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One of the most important steps while building a company or a product is to validate the product idea. When a company has to be started, it becomes crucial to understand whether the proposed idea for the organization would work in the market. The risk of business failure is a serious problem as the person who has invested in the company has a chance of losing the investment. There is more than 50 percent of the small businesses which failed within their first year. One of the most common causes of business failure is having an over-enthusiastic newbie entrepreneur who launches products that do not have any demand in the market. Entrepreneurs become over-enthusiastic about their products and do not give attention to the practical approach of knowing whether people would buy or use the product. It seems very obvious that to achieve business success, the company has to make products which the people need and use.
Any business cannot sustain itself if its products does not have any demand in the market. Hence, as a smart and practical business owner, you need to validate all the product ideas before it becomes an actual product. You should always take the necessary steps to check that people are willing to pay for the product you are going to make. Product idea validation should also be discussed by the Scrum Master and Product Owner such that the main coordinators of the business are aware of the demand of the product. Before creating a product, you have to take the necessary steps to see that people are willing to pay for the product. However, product validation is easier on paper and harder to implement practically. Entrepreneurs often struggle to find ways to validate their product and understand its demand in the market.
You may have bigger dreams about the product you want to build and become a successful entrepreneur, but if your product does not resonate with the people and the market, it cannot be successful. For your product to become popular and grow, you need to first ensure that there are enough people to buy and use the manufactured product and help you generate your revenue. Here are a few ideas on how to validate a product without having to invest heavily in your resources.
Just writing down your product idea may sound simple, but this would help you consider all the aspects of product manufacturing and marketing. This is not the same as a business plan which may change as prospective customers come into the picture. Writing down a product concept means that you have to answer a few key questions which you can go out and test. You would answer all these questions based on your assumptions which you would validate while testing and reduce any risk before launching the product. Some of these questions are:
The answer to this should be very specific based on the product you are launching. If you say that everyone is your customer, you would set a tough time to prioritize. You have to answer the questions of what kind of business you are doing, how big or small your business is, and what type of market you are entering. These would give a clearer idea of how to approach your customers.
Many entrepreneurs think that talking about the product features and marketing about how it is the latest technology would attract customers towards them. However, in reality, people would like to buy a product to solve a current problem they are facing. Hence, always start with a problem first, which implies that you have to emphasize what problems your product would solve. You have to first list out all the problems you think the product would solve and also validate with the customers whether they also view it as a problem. The key focus here is to see whether the customers think that the problem is worth solving and would they be ready to spend their money solving it.
Once you write down the problems, you have to link them back to your product and explain how your product would help them make their lives better. Would your product make them more money, would it help them live a more comfortable life, analyze and look at it in a better way?
The customers today are smart and know that just technical jargon won’t woo them away into buying the products. Your product features need to be more than cool; it has to solve specific problems which can save them money or time for the customer. Experts advise that building a minimum viable product that has features that provide enough value for the customers to buy, would be a great way to start a product.
While writing down your product concept, you have to answer who is your customer and you cannot say, everyone. Knowing who you are making the product for and selling your product to is a crucial step in business as they are the ones who would help you maximize your business. Just knowing your audience is not enough, you have to understand their possible pain points, their peculiarities, etc which would influence how you design your product. You should also consider the purchasing power of your audience which would help you price the product accordingly. This means that you have to know the economic status of your customers such as their average salary, financial range, what they do for a living, etc. When you price the product too high, it may drive away your customers. Likewise, when you price it too low, the customers may start doubting the quality of your product. Here are a few ways to identify a target audience:
Start with a narrow audience: Unless your idea is as a service such as an eCommerce platform, or software that would solve a wide range of problems, it is not advisable to have a broad range of audience. It is better to concentrate on, say, a particular age group, or a group of people sharing similar interests, qualities, or a geographic location. For instance, if you are building a car tracker software, your target audience would be a group who know how to use tech and are active with cars. You could further narrow it down to a particular location such as New York or Seattle and start marketing your product. These are called User personas.
Conduct Online surveys: This is one of the most effective ways to find out whether people are willing to pay for your product. These surveys can be through email questionnaires where you could email your targeted audience and take their feedback about the product. Always be aware that the attention span of a person is very limited, so be specific in the surveys, and ask well-written questions which would interest the audience. Take time to familiarize yourself with the best email marketing practices such that you can deliver better results.
