3 Cost-Effective Ways to Quickly Validate Your Startup Idea
When the fitness wearables craze hit, everyone wanted a piece of the pie. But as Jawbone and others discovered, the market simply couldn't support 10 Fitbit lookalikes. After a failed pivot to clinical-grade wearables, Jawbone -- once valued at $3 billion -- shut its doors for good.
Jawbone is the latest reprise of an age-old problem for startups: failing to meet a market need.
Plenty of startups face cash flow issues, and when the business fails, entrepreneurs often blame a lack of financing. But according to CB Insights, most startups are dead about a year and a half after raising an average of $1.3 million in financing. So the problem isn’t necessarily money -- it’s finding the problem itself.
To be successful, your startup must solve a problem faced by a sizable segment of consumers. To be sure the problem actually exists, find a group of consumers (real consumers -- friends and family don't count) who can provide insights about the problem and their ideal solution. Don't focus on growth; focus on providing value.
Ready to become an industry-leading problem solver? Use these three strategies to find a solid product-market fit:
1. Jump into the conversation.
Even big, established brands such as Coca-Cola and Google can't assume they know what their customers need. So don't be afraid to ask your target market what it wants.
NASCAR does an excellent job of this. It regularly turns to its Official NASCAR Fan Council, an intelligence platform that collects insights from thousands of fans, to glean insights directly from viewers on a continuous basis. In partnership with Hewlett-Packard, it’s also created a social media command center that helps it keep up with fan feedback.
If creating an intelligence platform to gather market insights isn’t in your startup-sized budget, turn to focus groups. Focus groups let you dig into a potential customer's thoughts and emotions, which you can then use to map out buying behaviors.
Fortunately, focus groups don’t have to be expensive or even formal. For example, after creating a makeshift version of what would become her popular Spanx undergarment, Sara Blakely had conversations with store clerks across the country to understand the market appetite for her idea. She learned that consumers were hungry for her product, and by 2014, Blakely was a billionaire.
2. Quantify your market.
A recent Boston Consulting Group survey found that while most CEOs realize the importance of consumer insights, about two-thirds say their strategies are lacking.
Getting to a market insight prior to peers can be the difference between surviving and thriving. Once you've discovered what your customers want, you then need to quantify your market size and prioritize an action plan. In other words, once you have the "why," you need the "how many."
Combining these approaches helps you stake out a profitable niche. By understanding your market before you begin product development, you give yourself the opportunity to tailor your product to your niche's needs.
One of the easiest and more effective ways to listen to the market is through surveys. While surveys may not be the best conversation-starting tool, they can further explore and quantify findings from an earlier focus group.
Netflix, for example, knew that some of its users binge-watched its programs. By sending out a survey, it discovered that 76 percent of users are binge watchers. Netflix’s chief content officer, Ted Sarandos, also noted that its research revealed that most people don't get hooked on a show after just the first episode.
Upon gathering these insights, Netflix began releasing all episodes of a season at once to give three-quarters of its customers what they want: the ability to binge watch.
3. Keep an eye on changing needs.
Just when you think you’ve got your customers figured out, their needs change. That’s why you always have to stay on top of your market's needs. Social listening lets you identify and analyze what's being said about your brand, which can then help you strengthen products, generate new business, and improve customer service.
There are plenty of tools out there to track and monitor conversations happening online about your brand. Use them to discover where your brand's experience is falling short and, ultimately, to delight your detractors.
Cisco, for example, reported a 281 percent ROI through social listening by paying attention to the conversations surrounding its short-term business initiatives, such as sponsoring the Olympics and hosting Cisco Live, its annual trade show.
When you’re learning about your customers and validating your startup idea, take advantage of your entire toolbox. Insight tools work better together, and because each has its own strengths, combining them will deepen your findings. Start with your customers' "why," and the rest will follow.