The process of validating your product idea is an important step in the development of any business. This whitepaper will walk you through a few steps to test your ideas by depicting how users interact with, and feedback on, specific features or products before moving forward with further investment.
The “business idea validation tool” is a product demand validation tool that helps entrepreneurs to validate their business ideas. This software is for companies who are just getting started, or have already been around for some time. It’s also great for marketing research.
It’s critical to ensure that consumers are interested in purchasing your goods before you start your company. This one step will save you weeks (or even months) of wasted time, as well as potentially thousands of dollars.
I’ll teach you how to make sure your clients are interested in your goods before you invest any time developing your company in this post.
What is the definition of demand validation?
Your concept, in all likelihood, isn’t flawless. Please accept my apologies for having to convey that harsh reality.
However, the good news is that there is a solution.
The first step in making your concept a success is to get other people to care about it. Your company will not go far if you are the sole possible client for your concept. Other individuals must be interested in purchasing what you’re selling. In other words, your product must be in high demand.
Demand validation comes into play at this point. The act of ensuring that other people are prepared to part with their hard-earned money to purchase what you’re offering is known as demand validation.
What are the benefits of validating consumer demand?
Because you’re beginning with an estimate rather than an actual product, you’ll need to verify that there’s a need for it. You’re making an educated bet that your product will be popular. You’re assuming that people are willing to pay for your service. You’re assuming that you’ll be able to turn your company into a successful venture.
Because your concept is only a series of assumptions, you’ll need to devote some effort to turning those guesses into facts. You may improve your idea and turn it from a poor concept into a viable, profitable company once you have the facts.
How to get consumers to test and verify your product concept
1. Consider the following three questions.
Now that you’ve got your company concept (actually, it’s just a guess, right? ), you’re ready to tackle three key questions:
- What is the issue that my prospective consumers are facing?
- What’s the answer to that conundrum?
- Why would anybody pay for my service?
You must comprehend the answers to these questions in order to effectively communicate your concept to others. More significantly, a sanity check is required to ensure that your concept is useful to prospective consumers. These are the initial stages in validating a demand.
We went through this identical process at Palo Alto Software a few years ago while we were working on a new team email solution. Here are our responses to the following questions:
- Problem: Managing [email protected] and [email protected] emails with a single email account is difficult, and consumers often get the incorrect or no answer.
- A collaborative email management application for teams is the solution.
- Value: Everyone can work in the same inbox without treading on each other’s toes, ensuring better assistance with less hassles for consumers.
This model won’t work for me since I’m opening a restaurant, you may think (or bike shop, or hair salon, or clothing store, and so on). This structure, however, does not need the creation of a new kind of company or product.
Consider the following scenario for a restaurant:
- The issue is that there are no excellent, reasonably priced Italian eateries in this area.
- Solution: A new west-side restaurant serving genuine northern-Italian cuisine.
- Value: A delicious dinner near your house at a reasonable price.
Consider the following scenario for a bike shop:
- Problem: Buying a decent bike in this town without being a “insider” cycling expert is difficult.
- Solution: A snob-free store where ordinary folks can obtain top-of-the-line equipment and professional guidance.
- Value: Affordable, high-quality cycling gear for your family and commuting, without the attitude.
You can use this exercise for any company, believe me. However, it is not always simple, and it will be tempting to delay and avoid this stage. Don’t allow your irritation get the best of you; the time you put in now will pay you later.
2. Formulate a value proposition.
You’re ready to construct a value statement now that you have the answers to your inquiries. This is often referred to as a value proposition or a unique selling concept, although the name doesn’t actually matter. Whatever you choose to call it, the exercise is the same.
Template for a value statement
Here’s a short template to assist you in developing your value statement:
If you believe that [issue] exists, you should consider [solution] such as [business name] in order to [value].
All you’re doing here is putting your three responses from the previous stage into a sentence. It’s possible that some wordsmithing will be required to make things work, but that’s OK. The important thing is to keep the message consistent.
This isn’t always as straightforward as it seems, but it’s well worth the effort. As you go through the demand validation process, you’ll come back to this value declaration again and again.
