How to do Market Validation

Market validation is a process to help turn your idea into something that people want and will pay for. Validating your idea significantly increases your chance of success and makes the process of starting a whole lot easier!

Here's our Mum's Garage take on market validation, in particular, customer discovery,  why it's important, and some straightforward tips on how to make a start. 

What is market validation and why is it important?

A successful business consists of a number of variables. These variables include customers, product, brand, vision, culture, team, business model, financials, legal requirements etc.

Your success at building a startup will be determined by your ability to distil and combine the right set of variables. The fewer variables there are, the easier it is to get it right.

When we’re hit with a great idea or a problem that we want to solve, our imagination runs wild with all the possibilities and opportunities that could exist with the idea. There are a lot of variables.

People doing customer discovery as part of the market validation process

At this stage, before you’ve spoken to anyone else about the idea in a meaningful way (i.e. not just your friends over a beer), these ideas are based on assumptions from your experiences or imagination alone. They are based on your reality, not necessarily that of a larger audience.

To build a successful business you need to find the combination of variables that stand true for a large enough audience to make the business viable. Market validation is a process to help you understand what is true, without spending a lot of money, so you can make better decisions about what the first set of variables for your company should be.

“Make every detail perfect and limit the number of details to perfect.” — Jack Dorsey, Co-founder of Twitter

Getting started with market validation

The first key variables that you want to get clear on are:                                                

1)  The problem you're solving

It's a lot easier to market and sell something that solves a significant problem. You will significantly increase your chances of success by taking the time to find the problem that people will pay to have solved before you invest time and money into building the product.

2) Your early adopters  

This is the specific customer group who have the problem and will care the most about what you're doing to solve it. The more types of people you try to solve problems for, the harder it is to do pretty much everything in your business. Building a startup is hard enough as is - building a startup that targets everyone from the beginning with minimal resources is very difficult. 

3)  An understanding of what this group really cares about (values, beliefs, behaviour patterns, their current, undesired and desired reality) so you have a good understanding of what they want in a solution.                              

The easiest and most effective first step for getting certainty around these variables is to talk to the people who may be your potential customers. By doing this you will be able to identify a common problem for a specific group of people, which will help you to narrow down the problem you are solving and who needs it solved the most. This provides a larger degree of certainty that you are on the right track.

You can do this through customer interviews.

Customer interviews                

“A true customer interview involves a 1-on-1 interaction, ideally in person, and emphasises asking questions in order to draw out information.” — Eric Jorgenson

There's an art to conducting a good customer interview, which you’ll master with practice.

The objective is to gain a deep understanding of the person you are interviewing, to understand their fears, frustrations, wants, desires and values in relation to the topic you’re exploring.                    

To get the gold, aim to build rapport with the person you’re interviewing and keep the conversation open and free-flowing. At the same time, try to keep the conversation on track towards getting the information you need by maintaining a loose structure.

With an interview you are trying to understand the real problems of your customers; you are not trying to validate your solution. You need to forget about the solution (product/service) and go in with a clean slate & open mind.                                                                    

“It’s really important to understand the philosophy behind the customer development interview, particularly because it runs so counter to entrepreneurial instincts.

Why? Because people are too polite to say ‘no’. Because people can’t imagine technologies that don’t exist yet. Because people overestimate how much effort they’re willing to put into something. Because people think incremental, not disruptive.” — Eric Jorgenson

Here's an approach we've found to be highly effective for conducting interviews:                                                   

Step 1:  Listing Assumptions

Before you start interviewing, have a think about the assumptions you have when it comes to your idea.

    a)  Who are your target customers?

    b)  What problem(s) do they have that are significant enough that they will pay to have them solved?

    c)  What do they care about in a solution?

    d)  Any other assumptions you have that you think are important to explore

Step 2:  Listing Target customers

Write a list of all the people you know who fit the description of your target customers. Also, consider the places where you could find others who fit the description. The more specific you can be about who you think your initial target market might be, the better.

“Without a focused group of people to interview, results aren’t likely to be meaningful. The more tightly we can define our interviewees, the faster we can validate or invalidate a hypothesis.” — Eric Jorgenson

Step 3: Prepare a question guideline for the interview

It’s useful to have a number of questions written down to guide the conversations and provide prompts if needed. These questions should be designed to test your assumptions and uncover your customer’s problems. You can group them into topics you would like to explore, in relation to your idea.

The first question should be something easy,  to get them talking about the topic.

The rest of the questions should be designed to explore the interviewee’s current state, desired state, undesired state, and the roadblock or problem when it comes to the topic you’re exploring.

Good questions should pass the mum test:

“Even if you asked your mum about it she would not lie to you because she does not realise that you are giving her the chance to hurt your feelings.” — Rob Fitzpatrick

Example: “when’s the last time you did this...”, "tell me about how you....."

If you get people to tell stories that describe their behaviours, their answers will better reflect reality.             

Think of your script as a guideline - you don’t have to go through every question as a process.

Often what happens is someone will say something that you can tell has more to it, which you will delve into and explore. If that comes up, you can say things like “can you tell me more about that?” or ask a series of why questions to draw out more information.                  

Remember: The interview isn’t about validating your solution. It’s about understanding the customer’s problem.        
               

Useful Tips:    

Time Spent:

Try to talk to interviewees for at least half an hour. It takes a while to get the good information out.

Record It:

Record the conversation so you can refer to it. It also makes for great training material when you bring others into your business, so they can have a good understanding of who your customer is, and what problem you're solving.

Referrals:

Ask each interviewee if they know anyone else you can talk to - try to get at least one referral from each person.

Processing The Learnings

It’s important that you have a good process for storing and processing the learning’s you get from the interviews.

In our experience, a great way to do this is to write down any key quotes or learning’s on post-it notes (include the name of the person who said it for context). Group the post-it notes into common themes as a way to help you identify trends. You can also group them under the headings ‘Customer’, ‘Problem’, ‘Current Reality’, ‘Desired Reality’ and ‘Undesired Reality’.                       

You will have a feel for what the problems and important takeaways are from the interviews, but it is important to have the hard evidence in front of you (put the post-it notes on the wall or somewhere you can see them) to keep you on track and avoid biases.

“Anything that is measured and watched, improves.”

— Bob Parsons - Founder of GoDaddy

Need additional help? You can reach us through email, Twitter or Facebook! We'd be happy to answer any extra questions.

Additional Resources

How To Fail-Proof Your Business With Customer Development - Eric Jorgenson

95 Ways To Find Your First Customer For Customer Development Or Your First Sale - Jason Evanish

How To Do (And What To Expect From) Early-Stage Customer Development & Sales - Rob Fitzpatrick

Acting On Customer Discovery - Steve Blank