Another Episode in the books!
Terry Lin joins the 37th session of Smart Brand Marketing.
This week is the middle of the 3 part series where we go into how to build a physical product and create our own brand. The focus today is on market validation.
Market Validation and Why You Should Learn About it
If this isn’t already obvious to you, there is actually more to starting a business than what it seems. As a matter of fact, having a brilliant business model is not going to cut it these days. After all, there are a lot of brilliant business models out there that you don’t know of because, well, they did not last long.
With that said, the way you approach the market can make or break your entire business right from the start. The question is, how can you do approach the market in such a way that you can assure your business’s success in it right from the start? This is where finding validation in the market comes into play.
What’s Market Validation?
The concept can be confusing since it sounds new but market validation is actually quite simple. Basically, validation is just the act of finding out whether or not you have a place in a market before you actually venture into it.
The concept actually lies in you answering one question: Is there something in that market that my business can fill in. If the answer is yes, then venturing into that market is all worth the time, money, and stress. If not, then maybe it’s not yet the time for you to go there.
The topic to be tackled here is the concept behind your business. After all, your business is based on a single idea, right? It does not matter if that idea is truly unique or generic, mundane or so far out there, the point is that it’s the one thing that your entire business currently stands on.
Now, validation breaks down that idea to its most basic components where it fits into the market, how you can make it work in the market, and the labor and money needed to do it.
How it Works
On the surface, market validation can look complex and expensive but it actually just helps you answer 3 distinct questions.
1. Does my product/service solve a problem?
Every demographic out there see things different from each other. This simply means that, even with the same product category, every demographic out there will be looking for a distinct solution to a problem that that product category was designed to solve.
For instance, people living in a lower grade urban area might have less problems with traffic than people in a highly urbanized area which means that ride sharing services might not be as in-demand in the former as in the latter.
Another example would be a neighborhood made up of lower-income families compared to an upper-class one. The former might not be that enthusiastic with someone setting up a fine dining restaurant in the local area but the latter would find it an okay idea. It may or may not solve a problem for the latter demographic but it’s certain that they won’t mind paying for it.
At this point of time, the one thing you should focus on is the identity of the problem since if you can discover it, well, the solutions would start showing up. In fact, if you can determine what the core problems are in the demographic regarding a certain product categories, the solutions will become so clear to the point of being too obvious.
2. Is there Something Similar to What I offer in the Market Now?
Here’s a shocker: it’s actually getting harder and harder everyday to come up with a really unique concept. So, with that said, there is a high probability that your “original” idea for a business is not so original after all after thorough research.
However, the goal here is not to compare and contrast your idea with theirs. Instead, what you should try to find out is whether or not these ideas were actually successful or, if not, why they ceased to exist.
Take e-commerce, for example. Sure, it’s becoming saturated today with too many platforms to choose from like Amazon and EBay but there might be still a space for newcomers to earn enough money in. How long this will last, though, is anybody’s guess.
3. Is it Something That People would actually Pay for?
Here’s something that you should really think about with your business model: does everything in it actually amount to something that people would pay for? When it comes to the online market, there is only one price tag that you have to take seriously: free.
Simply put, if people can get a similar product or service from another platform for free, then your current business model is not going to be feasible in that market.
Take for example what happened to torrent sites like Pirate Bay. Being a platform where everybody can get any file that they want for free, it considerably hurt the income of many companies including music artist, software developers, and even book authors. Fortunately, such file sharing sites were shut down since they were violating copyright laws or, at the very least, were driven off from mainstream markets.
There might be other questions that you need to answer depending on the business type you have but, more or less, these 3 are what matters the most in validation. With that said, there’s no stopping you from asking other questions which should give you a better idea of the market you are about to venture.
Testing Your Idea
Validating your product should be easy but there are ways to make the process more “effective” on your part. Here are some tips to help you. However, always keep in mind that these will require you to engage with your market on a far more direct and intimate manner than you might be comfortable with.
1. Start With Your Network
If you don’t have a list of prospects where you can validate your product, you can always start with your OWN network. Yes, this means your friends, family, mentors, investors, and other similar relationships.
