In the current fast-paced business landscape, having a brilliant concept alone is insufficient for success. Business owners and entrepreneurs must also ensure that their product or service is needed by the market. This is where market validation plays a crucial role.
Market validation involves obtaining feedback from potential customers to confirm that a need for your product exists in the market.
Today we’ll delve into the significance of market validation, the best ways to conduct it and how to convert gathered feedback into actionable insights. Why? Because whether you are a first-time product creator or are expanding your business with new offerings, if you don’t get the product right, you’ll fail. And to get the product right, you need to be equipped with the right resources and tools. And that’s what we’re here to offer.
What Is Market Validation?
We’ve touched bases briefly on what market validation is, but to put it in a more unified way, market validation is a series of processes aimed at collecting feedback and information from potential customers to verify that there is indeed a demand for your product in the market.
Market validation enables businesses to ensure that what they’re creating is something people truly need and want. It’s a critical stage in developing successful products and by far the most deciding factor in becoming a hit or miss.
The Importance of Market Validation
Creating a product comes with huge expenses – financial and not only. So the risks of not validating the market and confirming your product’s need are simply too big to ignore.
There are a host of reasons why market validation is more than a nice-to-have attribute:
- It mitigates the risk of failure
- Confirms market demand
- Helps identify gaps in the product
- Saves time and money
- Boosts investor confidence
Let’s briefly cover each.
Mitigating the risk of failure
Not only does market validation ensure your product’s need in the market, it also enables you to recognize the potential issues or areas of improvement you might have missed initially. All creators sooner or later become too attached to their product idea to see its flaws. And if there is no data to guide you in the right direction, you’re running the risk of launching a product no one wants or a product that lacks a solution to a core customer need.
Confirming market demand
If enough people confirm that they need what you’re offering and are willing to buy it, you essentially eliminate the risk of launching a total flop of a product. And with this confirmation in hand, you now have all the resources to create a successful market hit.
Saving time and money
Spending time and resources on gathering feedback from your target consumers can be time-consuming and expensive. However, launching a product your target market doesn’t need is ultimately going to be much more expensive for you.
Market validation gives you the green light to launch and, in case the findings are unsuccessful, it gives you the necessary insights on which direction to move in for improvement.
Securing funding and investor confidence
Assuming you’ve watched Shark Tank, you know that investors always need evidence that the product is needed and people are willing to pay for it. Market validation is essentially your key to securing investment and boosting investor confidence.
All in all, market validation accomplishes several goals essential to any product creator – it helps you make data-driven decisions, reduce potential risks, and increase your chances at success.
The Power of Prelaunch Market Validation: Outshining Traditional Market Research
Traditionally, research and market validation has been fairly straightforward given the options at hand – surveys, focus groups, user tests, etc.
But what differentiates an interested interviewee from someone who will actually make a purchase come launch day? Their commitment to the product. And since commitment can’t be measured through surveys and focus group work, a solution that is far more complex, relevant, and inclusive has to be at play.
Thankfully, that’s where Prelaunch.com as a platform steps in. And in this section we’ll discuss step by step why traditional methods are no longer enough for the modern-day creator and how Prelaunch.com can replace them, making market validation, concept validation and product-market fit testing easier than ever.
And finally, just because it’s crucial to back everything up with real-life examples, we’ll dive into a market validation case study done with Prelaunch so you can better understand how everything works.
The Limitations of Traditional Market Research: Why Focus Groups and Surveys Aren’t Enough
Traditions are good. But innovations are better. Methods like focus groups and surveys have been widely used across all industries for market research and validation. The primary purpose was, of course, to obtain customer insights and understand people’s needs and preferences.
However, not only do these methods come with limitations, but they also don’t actually provide product creators with 100% accurate data simply because of their nature. Asking someone if they’d be willing to buy your product is extremely different from them showing their financial commitment to the product.
This brings us to the next point, someone who’s merely interested is going to give you a different type of feedback than someone who commits to buying. So the motive matters here.