This data includes knowing the size of the potential market, understanding your possible competition, range of your product, price value, possible suppliers, costs of production, consumer behavior, and other obstacles that you would face when you build the product. Here are a few ways to know about the market’s trends and the size of your potential market:
Reading reports and statistics relating to your industry from credible research sources.
Checking social media to understand the popularity of your product or the number of people facing the same problem. You can understand consumer behavior and take the feedback given by the customers.
Google trends help you know the popularity of a topic over a location at a given period. This would give you an idea about how relevant is your product in the given market. For instance, if you want to make an app that helps in grocery pickup, using google trends you can understand how many people in a given area would use this service. This would also help you know the features that you have to integrate into your product according to the consumer’s point of view.
This includes knowing and listing out the resources to build the required product. Any product building would require these components:
Capital: All the project stages require funding; hence, you have to analyze whether you would have enough money to sustain the business through all the stages of the project.
Infrastructure: These are the tools and technology that the product would require to be built and can be imagined as the parts of the product’s body. The expenses for the infrastructure have to be mentioned clearly so that accounting for product development becomes easier.
Manpower: Human skills and services refer to the partners, employees, etc who are needed to facilitate and run the production of the product. You have to calculate the payroll of each individual so that you can measure the financial compensation and create an appropriate work environment.
Time: The time required for the production team to make the product a reality.
These are general resources that every business would need. To find out what exactly resources your business needs, you should:
Research your competition: Find out how your competition has started and what tools and technology they use to optimize their business. Find out how they maintain their work environment and sustain the production of their products. This would give you an idea about the resources you need to get started.
Research about your product: You may have a product idea, but turning it into a reality is easier said than done. Use the internet, brainstorm ideas with experts, read research articles and find out the details about how to build your product. This would give you a fair idea of the tools and strategies you need for your product.
Find your suppliers: Once you know the tools required for your product, you need to look for suppliers that would provide them. Use your network, get discounts and get the “body parts” required for the product. Suppliers would give you a clear idea about the price ranges of the components of the product or would give you a price of the whole product itself. They would also help in deciding the tools and techniques for creating your product and how much expenses you may incur along the way of building your product.
Perform a Break-even Analysis: In break-even analysis, a timeframe is set where the revenue needed to cover all the expenses which include the marketing and tax costs is generated. This is a vital part of the business plan and a great way to see whether the business has chances of sustaining in the market.
A Prototype is a primitive version of your product that has the basic solution for the problems you are looking to solve. It is one of the most cost-effective and fastest ways to pitch your idea to the investors as it requires very little effort than the actual product. One of the forms of the prototype is a minimum viable product, which is a functional version of your product although in very raw stages. For instance, if you would like to create your workshop for a psychology course, an MVP could be a youtube tutorial or a blog that would touch upon a few areas of the workshop. MVP gives you actionable feedback so that you can add these features to your actual product. It also helps you discover your target audience and their pain points and specific demands.
While designing a product, there may be many choices the project team has to make in terms of the features of the product. This often confuses them and many times they may develop product features that would not be as helpful as they assumed. Hence, user interviews and user observations are two methods where the customer’s opinion could be used while designing the product. User interview is conducted in the early stages of development where an interviewer asks a particular set of questions to a potential user. After the conversation, the team systematically analyses the interview and takes ideas for its project design. User interviews can be used to capture the feelings, daily routines, motivations, etc of the customers which could be used while designing the product. User observation, on the other hand, is a process that involves listening and watching people while they are using any service or product. This helps the researcher get an objective view of the service or product. In this method, the researcher makes purposeful, careful, and conscious efforts to process the information and come to a result. Both these methods are effective methods to test and validate the product ideas.
Product Idea validation is a crucial step for any start-up as it would decide whether their product would perform well in the market or not. Entrepreneurs may get excited with their product idea and may not validate it from the point of view of the consumers which would lead their startup to fail. Before you venture to the markets with your products, you must have substantial data about your product and the market. By using these techniques to validate your product idea, you could have a clear idea about the things you would face in your entrepreneurship journey.
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