Example of a value statement for email software
Here’s the value proposition for the team email product we’re developing:
If you find it difficult to manage [email protected] and [email protected] emails with a single email account, and customers occasionally receive the wrong response or no response, consider using a collaborative team email management tool like Outpost, which allows everyone to work in the same inbox without stepping on each other’s toes, ensuring better customer support with fewer headaches.
Example of a value statement for a bike store
Here’s an example of a bike shop:
If you think it’s difficult to buy a good bike in this town without being a “insider” cycling expert, try a snob-free shop like Garrett’s Bike Shop, where regular people can get top-notch gear and expert advice, so you can get high-quality bike gear for your family and commuting needs at reasonable prices without the attitude.
Example of a restaurant value statement
If you believe there aren’t any excellent, fairly priced Italian restaurants in this area, you should try Beppe’s, a new restaurant on the West Side that serves genuine northern-Italian tastes, so you can have a wonderful dinner close to home at a reasonable price.
3. Determine the size of the search volume
With your three answers in hand, you can begin confirming that your prospective clients have the issue you believe they have and would be interested in your solution.
Let’s begin by looking at what people are searching for on Google.
You can check how many people search for particular terms and phrases using tools like Google’s Keyword Planner and Moz’s Keyword Explorer. Create a list of searches relevant to both the issue and your particular solution by considering what others may search for while searching for solutions to the problem you’re attempting to address.
For our team email product, for example, we could search for keywords relevant to the issue we’re solving:
- Organize your email
- Respond to emails from customers.
- Management of inboxes
- Overwhelming email
We’d also have a look at the solutions that people may be looking for:
- Emailing as a group
- Collaboration through email
- Inbox for the team
- Email a friend
- Email collaboration
- Email addresses for teams
If you have prospective rivals, check at their brand names to discover how many people are looking for particular solutions.
Hopefully, your study has shown that individuals are already looking for a solution to your issue. If you’re still stuck at this stage, go back to the drawing board, improve your concept, and try again.
4. Participate in the discussion
Next, search for online forums and other sites where your prospective consumers may congregate to discuss issues and solutions relevant to your business.
Check out Yelp and other review sites if you’re opening a restaurant, for example. Look for gourmet Facebook groups in your region. What exactly is the topic of conversation? Are they satisfied with their existing choices? What are they searching for if they aren’t satisfied?
This degree of study will assist you in converting your assumptions about the issue you’re attempting to solve into real facts. Use your study to demonstrate that individuals have the issue you believe they have and how much demand there is for your solution.
This kind of research will also provide you with a rough estimate of the size of your prospective audience. The information is just a rough estimate of your prospective market, but it will tell you whether there are hundreds or thousands of potential consumers out there.
5. Interact with prospective consumers.
The next stage is to speak with some of the individuals you saw from a 30,000-foot vantage point in the previous phase.
No, knowing how many people look for the issue you’re addressing on Google isn’t enough. You should learn more about these individuals. Is your product something they’d be willing to pay for? If so, how much will it cost? What are they doing now to address their issue? What do they think of your concept in general?
Make a list of prospective consumers’ favorite hangout spots.
Begin by locating 10 to 20 distinct locations where individuals with the issue you’re addressing congregate. Don’t simply mention “Facebook”—insist on being specific: Individuals who have rated other Italian restaurants on Yelp, people who comment on restaurant reviews in the local paper or alternative weekly, and so on are all members of the Springfield foodies community.
We searched for forums where people spoke about customer service, commented on blog articles about office efficiency, created blog posts about productivity and email hacks, and listened to the Startup podcast, among other things, for our team email solution.
You’ll need at least ten of these, and the more the better. If you’re having trouble with this phase, go back to your initial concept and make some changes. Maybe you’re not thinking about the appropriate kind of client or the issue you’re addressing has to be rethought. In any case, don’t go on without creating a list of locations where you may discover prospective clients.
Make a list of prospective customers.
Now that you have your list, you need to find particular people from each category to contact and ask if you can discuss your proposal with them.