The reason is simple: familiarity breeds contempt. Those who know you the best and might have seen your work will more often than not pull no punches when being asked to critique your ideas. Of course, you’d find some friends who are a bit, well, too friendly to your cause that their comments might be biased to your favor but its up to you to sift through which ones actually help you and which ones are fluff.
2. Look for the Value Proposition
A lot of entrepreneurs think that people buy their product for the features. That is not exactly the case as a customer tends to buy something since they expect to gain something from it. This is what is called a value proposition and, more often than not, it is something that is not clear to you as the business owner unless, of course, you ask around.
Let’s take a look at the gaming industry’s console of 2017, the Nintendo Switch. Sure, it can’t go 4k or 1020fps in the field of graphics nor does it have a robust online network compared to Sony and Microsoft. And, of course, there’s that stigma of Nintendo being a “kiddie” videogame company.
But do you know what it has that the other two don’t have with their consoles? Games with damn good gaming experiences and no micro-transactions. Hit after hit came like Zelda: Breath of the Wild and Super Mario: Odyssey while other console gamers had to deal with less than stellar experiences in games like Star Wars Battlefront II and Need for Speed: Payback. It’s as if the fact that gamers are actually looking for gameplay, not graphics, is something that was lost with many companies and developers, chief among them Microsoft and Electronic Arts.
The point here is that, whatever is the value proposition in your product, it is most certain that it is linked with the problems that you had discovered in that market. If your product answers one of those problems or more, then you can expect it to possess some sort of value for your potential customers.
3. “Liking” is not the Same as “Wanting to Buy”
The one thing that you have to understand with validation is that it’s a fairly subjective process. When somebody says that they “like” the idea, you should take what they just said at face value.
The reason for this is such: affirming an idea is simply just that. There’s no assurance there that such an affirmation will directly translate to them buying it. As such, when somebody tells you that they like the concept, you need to follow that with the question “why?” How they answer that will give you an idea as to which aspects you should fix to make the idea more appealing that people will actually pay for or buy it.
How Many Tests do You Need?
This is something that is often asked when it comes to validation. There is no exact answer as to how many tests you should conduct as this can range from 20 interviews to 300 samples from surveys.
However, it’s important that you do more than a handful of tests. Limiting your scope can lead to inaccurate or, worse, biased results. For instance, you might have done validations but limited your range to your circle of friends. The question is this: do your friends represent everyone in that market you are going to venture into.
Of course, the answer will be no. If possible, you should get more than 10 answers coming from different demographics to give a wider yet still focused glimpse of the overall market.
On the flip side, you should not do too many tests. This is because increasing the volume of data you will have to analyze lengthens the process and also overwhelm you, leading to one of the deadliest enemies of any businessman: analysis paralysis.
If the market is that large, you can opt for a marathon of short tests than one long one while also controlling the type of information you will have to act on.
Doing Things Your Own Way
However, you might come at a point that you realize that your product does not exactly fit a certain mold or follow a certain path when compared to other similar businesses. For instance, your product/ service might be addressing a problem that not a lot of people are facing as of now as is the case of venturing into new and untested markets. As such, you can’t really rely on tried and tested methods to get the information you need.
That’s always the problem when you are virtually the pioneer in that market. There are still no rules to follow and no standards set. So what are you going to do now? The most direct answer for that is “do your own thing” although a cooler answer would be “make sh*t up”.
The amazing thing about venturing into really new markets is, surprisingly enough, the same problems mentioned a paragraph before. Since there are no rules and standards, you can actually make your own and let others build on it as they enter it (following you, of course). That’s the perk of being the first guy in a new market, the ability to dictate the rules of the game in its initial phases.
Start your own community, do meetups, promote your brand as much as you can to raise awareness of a new problem that your product can address effectively. As of this stage, you don’t need permission to do anything and no one can tell you what your doing is wrong. And that, in itself, is validation.
Have you tried venturing into new markets? What other methods did you use to validate your products and services? Let us know in the comments below.
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