In my years as a
Conversion Scientist, I’ve had the opportunity to diagnose hundreds of online businesses. They come to us with underperforming websites, and I have to determine the root of the problem.
Is the product something people want?
Is the traffic of the right quality?
Is the messaging on the site communicating the value proposition compellingly?
I am asking the same question that our prospects are: Should we invest in that? For me, the question is a bit more specific: “Can we optimize this site enough to increase revenues to cover our fees and much more?”
If the product or traffic isn’t right, I have to say, “No.”
These are the challenges entrepreneurs face, as well. For this reason, the folks at Tech Ranch Austin asked me to talk to their “Venture Forth” entrepreneurs about validating markets for their ideas.
These entrepreneurs are looking for funding, partners, employees and customers for an idea that may not have launched yet. While I technically don’t do market validation for a living, I do have some tools in my pocket.
Here’s what I told them.
Secondary Research: The Big Picture
In general, secondary research is any source of market data that tells you what someone else knows about your marketplace. It’s where you go to get validation for your idea. It’s where you assemble the big picture.
Analyst reports, market studies, market share aggregations and demographic databases can be used to estimate the size of a potential market. My recommendation to the entrepreneurs is to hire a few hours of a great researcher’s time for this.
You can always tell an entrepreneur who has relied too much upon secondary research. Their pitch to an investor includes something like, “If we get just one-tenth of one percent of this market, we’re a $100 million company.”
Most investors are too smart to fall for this.
Primary Research: The Harsh Truth
Primary research is what you learn about your marketplace from the people who might pay for your product or service. There are two kinds of research: qualitative and quantitative.
As I’ve said before in this column, qualitative research is the study of individual behaviors. Quantitative research is the study of groups of people.
Qualitative research includes interviews, surveys, focus groups, taste tests and user feedback. Quantitative research includes sales data, analytics, statistically significant trials and what I call the “MVNP” test.
The Challenge Of Market Validation
The true question you are asking when validating a market is not, “How many people have the problem and the money and motivation to fix it?” This is the total market.
Your Total Addressable Market is limited to those you can reach.
Of these people who would buy your thing, there is only a portion of them who can be reached. You may want to sell cave floor coverings to hermits, but the nature of the hermit marketplace makes them unreachable.
The portion of your market that can be reached by advertising, TV, word of mouth, search, and so on is the maximum limit of your addressable market.
More limiting than this is how much of an addressable market you can afford to reach. The cost of reaching a marketplace is inversely related to your ability to convert them to customers.
For a new or non-existent product, this makes your total test market small indeed.
The portion of your addressable market that you can afford to reach is often quite small.
Your ability to test a marketplace is a function of reach + salience. Not only do you need to reach them, you need the right words to convince them that they should purchase.
Not only do you need to reach them, you need the right words to convince them that they should purchase.
You may reach a valid market, but if you don’t use the right words or feature the right benefits, they may never know your amazing product was put before them.
The Maximum Viable Non-Product (MVNP)
The Lean movement has made the MVP, or “Minimum Viable Product” a staple of product development. The idea is that you build a product with the minimum set of features necessary to test it in the marketplace. Then you launch it.
This style of development lends itself well to online software products, or SaaS. It is less effective for hard products.
It doesn’t address the issue of how to talk about the product to the market, either. How do we find the right value proposition to truly test the product?
I recommend using the tools of a Conversion Scientist. To do so, I propose developing a Maximum Viable Non-Product, or MVNP. This is a page, website or prototype that tests your ability to get people to act on your messaging.
You’ve seen websites that present a new online service but only allow you to request an invitation. With the proper analytics, these sites are measuring how many visitors came, which took advantage of the offer and where they came from.
Many require that they share the service on social media to qualify for an invitation. This tests the social efficacy of your phantom service.
Try different messages to see if you can find a winner that drives invitations.
MonkeyWorks asks for feedback in exchange for an invitation.
This data will tell you if you can afford to reach your market, what your conversion rates are and what language will drive your ultimate sales.
This is data you can take to investors, partners and potential employees. It’s hard data and highly relevant.
Designing An MVNP
You want to design an MVNP that tests your message as close to purchase as possible.
One of the Tech Ranch entrepreneurs was selling niche tours in Europe. She wanted to know if she could fill a tour in Spain, a new country for her business.
I proposed that she put a page up offering the Spain tour. This would take the visitor all the way through until it was time to ask for a credit card. Then a notice would tell the visitor that the tour is no longer available.
In this case, the MVNP included the plans for the trip, the locations and the price. She wouldn’t have to do any of the actual booking work or put down any deposits.
And at the end of the test, she would have a list of people who had tried to buy the tour, a ready market to sell future tours to.
Use anything that you have for your MVNP. Ideally, you will want to test the number of people who would actually click “buy.”
However, you can also test invitations or ask for an email to inform them when the product is ready. You can even test different price points for your MVNP.
The upshot of this is that it’s often cheaper to launch a landing page or microsite than to create an MVP.
You are testing the effectiveness of your message before investing in features. You’re validating a market without risking lots of capital.
Getting Visitors To Your MVNP Site
There are a number of ways to get visitors to your MVNP website. If you can’t get some traffic to your site at a reasonable price, then your Total Accessible Market may be too small.
Here are some ways to get qualified visitors to your site:
Search ads, like Adwords
Targeted Social ads, like Facebook ads
Niche crowd-funding sites, like Indiegogo
The mailing list of a complementary product
Remember that part of validating your product idea is validating the channels by which you will market it.
Don’t Forget The Qualitative Approach
Before investing in ad traffic, you might consider collecting individual input on your MVNP prior to testing it. There are a number of online resources to gain feedback on your MVNP, including UserTesting.com, VerifyApp.com, and Google Consumer Surveys to see what people think of your MVNP.
Udemy did this with one of their landing pages before doing a formal split test and saw a 246-percent increase in clicks.
It’s as important to validate that you can market a product as it is to validate that there is a market for a product.
Building a Maximum Viable Non-Product may be less expensive than building a Minimum Viable Product and can deliver the data you need to get your idea funded and staffed.
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