At least ten people from each category should be found. Again, the greater the number, the better. Sure, there are a lot of individuals involved (at least 100), and yes, it’s a lot of effort. But who said establishing a new company was simple? While this may be difficult, it is much preferable than having to close a company into which you have spent time and money because consumers do not want your product.
Make contact with prospective consumers.
After you’ve compiled your list of individuals, the following step is to speak with them. It may be tempting to begin with a sales presentation to gauge their response, but there is a better approach.
Refresh your memory on the answers to the three questions we discussed previously. Now it’s up to you to put them to good use.
Begin by contacting someone (by phone, email, Facebook message, LinkedIn InMail, and so on) and sending a message like this. I’ll continue to use our team email product as an example, but this structure should work for any company.
“Hi— I truly liked your Gmail hacks blog article. I really enjoyed [insert what you enjoyed here] and want to use that hack with my own email.
I’m curious about how you handle [email protected] and [email protected] emails with a single email account to avoid consumers receiving the incorrect answer or no response at all. Is this a concern of yours? Do you have any recommendations for resolving this issue?
Thank you again, and keep up the fantastic blog posts!”
Of course, depending on who you’re contacting, you’ll need to adjust your message, but you get the idea. In the example above, I bolded the issue statement, but this is not something you should do in your real letter.
When you don’t receive an answer, what should you do?
Now, not everyone will respond to you, but you should at least receive a few. That’s why you’ll need a large list of possible connections. If you are totally unsuccessful, you may need to search for other places where your prospective consumers congregate, or you may need to revisit your issue statement. It’s conceivable that individuals don’t have the issue you believe they have.
6. Examine their reactions.
You’ll receive two kinds of replies from those who do respond:
- “I’ve never heard of that issue, and I don’t have it.”
- “I know a lot of individuals who are dealing with that issue. This is what I do to address that issue, and this is what I advise other people who have the same difficulty to do.”
If you receive a lot of the initial response, you’ll have to go back to the drawing board to refine your concept and come up with a new set of assumptions to test.
Ideally, you will get a large number of answers that fit into the second group. If that’s the case, you’ll want to follow up and elaborate on your solution:
“Thank you for responding so quickly! I’m fascinated by how people handle their email. In fact, I was considering developing a team-based email management system.
I envision a solution that allows everyone to work in the same inbox without treading on each other’s toes, ensuring that consumers get better service with fewer hassles.
Do you believe a product like that would be useful to you or others in similar circumstances? Do you think you’d be willing to give it a go if it cost $20 a month?
Thank you once again for your time!”
Do you see how helpful it would have been if you had answered those three questions sooner?
Hopefully, you will get a response. People are busy with their own activities, therefore not everyone will reply. However, you should get some replies.
New inquiries should be asked as a follow-up.
If you do not get a response, try again. It’s OK to follow up with your first contact many times. You may be sent back to improve your predictions if you get a “no thanks, that doesn’t seem helpful” answer. If you’re lucky, you’ll receive a lot of “absolutely!” replies.
You may face price resistance or discover that you have underpriced your product, but resolving the pricing issue will require further study and testing. At this point, simply make sure that the price you propose is one that your company can maintain. It’s preferable to propose a price that’s too high than one that’s too low.
However, the objective at this point isn’t to locate the best price. Simply said, the objective is to ensure that consumers desire your goods. Price will be discussed in more depth later in the process.
7. Create an MVP
If you’re establishing a company that makes sense for internet advertising, the next step is to put all of your research to the test: Will consumers really put their money where their mouth is?
Create a landing page and run some advertising tests.
You’ll create a landing page for your product and purchase advertising on Google and/or Facebook in this last test.
Your landing page doesn’t have to be flashy, but it should seem genuine. Thankfully, there are a plethora of excellent services available to assist you in quickly and simply creating a professional website. Create a basic page that explains your product or service using Squarespace, Wix, or Shopify.
On your landing page, you’ll want to include your pricing and a “purchase now” button. However, your “purchase now” button will not function. Rather of directing your prospective client to a purchasing basket, you want them to land on a page that describes your present position. Something along the lines of, “Sorry! Product X is not yet available. Please provide your your address here, and we’ll send you an email when it’s ready.”
