders.
Market Validation Prerequisites: A Few Very Important Things to Keep Ready Before Validating the Market
Before you perform market validation, there are some things you must keep in your mind to ensure its effectiveness. So, here are a few of them:
1. Define your target customer segments
Organizing your target audience into groups based on various categories like demographics and psychographics is an important step. It entails dividing your target audience into different segments based on some common traits like age, income, hobbies, and location, etc., to understand their specific requirements & serve them better.
While doing it, it is important to keep the following in mind:
- Don’t go too narrow: Obviously, you want to have a distinct and clear idea of the audience you're speaking to. But be careful not to take it too far and make a segment with just one or two people. Consider removing a few of the filters if you notice that some of your segments are capturing no one or very few people.
- Set goals and measure your success: Audience segmentation only works if you know what you're utilizing it for. Set your exact goal & periodically evaluate your progress.
Market segmentation is important for the following reasons:
- Market segmentation allows you to understand your customers on a deeper level. You can use this information to tailor your content to every segment’s unique challenges and requirements. With that, you can also create ad campaigns and convert more customers.
- It also helps you improve your customer service efforts.
- Market segmentation allows you to prepare for different challenges that are likely to occur.
- Dividing the market also helps find new opportunities to build and serve products, services and support efficiently.
- Communicating with different segments through their preferred channels or platforms also becomes easier. This also makes them feel more personal and included, thereby building long-term relationships.
It is similar to creating buyer personas or semi-fictional representations of your ideal customers based on market research and a few practical assumptions.
It helps you understand and relate to the target audience for your products and services.
Here are a few buyer persona canvas templates that you can edit & use directly for your market segmentation.
2. Ensure your market is big enough to achieve your sales and profitability goals
While validating the market, an important factor that you need to consider is the size of the market. Accessing the potential market size helps estimate your sales and profitability goals. Moreover, it is also important to calculate the Total Available Market (TAM), Serviceable Available Market (SAM), and Serviceable Obtainable Market (SOM) to help investors get an idea of the potential returns.
Here’s what these terms mean:
TAM
The whole market demand for a good or service is referred to as the total available market. E.g., The worldwide market for milk. However, it is not feasible for any company to capture the entire global milk demand due to its limitations and competition.
SAM
The portion of the TAM that your products and services are targeting that is geographically accessible is known as the Serviceable Available Market. E.g., milk market in your city.
SOM
The segment of the Serviceable Obtainable Market that you can capture is called SAM. E.g., 20-30% of SAM or those residing locally and a small percentage of people from nearby localities. This is the most practical and important consideration for investors.
3. Make sure your TAM isn’t shrinking
Even though your current, most important consideration should be SOM, ideally, you would need to ensure your TAM is huge and isn’t shrinking. This is because the investor can begin considering how you can extend and enhance the company's penetration inside the TAM once you have shown your ability to enter a local market and de-risk the investment.
Below are some resources to guesstimate your TAM:
- Statistica
- Google Trends
- Trends.co
- Gartner
- Local data websites like Eurostat
What Happens When You Skip Market Validation And Attempt To Launch Your Product?
When businesses fail to validate their markets, they risk wasting resources on products that may not be well received by the public or provide a return on investment
Skipping such an important step might be tempting because of deadlines or pressure from the boss, but often leads to dissatisfied customers and loss of profits. Without proper validation of the market, companies tend to enter a competitive environment without enough information and knowledge about how their product fits into it.
Below are some of the startups that have failed because they missed market validation and the valuable lessons we can learn from them.
- Juicero: This company was founded in 2013 with the goal of revolutionizing the way people make juice at home. The product was an expensive, Wi-Fi-connected machine that would press pre-packaged bags of fruits and vegetables into juice. Unfortunately for Juicero, their product failed to take off due to its high price tag and the fact that customers could easily squeeze the bags themselves. Had they conducted price testing, the scenario could have been different.
- Fab.com: This company was founded in 2011 with the goal of becoming an online marketplace for designer goods. Despite having a large user base, Fab.com failed to take off due to its inability to differentiate itself from other e-commerce sites such as Amazon and eBay.
