Here’s the situation: Your development team is busy creating a Minimum Viable Product (MVP). You have people off in all directions trying to secure some funding. But do you have a Market Validation Plan? Furthermore, are you executing this plan along with all the other activities? In other words, is this an activity that you are currently performing?
As the name suggests, a Market Validation Plan (another MVP for those who like TLAs) is about reaching out to your target market to determine whether:
- The market likes your product or product concept
- The market is willing to buy your product when you have it ready
“Like” is a bit of a weak word. But at this stage of development, the product may simply be an idea or a very early prototype. So “like” in this context is appropriate. As the development process advances and the product and concept solidify, you will require stronger validation. A vital aspect to validating the market is to determine if the market that you are targeting is willing to pay for your product. Are prospective customers willing to part with their cash either up-front or through a subscription model?
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The three steps of an MVP
Step One: First, and probably most obvious, is to talk to people or companies directly in your target market. These, in fact, are your target customers. Many companies are reluctant to do this. They feel that they may lose a sale if they don’t have the product just right. It becomes a Catch-22 between sales and development. Sales says, “The product is not ready to sell,” while Development says, “We need to validate with potential customers to make sure the product is ready.” My philosophy is that it’s better to lose some of these early sales and learn what the product needs to be than to develop the product with no validation and lose every sale!
There are many ways to find out who is in your target market. If, for example, your target is the IT group within large companies, look locally for companies that have such a department (LinkedIn is a great resource to find local companies.) If your target is individual software developers, again look locally or ask your development staff about other companies. If your target is the consumer, reach out to your personal network (Facebook is a great resource here.) In addition to asking whether or not they will buy your product, understand their work process and other systems they use. No matter what you are building, you have to fit it into a prospective customer’s existing day; understanding all the potential touch points between your product and their process is key.
Step Two: Next is to find experts who target the same market as you but are not competing with you. They may sell a different product or service but are targeting the same market. For example, suppose you sell compilers to software developers. You may want to reach out to companies that build and sell integrated development environments to the same target, or provide developer training services to the same market. Also included in this group are analysts and well-respected domain experts.
Nowadays, blogging and leveraging social networks (Twitter for example) are critical in establishing thought leadership. In addition to your blog and your tweets, make a list of all the people that blog or tweet into your target market. Be diligent and read their blogs and tweets. Comment where there is a tie between what they say and what you do, making sure to include a link to your blog. The point here is to start and maintain a conversation with others who target the same market you do. Once you have started the conversation, reach out to them to get an opinion on your product, looking for them to link to your site.
Step Three: Reach out to people who used to work for companies that you are targeting. With today’s highly mobile workforce, and by levering tools such as LinkedIn, it is relatively easy to find people who worked for a company that is in your target. Generally speaking, people stay in the same department when they move (e.g. people in marketing tend to stay in marketing), but they may move to companies that are in an entirely different space (e.g. developer tools company to renewable energy company.) If you are targeting the company from which they left, then this person would be a good candidate to talk to.
In all cases make sure to get at least the following answered:
- Whether the product solves problems that are pervasive in your target market
- Whether or not target companies would buy it
- What the overall workday process is
To summarize, an active Market Validation Plan is critical. You must find out if the market wants your product and is willing to pay for it. Reach out to people/companies who are directly in your target market, as well as those who were in your target market, and engage in a conversation with relevant domain experts.
Peter Hanschke is an Ottawa-based product management specialist. Peter’s post is part of our continuing series about the ecosystem necessary to bring technology to market. We welcome your comments.