According to research conducted by CB Insights, 42% of startups fail because of a lack of market need. Be ready to validate your idea if you want your startup to be among the other 58%.
Why would you want to waste your valuable time and hard-earned money on building something that people don’t want to buy?
This comprehensive guide will help you validate your startup idea so that you’d know whether you’re building a product that the world needs.
What is Market Validation?
Market validation is the process of finding out if there is a need for your product in your target market. It is an essential step that must be considered after coming up with a startup idea and before building your product.
We’ll learn the need for market validation with an example of eDreams. eDreams is an online travel agency focusing on flight ticket flexibility.
They researched whether people would be interested in buying tickets that are flexible and offers a free cancellation.
Initially, they didn’t get the confirmation since people started asking the reason why they would cancel a flight ticket when they wanted to travel.
After pointing out reasons like the ongoing pandemic, people were convinced of the need for flexible flight tickets.
Through this market validation eDreams founded that there was indeed a need for their product and that they should change how they market this need to their audience. It provided huge learning to the company’s marketing strategy.
How To Validate Your Startup Idea?
Entrepreneurs get excited about all new startup ideas that pop into their minds.
Some even act on those ideas without thinking for a second, they spent months creating a product based on that idea only to find out later that no one else is excited.
Follow the below steps to save yourself from all that trouble.
Every startup idea is born based on a problem. A startup intends to solve a particular pain point of their target market. The solution that you provide should be able to tackle the specific difficulties faced by your market.
All problems are not worth solving. There are two types of problems that any customer faces – top priority problems and nice-to-solve problems.
You should always target the former since customers may not be ready to pay you for solving the nice-to-solve problems.
Ideally, you should pick a problem that you already face since it can help you see through the eyes of a customer and even if no one uses your product, there will at least be one person to use it (you).
Draft Your Hypothesis
Now that you have identified the problem, it is time to make a few subquestions that will help you identify the needs and wants of your target audience.
Formulate a few questions based on existing competitors of your product. A competitor doesn’t need to exist for your startup, however, there are likely competitors based on similar ideas.
At this point all you’re making are assumptions. You can use forums and social media comments to build your assumptions.
Test Your Assumptions
Start reaching out to your target market and test if your assumptions are right. Record every response you receive as it can help you add and remove features from your product.
The cheapest and quickest way to do this is through interviews with potential customers in your target niche. Try sending them an email asking for an interview or a link to a small survey you created for this purpose.
If you feel uncomfortable reaching out to a bunch of new people, contact your close network circle and start testing your assumptions on them.
Approach them with a curiosity to identify the problems they face to effectively arrive at a conclusion.
Track Your Competitors
A potential market will always have competitors. It’s not bad if similar ideas to yours are already out in the market since the competition is an indication of market demand which is good.
Try to find more information about your competitors, the year they released their product, their marketing strategies, their market size, annual revenue, company valuation, etc. Use the products yourself to find flaws and their pros.
You can search for your competitors’ reviews on forums and review websites to find what your potential customers are interested in.
Make An MVP
A minimum viable product is a simplified version of your product that has only the essential parts and nothing fancy.
You can let people use your MVP and give feedback on what they feel about it and how to improve your product. Create a landing page and run social media ads to it. If you get signups, people want your product, if not you have space to improve.
Sell Your MVP
List your startup idea on startup directories like ProductHunt and get your initial users. You can leverage the huge network of founders and users who will be willing to test your product and if you’re lucky, you’ll get your first paying customers.
Another thing to keep in mind is that you should be able to sell your product more than once to your customers. The subscription model of NetFlix is an example. This will ensure that you gain more from a single customer and that you receive equal returns for the value you provide.
Go Start Up!
If you follow these steps correctly, you’ll have an overall idea about the success of your startup. Do keep in mind that market validation is subjective and even if people might say that they love your product for the sake of being nice, they might not pay for it.
Liking something doesn’t mean that they’ll buy it. You have to dive deeper into your marketing strategies to make sure that you make the sales.
These few steps are followed by almost all startups these days and you should too if you want to build something that people love to buy.
Hope this helped in finding an answer on how to validate your startup idea, thanks for reading!
Frequently Asked Questions
Why is market validation important?
Market validation is important because it saves you from wasting your time and resources on an idea that doesn’t work. If the market is in favor of your idea, you’ll get a good understanding of how to enhance your product and market it.
What is an example of market validation?
MailChimp can be considered as an example. MailChimp is the world’s largest email marketing software. Initially, it started as a side project.
The founders of MailChimp were web developers. Apart from the web design, they were getting a lot of requests to integrate email marketing solutions.
Due to the high demand, they collected customer feedback to validate their idea of an email marketing software. The rest is history!