To validate product ideas is generally a natural instinct. No company wants to bring a product to market which doesn’t have the necessary pull. Thus, market validation is essential.
However, this is not an idea everyone accepts. In fact, many companies, big and small, launch bad products every day. As participants of the market, we don’t see these bad products because they lose out and quickly disappear. And yet, companies keep bringing bad products to market. Thus, the need to validate product ideas is natural.
In order to validate product ideas, companies first have to know how to do market validation. If your company is bringing a product to market, it must know how to validate market demand for the product. It is an absolute necessity.
In this piece, we will explain the need to validate product ideas as well as how to validate market demand for a given product.
Why Is It Important to Validate Product Ideas?
Can you name ten search engines? Can you name the ten kinds of cold drinks that you like?
There is a good chance you won’t reach ten names on both those questions. Even if you manage to do it, the twenty names you come up are not names you generally use for service or consumption.
What is the lesson here? Every segment of the market has thousands of products. There are literally hundreds and thousands of search engines. In addition, there are hundreds and thousands of cold drinks.
How many do you use or remember? Let’s assume the number is ten for each.
What happens to the rest of the products in these segments? Some of them survive because they manage to create a niche market. However, many of them just die out. Bad products come and go all the time. As consumers, we miss their arrival and departure because we only see successful products on digital platforms and supermarket shelves.
Thus, bringing any product to market is a risk. Companies put their skills and money on the line when they bring anything to market. The risk is obvious. There is a lot of money riding on every product which comes to the market.
How can this risk be managed? Wouldn’t it be better to take a risk if the probability of the product’s success was known? Isn’t it better to launch a product which has a clear market demand?
These questions lead us to understand the need to validate product ideas and know how to do market validation. If launching a product is a risk, knowing how to validate the market for the product reduces the risk.
How to Validate Your Product Idea?
From a broad perspective, there is no shortage of techniques to validate product ideas. In fact, it is safe to say you can never run out of ways to test the market demand for your potential product.
There is no universally-accepting product validation technique. In fact, entrepreneurs have a whole range of techniques they use to validate product ideas. Some are gifted enough to know what will work in the market. Others have to know how to validate the market for any given product.
In this piece, we will throw out some techniques you can use to validate your product ideas. We will explicitly explain how to validate product ideas. This will help reduce the level of risk you take when bringing something to market.
The ‘Out of Stock’ Trick
Full disclose, this is not our own idea. We found this swarming around the internet and tested its ability to predict market demand. Here’s how you can use this trick to validate product ideas.
- Assume you have an idea for your product. Create a product design and list the product on your website’s store. Make sure you list all the essential product details
- Promote the product on various social media channels. Take out Facebook Ads and Google Shopping Ads for your product. Keep a small budget as you’re only testing the idea.
- On your website, create a system where visitors can add the product to their shopping cart. However, once they reach the payment page, tell the users the product is unavailable or out of stock. Furthermore, give them the option to add their email address to receive updates about when the product will be available.
- Now, check the number of people who actually add the product and reach the payment page. In addition, make a note of the number of people who give away their email ID.
- If 30-40% of product page visitors end up adding the product to the shopping cart, you know you have a good product on your hand. If 5-10% come forward and give their email ID, you may have a great idea.
- Thus, using Facebook Ads and a little website maneuvering, you can effectively validate product ideas.
Some people may find this method a little unethical because it tricks users into buying a product that doesn’t really exist. However, your business can significantly reduce the risk of investment and accurately gauge customer behavior with this technique. Furthermore, the response you get is completely genuine because your audience doesn’t know the product doesn’t yet exist.
Talk to Your Customers
Many people ask how to validate product ideas. Generally, the solution to complex questions is actually quite simple.
How to validate your product idea? The answer is simple – talk to your customers.
Whether you’re running a big conglomerate or a small startup, talking to your customers is never a bad idea. Companies generally begin to err when they lose touch with their audience. This is a common trait amongst failing companies and a trait visible in the type of products they make.
How do companies talk to their customers? There are many channels of communication which companies today can exploit to better understand their market. Social media is an obvious option.