These aspects of old market validation methods can hinder success for lots of entrepreneurs, especially first-time creators since they don’t already have an existing audience that is at least partially loyal to the brand.
That being said, let’s break down why exactly focus groups and surveys are no longer enough to conduct proper market validation:
- Limited sample size
Focus groups and surveys usually have a limited number of participants, which might not represent all of your target market. While market validation doesn’t include questioning every single one of your huge or niche target audience, it’s still considerably less reliable than what you could get with wider access using Prelaunch, for example.
- Geographic and creative limitations
If your product has global goals, you won’t be able to reach enough people from enough locations and backgrounds to provide you with reliable information by using traditional market validation methods. Your best chance of ensuring you get the diverse insights you need is through a more streamlined and managed process that has a wider reach, like Prelaunch.com’s advertising and dozens of tracked data points.
- Response bias
Respondents may provide answers they believe are socially acceptable or what they think you want to hear. This results in inaccurate insights and won’t be of much value to you. Response bias is also one of the reasons you can’t simply create and launch a product based only on the praise and encouragement of your friends and family.
- Incomplete insights
Focus groups and surveys may not provide a complete picture of a customer’s actual behavior, attitude and preferences. Right off the bat, respondents may not be able to fully grasp the product (which is another issue you, as the product creator, should address), express their feelings or understand their own motives while being surveyed or in a focus group.
- Limited context
Focus groups and surveys are usually done in isolated environments that might not reflect real-life use cases and circumstances. Not having the relevant context at the time of asking them your questions can result in less helpful feedback and insights.
- Time-consuming nature
Typically, organizing and conducting mass surveys and focus group work can be time-consuming and costly. Small businesses especially will struggle with this, resulting in smaller sample sizes, and thus defeating the whole purpose of the market validation process.
Market Validation with Prelaunch.com: The Key to Launching Successful Products
According to numerous sources and stats, while it’s difficult to establish the precise number, the percentage of failed products a year is a staggering 75%. To Prelaunch.com (and pretty much everyone else), it’s a huge gamble. So instead of launching without validating your concept, market demand, pricing, and other metrics, Prelaunch gives you the opportunity to significantly decrease your failure potential with an easy test.
But don’t get us wrong, while Prelaunch validation is easy to perform for the product creator, in the background it’s extremely advanced and multi-layer.
Let me explain.
Prelaunch.com is a product-market fit validation platform that allows you, the business owner, to test every single metric and aspect of your product and its target market to determine whether or not you’re ready to launch, if what you’re offering is needed in the market, whether or not you’ve determined the right pricing strategy, and if your product lacks any feature you overlooked.
But how does Prelaunch accomplish all of this and how reliable is the data you gather?
The problem
With the traditional research methods we’ve covered, you are only able to get a glimpse at initial market interest. You have no actual way of knowing if a user’s intent stretches beyond that interest – meaning that you can’t realistically know if they will give you their money in return for your product or service based only on survey responses.
This is a huge problem because it means surveys and focus groups don’t give you feedback as a highly-committed lead. They only give you information coming from a place of mere curiosity.
The solution
Prelaunch.com, unlike surveys and focus groups, solves this problem with a unique system – we call it the reservation model. Here’s how it works:
- You create a highly-converting product page with enough information about the product and visuals (it’s easy because AI does the work for you)
- You then drive traffic to your landing page (again, the Prelaunch team does this for you by running targeted ads on your page)
- You place your product on the Prelaunch marketplace for additional traffic from the platform’s community of early adopters
- Visitors are asked to leave their email addresses if they want the product
- This is where it gets interesting, now they are asked to place a small deposit to secure a discount for the product when it launches. It dramatically increases the purchase intent with financial commitment and ensures that the feedback you receive is actionable and highly reliable.
- And lastly, people with the highest purchase intent get your very specific survey about the product – giving you a goldmine of data from people who intend to buy the product and have demonstrated their commitment.
- Subscribers who opted out of making a reservation get a different survey that aims to determine what exactly held them back from committing to the product financially, helping you better understand both your “interested” and “committed” visitors.
