You have a Business Innovation idea. You’ve raised the funds to make it a reality. You have what it takes to be an entrepreneur. What’s next? It’s time to validate your offering’s market potential.
Before starting a business, you must study business. Market validation is the process of determining whether your business idea is worth pursuing. Market validation can give you an idea of whether you can reasonably predict whether people will buy your product or service and whether your business will be profitable.
When you’re starting to develop a new business idea, it’s important to validate whether or not it’s a good fit for the market. By validating your idea early in the process, you can ensure you don’t waste time and resources on a company that isn’t a good fit. Additionally, securing market validation can instill confidence among investors, crowd funders, and banks that your startup is the right idea.
The best place for Business Innovation
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Why Business Innovation?
Business innovation is a must-do for your business for one simple reason: value addition. With so much competition that is ever increasing in the business world, every field has to adapt itself. It could be changing for a better revenue system or change in a series of actions.
You need to keep updating your business to ensure you achieve constant improvements. A successful business stems up from the creation of new revenue opportunities, introducing more efficient work methodologies.
How can you tell if your market is going to be interested in your product? The following are 5 steps that can help you assess market validation.
Step 1: Record your business goals.
Writing down the goals of your business is the first step in market validation. The process of articulating your vision can illuminate any assumptions you have.
Ask yourself: What’s the value of your product? Who’s the target audience, and what assumptions have you made about them? What differentiates your product from existing ones? What hypotheses do you have about your product, pricing, and business model? This will help you convey the value of your product and illuminate your assumptions and hypotheses that are yet to be tested and verified.
Step 2: Estimate Market Size and Share
Before beginning a business, you must first estimate the size of your target market and the share of it you could potentially capture. This is a major step in planning your venture. If you have a small market that is easy to dominate, then you can make a stronger case for beginning your business and gaining a larger share than if you were to have a large market that is hard to dominate.
To demonstrate this, Harvard Business School Professor William Sahlman uses the mattress company Casper as an example. In 2014, Casper’s founders assessed the market size for their product by comparing it to other mattress companies. Casper’s differentiating factors include its online business model, 100-day return policy, and the viscoelastic foam material used in its mattress.
Based on data for the mattress market at the time, Casper’s founders determined how much of the market they could win. They looked at how many mattresses were sold each year, how much of the market was filled by foam mattresses, and how many online-only mattress companies there were.
Do this exercise for your target market. For products similar to yours, research sales data, the number and share of current brands, and what percentage of the total market your segment holds. Determine where your product fits into the market and assess how much of it your business could own.
Step 3: Search for Competitor Keywords
Search engines are one of the best ways to gauge the market validity of your business idea. When consumers are in need of a product or service, they often use a search engine to see what the market has to offer. You can search for competitor keywords related to your product or mission by analyzing your competitor’s keyword strategy.
To estimate monthly search volumes for a keyword, you can use a tool such as Moz, which provides monthly search volume data for related search terms. For example, you might find that “foam mattress” garners over 11,500 monthly searches. This indicates a high demand for the product. Let’s say you create a new, extra supportive mattress. You can see that there are 240 monthly search results for “best mattress for lower back pain sufferers.” That’s a lot of people who might be interested in your product.
This type of search volume for a longer, specific query isn’t negligible. In fact, it can be used to bolster your hypothesis that there’s a need for your product.
Step 4: Conduct interviews with your target market segment
Conduct focus groups, surveys, or conversations with your target market segment to learn about your product potential. Conducting interviews with your target market segment can be an effective way to learn about your product’s potential. This initiative might include hiring a market research company to conduct focus groups, sending out an online survey, or simply requesting a conversation with someone.
You need to ask potential customers about their motivations, preferences, needs, and the products they currently use. You already have your assumptions and hypotheses written down, so frame them as questions to your interviewees. Be open to the feedback you receive.
The feedback you get about your product should reflect that it is not strong enough to have a strong market validity. You can use it to improve your offering and repeat the process of validating the market.
Step 5: Test your product
Once you’ve determined there’s space for your product in the market, test and retest it to ensure it’s the most useful and intuitive version possible. You can accomplish this through alpha and beta testing.
Alpha testing is a phase in the development of a product. It occurs when employees test the product internally. One of the goals of alpha testing is to eliminate bugs, errors, and oddities in the product before it’s released to the public.
Beta testing is the process of testing a product before it’s released to the general public. It’s typically done by a small group of real people who are specifically instructed to report problems they encounter. Beta testing might be public or private, depending on the product, and it’s usually announced ahead of time.
Testing your product with real people can prove invaluable when assessing market potential. If there is a need in the market, but your product is faulty, complex, or difficult to use, customers may opt for a competitor’s offering. The feedback from beta testers can help you better leverage and meet customer needs.
How can you use the feedback you’ve received to improve your business?
A successful entrepreneurs must seek feedback to validate the beliefs they hold about their product offering. A vital step in starting a business is determining whether your product is marketable. You must seek advice from those around you and do the hard work to create something new and exciting.
To get your product off the ground, you must take the time to outline your goals, assumptions, review the market, and interview your potential customers. You can only do this if you take the time to research and test things.