With this technique, you’ve accomplished two impressive feats. First and foremost, you’ve shown that people are willing to purchase what you’re offering. They are voting for you and ready to purchase when they click “buy now.” Second, those who provide you with their email addresses are your very first clients. So, as you’re developing your product, you’re also establishing a client database to sell to.
You’ll almost certainly need to purchase advertising on Google or Facebook to attract visitors to your landing page. Target the lists of keywords relevant to your issue and solution that you compiled previously in this procedure. Consider advertising to individuals who are looking for such alternative goods if you have competition.
Think about content marketing.
Explore content marketing as an alternative to creating a landing page and purchasing advertising. Instead of purchasing traffic, you might create a blog with relevant material for your target demographic. You’ll have a built-in platform to promote your not-yet-real product and generate visitors to your landing page if you can attract traffic to your blog by advertising your articles on message boards and other areas where your target audience hangs out.
The advertising alternative requires a little amount of money, but it is simpler and possibly quicker. Content marketing requires time, effort, and some writing abilities, but you’ll be creating a long-term value for your business. You may test both techniques and determine which one works best for you if you have the bandwidth.
An example of what not to do when launching a product
My team and I spent many years developing a new product. We were certain that our existing clients would like it, so we worked on it for almost a year before releasing the initial version. We were very pleased of our work, which was also highlighted on Techcrunch.
However, a good press launch does not necessarily imply a successful start for a new company. While a brief burst of publicity helped spread the word, we had made one critical error: we hadn’t taken the time to fully understand our prospective client before building our product.
We believed our product was for “everyone,” which is one of the cardinal errors of the startup process, and we didn’t tailor our marketing and message to any specific target group. We didn’t even know which features our consumers felt were the most essential or how they planned to use the product.
Needless to say, we had a hard time attracting consumers. As we found out who our genuine client was and what they really wanted, we had to alter our price numerous times and create new features. While we rushed to create what our clients really needed, certain features we designed in the initial iteration of the product were seldom utilized.
The Speed Conundrum
My opinion is that we squandered hundreds of thousands of dollars in the end because we created what we believed consumers wanted rather than what they really needed.
We had been attempting to go too quickly, and as a result, we had slowed down since we had missed the crucial stage of ensuring that we knew who may desire our product and why.
Being agile and quick-thinking are valuable qualities for any entrepreneur, but even the most astute entrepreneurs should plan ahead before committing time and money into launching a new venture. Validating that there is demand for your product is one of the most essential stages in the company planning and starting process. It’s the step we skipped and now have to pay the price. Continue reading to learn how to do things correctly.
Set the fuse.
If everything has gone smoothly up to this point, your estimate is more of a collection of facts than a guess. You’re aware that:
- Who is interested in your product?
- Why are they interested in your product?
- What is the value of your product to your customers?
It’s finally time to get down to business.
What’s great about this method is that it eliminates a significant degree of risk from the starting process. With demand validation, you can be certain that if you execute effectively, your company will be a huge success. You’ve eliminated a lot of the guesswork that comes with establishing a company, and you’re on the road to success.
Making a first attempt at a financial projection is a useful next step. What are your projected costs? How much money do you need to get your company off the ground, if any? What do you want to achieve in terms of sales? Here’s a helpful guide to predicting sales, as well as an outline of the best planning method.
Of course, you’ll continue to fine-tune things as you go, and you’ll make new assumptions that will need to be verified along the way. However, understanding that your company concept has a market is a big victory for your firm.
*Editor’s note: This article was first published in 2017 and has now been revised for the year 2021.
Watch This Video-
The “idea validation process” is a way to test your business idea. It’s important for businesses to validate their ideas before they invest in them. This will help you avoid wasting time and money on something that doesn’t work.
Frequently Asked Questions
How do you validate a product idea?
A: This is a difficult question. I would recommend looking at other successful products, to see what they did well and try to duplicate it
How do you test demand for a product?
A: The demand for a product can be tested by seeing how many people are willing to pay the highest price.
How do you validate demand?
- market validation examples
- market validation process
- how to validate a product idea
- market validation questions
- startup idea validation framework