- Color: This company was founded in 2011 with the goal of creating a social network based on photos. Despite having a large user base, Color failed to take off due to its inability to differentiate itself from other photo-sharing sites such as Instagram and Snapchat.
How To Conduct Market Validation Exercise For Your Product?
Learning how competitive the market is, who your competitors are, which features customers want in your product, and more is important to carry out your product in the market and ensure its success. So, here’s how you can conduct the market validation exercise for your product.
1. Identify Your Target Audience
The first step in conducting a market validation exercise is to identify your target audience. This involves researching the demographics, interests, and needs of potential customers who would be interested in your product or service. You can use surveys, focus groups, interviews, and other methods to gain insights into the needs of your target audience.
2. Analyze Your Competitors
Once you have identified your target audience, the next step is to analyze your competitors. This involves researching their products, pricing, marketing strategies, customer service, and other aspects of their business. You can also use tools such as Google Trends to compare the popularity of different products in the market.
3. Conduct Market Research
After analyzing your competitors, it's time to conduct market research. This involves gathering data on the size of the market, customer preferences, and other factors that can affect your product's success. You can use surveys, interviews, focus groups, and other methods to gain insights into the market.
4. Test Your Product
Once you have gathered enough data from your market research, it's time to test your product. This involves creating prototypes or MVPs ( minimum viable products) and testing them with potential customers. This will help you identify any issues with your product and make necessary changes before launching it in the market.
5. Analyze the Results
After testing your product, it's time to analyze the results. This involves looking at customer feedback, sales figures, and other data points to determine whether or not your product is ready for launch. If the results are positive, then you can move forward with launching your product.
6. Adjust Your Strategy
Finally, you should adjust your strategy based on the results of your market validation exercise. This involves making changes to your product or service, pricing, marketing strategies, and other aspects of your business in order to ensure its success. You can also use this data to make improvements and ensure that your product remains competitive in the market.
Conducting a market validation exercise for your product is essential to ensure its success. By following the steps outlined above, you can efficiently conduct a market validation exercise and make sure that your product is ready for launch.
It is also important to find out how the product's target market is responding to its marketing messages. For that, message testing is an important step.
Message Testing For An Effective Messaging Strategy
Many businesses rely on guesswork when determining whether their message is hitting the mark or not, which can often lead to inaccurate results. Thankfully, there are several reliable techniques that can help marketers test their messaging and get accurate feedback.
Message Testing Methods
Here we'll explore some of the various message testing methods available and how they can help you craft a more effective messaging strategy.
1. A/B Testing
A/B testing is one of the most popular message testing methods. It involves creating two versions of a message and then sending them out to different groups of people. The results are then compared to determine which version was more successful.
2. Surveys
Surveys are another great way to test messaging. They allow marketers to get direct feedback from customers, which can be invaluable in crafting an effective message. Surveys can also provide insight into customer preferences and help marketers tailor their messages accordingly.
3. Focus Groups
Focus groups are a great way to get feedback on messaging from a larger group of people. This method allows marketers to get a better understanding of how their message is being received by their target audience.
4. MVPs
Minimum Viable Product (MVP) is the most basic version of your intended product that still provides value to the user. Watch the following video to learn how can you validate with an MVP:
MVPs are frequently used for market validation to gauge user interest in the product and how they interact with it. Additionally, it enables you to gather feedback from your intended market and spot any significant problems with their usage.
Whether to create an MVP or not often depends on what it takes to create one. If it is going to take a year or so to develop an MVP version, it might be better to test the interest of the users through other ways first. Similarly, if developing the final product won’t take a lot of your time & resources, it’s better to skip this step and directly move towards the development of the end product.
If you want to develop your MVP quickly & within the budget, this guide on minimum viable product examples is a must-read.
But, how to put these methods into practice? Below are some of the best tools for message testing that will assist you in judging the performance of your message copy:
- Wynter: This popular user testing software called Wynter targets copywriting and messaging in particular. With Wynter, you can design efficient message-testing queries. The panelists will then just need to browse the website, respond to these queries, and provide feedback on various elements of the marketing message.
