What is market validation?
Market validation is the process of presenting a concept for a product to its target market and learn from those prospective buyers whether or not the idea is worth pursuing.
This process typically takes place early-on in the conception stage, before any significant investment has been made in developing the product.
The two most common approaches to market validation are:
- Interview people in the target market, such as the buyer and user personas.
- Send out surveys to these personas.
The key is that market validation research must include direct contact and feedback from people in the product’s intended market.
Why is market validation so important?
There are many reasons why an organization conducts market validation before committing to the development of a new product or service. Here are some of the key benefits:
It helps secure funding and resources.
For an existing organization, the product management team would need to present its executive staff with evidence of market validation before execs green light the project and allow the product manager to begin assigning a budget, development time, marketing tasks, etc.
For an entrepreneur seeking funding for a new product idea, venture capitalists and other types of investors required evidence of market validation before agreeing to fund the entrepreneur’s company.
Beyond its ability to help teams secure resources to bring their product concept to reality, it’s an inexpensive way to uncover problems with your product idea.
When an organization comes up with an idea internally for a new feature or an entirely new product, the idea might at first seem viable, even ingenious.
But until that product team subjects its idea to a true test—for example, conducting customer validation interviews to learn whether or not they would be interested in the product—the team could be missing the following major flaws in the idea:
- Target users don’t need a standalone solution to solve the problem your product concept addresses and they’ve already discovered a simple and inexpensive workaround that they’re satisfied with.
- The consensus is while they like the idea, they don’t think it’s important enough to pay for.
- The companies in your target industries don’t allow enough budget for your solution.
For these reasons, even a good idea can fail to achieve the all-important objective of product-market fit. The more development work your team has done before you discover whether your product will fail in the market, the more expensive that failure will be.
The value of market validation is that your organization can uncover those problems before committing any significant time or resources to a product concept. That makes this the most inexpensive way to learn that an idea isn’t worth pursuing.
How to conduct one-on-one interviews for market validation
The market validation process varies by company. It’ll also vary by industry and the type of user persona the product team is seeking feedback from. Different demographics will have their own preferred methods of communication.
Here is an outline of the broad steps you will want to take:
1. Prepare a clear and simple explanation of your product concept.
Develop a straightforward and easy-to-grasp description of the product concept that you can quickly share in your customer interviews.
Part of this step will also include thinking through some key details such as:
- Who are your customers
- What specific problem you believe they have
- How the product would solve that problem.
Answering these questions will also help you with the next step, which is figuring out which people to interview.
2. Find your ideal interview subjects.
Now it’s time to build a list of people to interview. If you know people in the target market for your product concept, you can start with them. That’s a quick way to begin compiling feedback.The downside to this approach is that these interview subjects will be more subjective and biased than you need from your interview subjects.
As you broaden your search for target personas to interview, it’s important to communicate let what the target persona will gain in exchange for giving you their time.
For example, explain that if they agree to speak with you about your product concept, you’ll either invite them to be among the beta-testers of the product or they’ll receive the product for free for an extended period of time after the launch.
3. Create your interview questions.
This is an important step because the way you frame your questions can have a strong influence on how your target users perceive your product concept.
We recommend you focus your questions not on your product but on the problems facing your target users and how they currently deal with those problems today. Use open-ended questions. They let your interview subjects answer the topics in their own words.
For more guidance on interviewing, read our blog post on how to create customer interview questions.
4. Conduct the interviews.
You can generate viable market-validation findings from only a handful of in-depth interviews, assuming you have identified the right people to speak with. The more interviews, the greater the sample size, the better. That way you can see the broad patterns or even discover new problems for these personas that you hadn’t considered.
We recommend a single product manager lead these interviews because typically the product manager will have the deepest knowledge in the organization about the target persona, the market, and other important strategic details. But if you have lined up too many interviews for a single person to conduct—a high-quality problem to have—you can also share the responsibility with another product manager or even a product marketing manager.
It is very important, though, to make sure everyone running a market validation interview starts with the same questions. Then eventually each conversation will take its own path. That’s okay. But you need to make sure that each interview also yields answers to the same questions, so your team can intelligently analyze the data.
5. Make sense of the data.
After you’ve conducted all of your interviews, pull together the details of each to help you answer the key question:
Did the market validate my product concept as viable and worth investing in?
Look for patterns in the answers, such as:
- Your product solves a large enough problem that the market would pay to resolve it.
- Your target users haven’t found another solution yet to this problem.
- The industries you are targeting with this product concept do indeed have a budget to spend on addressing such issues.
If you find a trend of answers like these, congratulations, you might have a market-validated product concept! At this point, you’ll want to summarize this data in an easy-to-understand format. This can help you earn approval and enthusiasm from your executive team, your company’s other stakeholders across departments, and investors.
Market validation: no product development should begin without it
Many organizations are so enthusiastic about their revolutionary product idea that, in their rush to bring it to market before another company beats them to it, they skip the market validation process and jump straight into product development.
However, there might be a good reason that a competitor hasn’t already developed a similar concept. It might not have a large enough total addressable market. Perhaps most target users view the product as a “nice to have” but not worth paying for. Those users might already have another solution to the problem—one that doesn’t require any product. Or maybe the market has seen several failed solutions and is now unwilling to give a new product a try.
Your organization shouldn’t spend a significant amount of time or money developing a product that would fail. To ensure this doesn’t happen, you should always conduct market-validation research early-on in the concept stage of any new product. Uncover any problems before they become costly development mistakes!