What are the benefits of using Prelaunch.com?
Now you know that you obtain information from people most likely to buy your product. But what else ensures your success and how is this data analyzed and tracked?
Prelaunch allows you to validate your products using an iterative approach – this means that everything about your product – from content to visuals, pricing and positioning is subject to change. And you’ll be able to monitor how a single deliverable, such as a $5 difference in the price, affects visitors.
All this information is gathered in your dashboard where you can see the performance of each iteration and track and compare metrics like:
- Traffic
- Concept validation
- Price validation
- Subscription rate
- Reservation rate
- Subscription to reservation ration
- Prelaunch score (a unique metric calculated by Prelaunch based on 30+ data points to determine if your product is ready for launch or not)
The results
To sum up, with Prelaunch.com you can understand if your product is a good fit for the market, whether or not people are ready to pay the price you’re asking from them, what the strengths and weaknesses of your proposition are and how you can improve it. It’s a cycle of trying and testing until you reach a version of your product that works well enough to launch with confidence.
To provide you with empirical data on how market validation looks like when done with Prelaunch.com, we’ll discuss a recent example for a dog training and relaxation device, MyFelo. The product testing was done to validate the product before launching a crowdfunding campaign for it.
The Prelaunch test was conducted to test the following:
- Market interest
- Pricing strategy
- Purchase readiness
- Best target audience for advertising
- Best geographic locations for the product
- Feedback and customer insights on the product
There were 3 price points the Prelaunch team tested to determine which one works best for MyFelo (a price point the product creator aimed at, and 2 variations that were slightly higher and lower). After weeks of testing, the finding was that the lowest tested price point got the most amount of traction from visitors. A testament to this was the number of people who made reservations immediately so they could get the product as soon as it launched.
Prelaunch.com measures the purchase readiness of the visitors with the product’s current benefits and pricing and is calculated by dividing the cost per reservation by the product price. All these metrics help determine whether visitors are interested in MyFelo and if the marketing efforts will see a positive ROI when the product launches.
Throughout the testing, Prelaunch.com gathers and analyzes the results of each tested variation and provides a comprehensive report so the product creator can see exactly what worked, what didn’t, and what needs to be changed for a stronger value proposition.
The target market is presented with 2 different surveys at different stages of their interaction with the product. First, they are asked about the issues they found with the product after they subscribe to be notified of the launch. This helps determine what stopped them from committing to it right away, but since they showed interest, it means this data comes from warm leads and is highly reliable.
Next, once they place a small deposit to secure their discount, they are asked specific questions about their interest in the product and how to improve it. For MyFelo, it offered enormous insights as to what needed more attention going forward regarding the features, messaging, and pitfalls to avoid.
This is where customers can express their needs more elaborately, ranging from the release date, use cases of the product, modes of operation, and battery to the technology and science behind MyFelo.
Example
MyFelo struggled to understand which usage purpose would be most appealing to consumers – dog training mode or relaxation mode. Based on the numerous survey results provided by the users most excited about the product, the training mode was what people were most interested in. So the positioning of the product, along with the main USP became the training mode, and relaxation mode was just an added benefit.
This type of data helps creators see what the visitors need and currently lack in the product. It also guides the product team in the right direction for future product versions, expansion areas, and so on.
And last but not least, this information helps both the creator and the Prelaunch team tailor the advertising and other promotional strategies to suit the audience’s preferences and “speak their language” better.
At the end of the Prelaunch testing, MyFelo has gathered a community of people who have shown much interest and care in the product. And any product that has a strong community, has a stronger chance at success.
Conclusion
Market validation is an imperative step for any entrepreneur who wants to launch a successful, profitable product or service. The cornerstone of a successful product is testing and gathering feedback from potential customers to understand whether there is a demand for what you’re offering.
With traditional research methods like surveys and focus groups, market validation will take more time and resources and provide insufficient data. But with a more comprehensive platform like Prelaunch.com, this process is more streamlined and backed by data from users that are committing to be your customer as soon as you launch, and therefore, is more reliable.