- FiveSecondTest: FiveSecondTest, as is clear from the name, gathers a group of testers and gives them five seconds to browse the website. Although it does a similar job to Wynter, its findings are less specific and more generic. They are then required to explain what they believe the website is about.
- Google Analytics 4: GA4 can be used to measure the success of messaging campaigns. By tracking metrics such as open rates, click-through rates, and conversion rates, marketers can get a better understanding of how their messages are performing and make adjustments accordingly.
- Adobe Target: Adobe Target, an enterprise-level solution called offers A/B testing services. It can be easily integrated with Analytics to generate reports for user experience testing, shifting market offerings, etc... You may quickly develop different website versions with Adobe Target and target audience segments based on the outcome.
- HotJar: HotJar helps create heatmaps, session recordings, and surveys for your website. It reveals how users move across your page, where they scroll, and where they spend the most time.
Even though it might not demonstrate how effective your copy is, it does make uninteresting copy more obvious. If your sales copy is lengthy, you can tell when the readership dwindles and they stop reading. You can revise portions with noticeable drop-offs.
Overall, message testing is an essential part of any successful marketing strategy. By using one or more of these methods and tools, marketers can ensure that their messages are hitting the mark and reaching the right people.
Best Tools and Resources for Market Validation
To make your market validation process easier, you can use some digital tools. Below are a few of them.
1. Google Trends
Google Trends is free-to-use and excellent for identifying and evaluating market trends. Google Trends carefully examines the search terms that people enter into the search engine. You can assess company ideas based on the popularity of products and search terms. This will enable you to determine whether a certain product is being purchased.
2. Quora
Quora is an ideal social network for information sharing. You can freely enquire about a subject connected to your business concept and promptly get responses. Each month, 300 million people use Quora.
3. MindMeister
MindMeister is used to develop ideas, create mind maps, and communicate them to other users. Additionally, MindMeister enables you to organize projects and take notes. The tool itself has a very user-friendly UI.
4. Brand24
Brand24 is a robust and all-inclusive internet monitoring tool. Users are looking for and asking for product reviews online. This suggests major issues that people are facing at a point in time. With the help of this tool, you can track mentions of a certain product. It is also possible to determine how frequently a topic is discussed or an issue appears. Additionally, Brand24 makes it simple to spy on rivals' activity.
5. Typeform
Using surveys and forms is a very efficient approach to testing a startup idea. And, to make their preparation less arduous and time-consuming, it’s worth giving Typeform a try! You may quickly personalize any survey with Typeform's tools. Numerous Fortune 500 firms, like Apple, Uber, and Nike, employ this software.
Using these tools can expedite the business idea validation process. However, you might also need a few resources for making this process easier and more effective. So, here are a few of them:
- How To Select A Test To Get Market Validation For A Business Idea: For a list of tests to choose from for your market validation exercise.
- Validate Your Product: 19 Market Testing And Market Validation Tactics (Plus 7 Tools For Validation): To learn about different validation techniques in detail.
- 6 Market Validation Methods In Australia: To understand the six market validation methods commonly used in Australia: customer interviews, wireframes, and prototypes, concierge service, halving the market, minimum viable product, and test marketing, in detail.
- Product-Market Validation: A Step-by-Step Guide: To learn how to use Facebook advertising to determine who is most likely to purchase your product and to demonstrate the popularity of your offering.
- Practical Guide on Validating Idea In 2 Days: To learn how voXup’s +PeterLewis tapped into the offline forum his app was trying to address - community residents - and simulated flows for his app’s most common use case.
A Quick Guide For Designing Your Market Validation Surveys
Designing market validation surveys is an important step in understanding the potential success of a new product or service. A well-designed survey can provide valuable insights into customer needs and preferences, as well as identify potential challenges and opportunities.
Best Practices
- Define the goals of the survey and the specific information you are looking to gather. This will help to ensure that the questions you ask are relevant and aligned with your overall research objectives.
- Consider the target audience for the survey and tailor the survey to their specific needs. Who will be taking the survey and what information do they have that is relevant to your research?
- Use clear and concise language that is easy for respondents to understand, and avoid using jargon or technical terms that may be unfamiliar to your target audience.