There are a number of social media mapping tools which can be used to analyse audience behavior closely. Since social media is largely open, companies can study how their audience interact on the platform.
Besides digital media stats and techniques, the traditional route is talking to people directly. When you go to a mall, you’re likely to find a small stall with a man or a woman sitting behind a desk. There is generally a banner of the company attached on the table. What is the company trying to do here?
Most of the time, they are gathering important market validation. Big companies can afford to rent space in big malls and hire people to sit behind a desk there. Small companies tend to do this through informal surveys. In fact, for small B2B companies, the best way to talk to customers is cold-calling. All companies share their contact number online these days. Thus, cold calling becomes an effective way of validating product ideas.
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The best way to know if a product will work is checking if customers are actually putting their money where their mouth is. This is where a crowdfunding campaign can prove helpful.
As an entrepreneur, you do not need to think of crowdfunding as a way to gather funds for production. Instead, crowdfunding is a good metric to check how many people are willing to put their own money on a simple product idea.
The biggest danger of going to market is not knowing whether people will pay actual money for something. Crowd funding reduces this risk because it shows the amount of money people are willing to invest in a simple product idea.
However, it is important to choose the right platform to run a crowdfunding program. Kickstarter is generally the platform of choice for crowdfunding, but you can also use Indiegogo. Furthermore, study crowdfunding campaigns to check how to run a successful one. It is important to run a good crowdfunding program or the entire effort is kaput.
Crowdfunding has another great advantage. Many investors feel apprehensive about investing in a given product because of the high risk involved. A good crowdfunding campaign can help convince investors about the growth prospects of a given product. Thus, any investor who wants to validate product ideas can simply ask the entrepreneur to run a small crowdfunding campaign to see if people will back the product.
There are many examples of successful startups that came about thanks to crowdfunding platforms like Kickstarter. It is the ultimate entrepreneur trick, but it requires some level of hustle and hard work. If you’re ready for the hustle, you can bring several successful products to the market by making continual use of crowdfunding effectively.
Generally, the easiest answer to how to validate market for a product is studying other companies. Imagine you have an idea for a great new line of sneakers.
To check whether there is a demand for the sneakers, you create a few samples and try placing them on prime locations. You can even try selling them online.
If they sell well, do you immediately start a company? No. You must first check whether it is viable to run a small sneaker company in the market. Furthermore, if a bigger company simply copies your sneaker design and beats you to market, how will your small company survive?
The answer to these questions lies in smart competitor analysis.
How to Test Your Startup Idea?
Validating product ideas is generally an answer to how to validate your market. However, testing a startup idea is a much larger question. A product is not equal to the company. It is just something a company creates in order to bring value to the market and generate revenue.
For example, Facebook as a platform is a product. However, as a company, it is the owner of multiple tech platforms. An Indigo is a car manufactured by Tata. However, it is not equal to the overarching Tata Group.
When you ask how to validate your market, the question is limited to studying product demand. However, how to test your startup idea is a much deeper question. It covers the products the company is offering along with its ability to survive in the long term.
When an investor is investing in a product, the hope is only that it makes money in the market. However, when an investor is investing in a startup, the bet is on the company itself, not just the success of a product.
How to test startup idea? Generally, the idea for a startup comes from a great product idea. If the product idea is good, there is genuine potential for a good startup.
However, taking a good product idea and translating it into building a great startup is contingent on a number of factors. This includes the talent of the entrepreneur, the composition of the team, company culture, vision, goals, and so on.
Thus, there is a fundamental difference between how to validate market for a product and how to test startup idea. One is generally about a product’s market appeal. The other is about turning good ideas into a real company.
Final Words: Why and How to Validate Product Idea?
In this piece, we study both the need and ways to validate a product idea. However, the methods we covered in this piece are not the only methods in the market. Entrepreneurs can use other methods to validate product ideas.
Furthermore, we also covered the question of how to test your startup idea. There is an innate difference between testing startup and product ideas. In this piece, we discussed this difference clearly.