Imagine a situation where you have a brilliant product idea. You think it through and realize there is a definite need and way to put it out to the market. However, you might consider pausing before investing a lot of time and money into it. Where is the surity that people are going to accept the product? Would the monetary aspects to it make sense in the short and long term?
We see countless start-up ideas taking life and fading away. Out of the many that do make it past the ideation stage, a staggering 90% of them fail. There are a lot of reasons for that but the most glaring one is the lack of market validation.
What is Market Validation?
Market Validation is a very initial stage of product development where you determine how viable a product is for a given target market. This is where you involve your potential users to understand if there is a real need and market fitment for your product once it is launched. Market validation is suitable to validate a new product/ feature launch or to understand how the market would react to any changes in an existing product.
While most new business ideas are based on certain assumptions, market validation unveils what users truly need. This understanding allows you to gain insights, thus ensuring you create products that deeply resonates with users. Hence, earlier assumptions can now be backed by data to ensure business decisions with lesser risks and challenges.
Why is Market Validation Important?
With the market saturated with new products and existing options, understanding conscious and subconscious user needs and preferences becomes a game-changer. There are several reasons why market validation for a product is crucial. Some of the important factors are:
Understand Demand:The first and most important function of market validation is understanding if your product is meeting a demand or uncovering a gap in the market. This helps you adjust to the situation and create products that users can connect with from the get-go. Adoption of users and building customer loyalty becomes an easier process in the later stages.
Avoid sunk costs: To develop a product is an expensive and time-consuming endeavor. Working on it without understanding if it is going to be accepted by potential users can leads to failure. This will translate to a lot of sunk costs. Market validation helps to avoid that by ensuring potential pitfalls and risks are more visible so that informed decisions are taken while building a product.
Secure Funds: The reality of any business is that to build a well-rounded product, you need money. Even with initial investments, you will still need funding for a business to grow. Market validation give entrepreneurs and investors an idea of how likely a product is likely to succeed in a business. With a sound research backing a market validation research, it makes it attractive for stakeholders to secure funding for product development and business growth.
Market Validation Process
Assess Goals & Assumptions
As the first step, you need to ensure the problem you are trying to solve actually exists. Your early ideas may be solving a need but a lot of times new ideas are based on your own limited experiences and not what the reality might actually look like. You need to find and learn fresher information connected to that problem and see how they all connect to each other. The more clear you are about your problem statement and its solution, the better equipped you are to fulfill the market gap.
Understand Market Size and Share
Once you are clear about the objective, understand the market you are going to enter. Research the present and potential market share and the estimate share that can be captured once you are in the market. Look at how it might fit into the current scenario and how the competitors (if any) might react. This would help you forecast how your product is going to perform and give you an understanding of your scaleability in the long run.
Researching search volume of related terms is a great way to understand the market scenario. A high search volume for related products is an indication of a high customer intent. Using search terms that customers might use or relate with the need you are trying to solve. This will help validate the fact that there is a product need.
Conduct Customer Validation Research
This is the step where you involve potential users of your product to understand its benefits and limitations. Through different qualitative and quantitative research methods, depending on the objective, you can uncover data and insights which allows you to understand your product from the end users’ perspective. These help you drive the product in the way that best suits consumer needs and prefernces.
Below are a few common research methods for market validation:
Surveys: This qualitative research method allows you to gather insights by creating a survey or questionnaire which allows users to provide data and feedback based on different demographics.
Interviews/Focus Group Discussions: Online or in-person discussions which can be one-on-one or held in a small group to get opinions or feedback regarding your product.
Prototype testing: Here, potential users get to interact with a mock-up of a product to better understand how the product flow works in early stages and understand what works and what doesn’t.
Usability testing: This determines how users interact with a product based on different tasks. Based on this test you’ll uncover different viewpoints and opinions of how easy your product is to understand and use.
A/B Test: When there are two versions or the same product or design, an A/B test is conducted. Based on the feedback gathered, a call can be taken on which version will perform better and should be prioritised over the other.
Test and Iterate
Once you are sure about the product and it is ready, you need to ensure the best version of it is released. The final step in this case is to test with real internal and external stakeholders. Any remaining issues or pain points are now flagged and the necessary adjustments are made. This is a continual process where insights from the feedback is religiously taken to incorporate changes and adapted to ever evolving consumer needs. This step ensures the product is as seamless and intuitive as possible for the end users.
Common Mistakes in Market Validation
Inefficient research: Understanding consumers lead you to build successful product. For that researches need to be conducted properly with accurate data being collected. From the data collected, the insights should have a clear picture of the product and how it relates to the market.
Inadequate testers: For every research conducted, there is an ideal sample size which would be ideal to get the desired results. A small sample size might lead to inaccurate results while a skewed sample size might give a biased result. Hence it is crucial that optimum testers are taken to get the best results.
Underestimating Competitors: Analysing competitors is healthy and helps you learn and adapt to users and the market. Even if it is a completely new product, an indirect competitor can have a different product, fulfill the same need and become one.
Inflexibility: Constructive criticism and feedback is key in the initial phase of a product lifecycle. Priorities needs to be set and addressed while consolidating user feedback. A product need to be able to adapt and change accordingly according to changing user preferences for a product to be successful.
Example of Market Validation
Let’s take home devices like Google and Amazon as an example. Before becoming a staple now it many homes, it was unclear that it is a need and would be accepted by users. They started with understanding the market through consumer research to understand how voice assistants with smart home integrations have a valid place in the market. After understanding the demand exists, they tested the prototypes for these devices with select user groups. These gave them insights to improve subsequent designs into a model which would fulfil the existing gap in the market. Finally, it led to the birth of the final product which is then launch to a market.
Not only that they keep testing and iterating various consumer feedback and launch new and improved models after several market validations processes. This leads them to occupy a niche market making them one of the leaders in the segment.
Product development, specially ones which require a huge cost, should not begin without validating it. The open market can be a huge and terrifying territory to enter. But market validation is a guide that can help you navigate that world and understand the risks, challenges and opportunities it can bring. Once you understand your place in the market, you can take well informed decisions to ensure the risks are mitigated to a large extent.
User research methodologies help you gain perspectives from a users point of view. It all really depends on what users want and how to you are going to provide them in the best possible way that meets user requirement.