- Keep the survey as short as possible to increase the likelihood of response.
- Consider the method of survey administration and choose the method that best fits your research objectives and target audience. Surveys can be conducted online, by phone, or in person. Each method has its own advantages and disadvantages.
- Test the survey with a small group before launching it to a larger audience to identify any issues or problems. This will help to identify any issues or problems with the survey, such as confusing questions or unclear instructions.
- Encourage honest feedback and make sure that survey takers know how their answers will be used.
Sample Market Validation Survey Questions
Below are some of the questions you can include in your market validation survey. You can tweak these based on your requirements.
- How familiar are you with our company/brand?
- On a scale of 1-10, how likely are you to purchase our product/use our service?
- What do you like most about our product/service?
- What do you dislike most about our product/service?
- Where would you expect to find this product?
- How does our product/service compare to similar products/services you have used in the past?
- What features would you like to see added/removed to our product/service?
- How much are you willing to pay for our product/service?
- How often do you currently use products/services like ours?
- Are there any specific issues or pain points our product/service could help solve for you?
- Would you recommend our product/service to a friend or colleague?
- Would you be interested in subscribing to our service?
- Are there any other comments or feedback you would like to provide about our product/service?
In summary, designing market validation surveys involves setting clear research objectives, identifying the target audience, creating questions that are easy to understand, considering the survey method, and testing the survey before launch. This will help to ensure that the survey provides valuable insights and is well-received by the target audience.
In Conclusion
Many businesses are so excited to launch their ground-breaking product idea that, in their haste to do so before a rival company does, they skip the market validation stage and go straight to product development.
Your company shouldn't invest a lot of time or money in creating a product that will fail. Conducting market validation research early on in the concept validation stage of any new product will help to prevent this from happening. Find any issues before they cause expensive development errors!
We hope this article turned out to be THE ULTIMATE GUIDE on market validation for you. However, if you still need more resources, these may be helpful:
- Failed but Validated? The Effect of Market Validation on Persistence and Performance after a Crowdfunding Failure
- 42 Failed Startups with No Market Need
- Market Validation In The Context Of New High-Tech Ventures
- The Definitive Guide To Message Testing
- How to Select a Test To Get Market Validation For a Business Idea
Addendum
In order to raise funds from investors, you need to present a pitch deck to them that includes a brief but informative overview of your business.
Here are a few guides and templates that will help you nail your pitch deck.
Guides:
Sample slides/Templates:
- PowerPoint Market Validation Templates
- 30+ Pitch Deck Examples, Templates & Tips
- 35+ Successful Pitch Deck Examples
Now, time to answer some of your most common questions on market validation:
When should market validation be done?
Market validation is often done early in the product development process before any large investments have been made.
What are the differences between market validation, proof of concept, and product-market fit?
Market validation is a method of confirming that your idea is a solution to a real-world problem. It is usually done after problem validation. Proof of concept is used to demonstrate that your concept is operationally viable. It is not visible to potential customers as in the case of proof of concept. Product-market fit refers to how well a brand's product can meet the needs of the existing market through its product.
What is the best way to get market validation for a new product?
Identify a market, write your assumptions, hypothesis, and more about it, test your product with real customers, get their feedback by conducting surveys and interviews, do more field research, re-iterate your product, and make it more suitable.
What is the best way to perform a market validation survey?
Understand who your target audience is, make a solid strategy to get in touch with them, and take actionable data by asking open-ended questions about their current solution, its problems, and expectations.
What are the best books for market validation?
Below are the top 5 books for market validation:
- The Four Steps to the Epiphany by Steve Blank
- The Lean Startup by Eric Ries
- The Lean Product Playbook: How to Innovate with Minimum Viable Products and Rapid Customer Feedback by Dan Olsen
- The Entrepreneur's Guide to Customer Development: A cheat sheet to The Four Steps to the Epiphany by Brant Cooper & Patrick Vlaskovits
- Crossing the Chasm: Marketing and Selling Technology Projects to Mainstream Customers by Geoffrey A. Moore
Written by Aastha Kochar, a freelance writer at Shnoco.
