According to Harvard Business School, 95% of new products fail. This applies to all businesses, both big and small. Failed products are mainly attributed to companies creating products that do not have any need or demand for them. To ensure that your product does not meet the same fate, it is best to perform product validation.
In this article, we will define product validation, and discuss its importance. Additionally, we will go over how to conduct product validation.
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What is product validation?
Product validation is a process that involves evaluating a product’s viability, performance, and fit within a market. It is an ongoing process that ensures the practicality and market demand of a product before it is even released. It is a similar concept to product iteration, which also aims to improve a product before it is released.
Why is product validation important?
The goal of product validation is to ensure that a product will address a real need faced by customers. This helps to minimize the risk of developing a product that will not find success in the market. If a product fails, it can lead to a major loss in profits, resources, and time. It is essential to make sure that potential customers form a connection to the product, are interested in it, and are willing to buy it.
Product validation is crucial for any aspiring entrepreneur or existing business. It drastically increases the chances of a product’s success, and decreases the risk for a failed project.
Prevent false starts
Product validation prevents you from going into false starts that are a waste of time. Instead, it allows you to utilize your time and resources on a project that has real potential.
Ensure that there is demand for the product
This process validates an existing demand for the product, allowing the company comfort in knowing that they have a market to sell to. It confirms that there is a genuine demand for the product before resources are invested into its development.
Find pain points and needs of customers
Product validation involves identifying and understanding the pain points and needs of customers. It is a user-centric approach that seeks to address and provide a solution to a problem people are facing.
How to conduct product validation
Product validation is a comprehensive approach to designing and creating a product. There are typically two ways that businesses go about this, based usually on their budget. The first method is by a big company hiring a firm to conduct the research and validate their product for them. In contrast, smaller businesses led by entrepreneurs may take the lean startup approach, due to their limited budget.
Identify a problem/need
Typically, the first step of this process is to identify a problem or need that the market is facing. You must ask questions such as “What do people need?” or “What problems are many people facing?” Additionally, you need to hypothesize and define the concept of your product, and affirm that it is properly addressing customers’ needs.
Otherwise, your product may end up like Amazon’s launch of the Fire Phone, which failed to gain traction and was scrapped after only 13 months. Its failure can be attributed to a lack of innovation, as well as the thriving success of smartphone competitors. Customers had no need for a new smartphone, especially one that did not introduce new concepts.
Find your target audience
Before conducting research, it is best to figure out what audience you are researching and selling to. The result will be known as your target audience. This demographic will not only shape your research, but also influence your product so that it is catered to them. In addition, your target audience will determine where you will focus your marketing efforts.
Plan how you will do your product research
Now you should plan the scope of your product research. This involves determining the size of the market, including the total addressable market (TAM), served addressable market (SAM), and serviceable obtainable market (SOM). TAM designates the total size of a market in a certain industry. It is not realistic that you will be able to serve the entire market, and should therefore focus on your SAM, or the portion of the market that you can realistically serve and cater to. SOM will be the portion of the market that you currently serve with your available resources.
Planning your research means deciding what problem you are going to solve, what possible solutions and features you will be testing, as well as where your data will come from. Optionally, you can set a deadline for your research. This will prevent your research from becoming over-complicated and stressful.
Run a market analysis
Market analysis is the process of evaluating an industry, niche, or segment of the market. This analysis will help you understand and interpret your target market, competitors, and how your brand and product will fit into the market. There are numerous ways to perform a market analysis. These include:
Analyze industry trends
One of the most important methods of market analysis is to analyze industry trends. This can help you better understand your industry and what you are getting into. You can analyze industry trends by gathering statistical data from trusted sources such as the US Bureau of Labor Statistics or the Small Business Administration. Additionally, you can find data about your industry such as the amount of businesses within the industry (as well as how many are being created annually) and the industry’s yearly revenue. This data will aid you in entering the space and spotting future trends.
Competitor analysis
Next, identify and analyze who you are competing against. Look at specific companies that will become your competition. What do these companies offer? What are their prices? How do they attract customers? What business tactics do they use? You must ask and answer questions such as these to get an in-depth look into your competition.
You need to come up with a unique value proposition, or a statement that declares the value and distinctive properties of your product, so that you can differentiate your business from the competition.
SWOT analysis
SWOT analysis looks at the strengths, weaknesses, opportunities, and threats of the competition. It is similar to competitor analysis in that you analyze competing businesses. However, this takes a more individual approach to each company, and gives an in-depth look to each one.
SWOT analysis helps you find market gaps within an industry and find opportunities for your product to thrive. In addition, this analysis provides insight into what these companies do right and what they do wrong. You can use this insight to avoid the same mistakes and build upon what has already been proven successful.
Assess the financial viability and pricing of your product
Before your product is brought into fruition, you need to assess its financial viability. Financial viability refers to a company’s ability to generate and maintain the necessary cash flow to support an operation and fulfill associated costs. This ensures that a business can carry out its commitments and obligations.
Additionally, you should assess the pricing of your product. First, you need to determine the pricing model that you will follow (flat-rate, tiered, subscription, etc.). This also means making sure that the price of the product reflects its value and is competitive in relation to similar products. Pricing of a product will most likely require some experimentation. Ensure that your product has a reasonable profit margin.
Risk assessment
When starting a business, there is always some level of risk associated. Risk assessment is a process used to identify potential roadblocks and analyze what could happen. This includes analyzing legal standards and regulations as well as competitive influence. Businesses should create a strategy to adapt to these risks so that they may limit or prevent failure in their product.
Gauge interest on social media
According to the University of Maine, there are 4.8 billion social media users around the globe. Social media is a powerful tool that almost all businesses use. Not only will this give you a head start on developing a brand presence, but it will also help you get an idea for how people will react to and interact with your product.
Platforms such as Facebook, Twitter (now X), Instagram, or even online forums such as Quora can provide a foundation for which you may interact with potential customers. You can use features on these platforms such as polls or utilize comments to gauge interest in your product.
Release a minimum viable product (MVP)
A common strategy used by businesses is to release a minimum viable product, or MVP. An MVP is a basic version of your product that meets the minimum necessary requirements for it to be available on the market. This will (hopefully) not be your final product and can be improved upon later. An MVP is important for product validation as it helps validate a product in its early stages and can even attract initial customers. It acts as a test to see how the live market will interact with your product.
Gather data and feedback
Gather data and feedback so that you may make it more desirable for customers. This shows initiative and will attract customers accordingly. This feedback should check and validate/refute your company’s assumptions about your product. There are many ways to gather data and feedback. These include, but are not limited to:
- Surveys
- Customer interviews
- Pre-orders
- Focus groups
- Product reviews
Apply changes based on the results
Based on the information you have gathered, you should apply changes to your product that conform to your market’s needs and wants. This may mean the adding or removing of features of the product, or even the strategy you use to market the product. These changes should fortify your product’s value and make it more enticing for customers.
The worst thing you can do when creating a product is rely on assumptions. Product validation is an iterative process that uses research and strategies to build the best possible product. This process should not end once the product has been put out on the market. Product validation should be a continuous process that sees the repetitive improvement of the product. Remember to not get stuck in analysis paralysis. Don’t procrastinate, take action.
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