Market validation is the process of confirming the need of a new product or service in a target market. Testing its potential viability can help you predict whether there is interest in the product or service, and whether it can be profitable in the long-term.
In the healthcare and financial space, market validation is an important step in the product development process, as it helps to reduce the risk of launching a product that may not be successful. By validating the market before launching a product, companies can save time and resources that would otherwise be wasted on developing a product that could potentially fail.
There are several methods to determine market validation, including:
- List Goals, Assumptions, and Hypotheses: This helps articulate what problem you are trying to solve and how you plan to solve it. As you test your idea, you can compare your results to initial assumptions, allowing you to refine your understanding of the problem and potential solutions. You can ask yourself these questions which illuminate hypotheses you've made that are yet to be tested and verified.
- What’s the value of my product?
- Who’s the target audience, and what assumptions have I made about them?
- What differentiates my product from existing ones?
- What hypotheses do I have about my product, pricing, and business model?
- Customer Surveys: Surveys allow companies to gather feedback from a large number of potential customers. By sending out surveys, ask prospects about their needs, preferences, motivations and willingness to pay for a new product or service. Ask them about what products they currently use. Circle back to the list you created and frame any hypotheses you made as questions in your survey. If the product doesn't have strong market validity, you can use this information to improve your product's offering and alter its messaging.
- Focus Groups: These are small groups of potential customers who are asked to provide more detailed feedback on a product or service than surveys, as participants discuss their opinions and provide feedback in real time. Conducting focus groups provides valuable insights help companies identify potential challenges or opportunities in their target market.
- Prototype Testing: Once you've conducted focus groups or surveys, you can ensure that you are putting the most useful, high-quality version of your product or service into the world. The feedback you get from testing your product can help identify any issues before it is launched, and also better meet customer needs. There are two main types of testing:
- Alpha testing is when employees of an existing business test a product or service in a simulated setting to test for any bugs or issues before releasing it to outside users.
- Beta testing is when a limited group of real, external users who test the product or service and are specifically told to identify problems. This exists when the version that is tested is unfinished.
- Competitive Analysis: This determines whether there is room for a new offering in the market and whether the new product or service can be competitive. By analyzing the competition, companies can also identify potential challenges or threats to the success of the product or service.
- Customer Interviews: Customer interviews involve talking to potential customers one-on-one to gather feedback on a product or service. Customer interviews can provide more detailed feedback than surveys or focus groups, which help companies have a bird's-eye view of their product, and resolve any concerns when it comes to their prospect's needs and preferences.
- Landing Page Testing: Companies can create landing pages for a new product or service and test them with potential customers to gather feedback and measure interest. Landing page testing can help companies to determine whether there is a real market for the product or service and can provide valuable insights into potential customer behavior.
Overall, market validation is an invaluable step before releasing a new offering into a market, as it helps to determine how successful it will be in the long term. This is why it is crucial to seek feedback to validate the beliefs and assumptions you hold about your product or service, which ensures you are making informed decisions about your offering before sharing it with the world.