It is commonly accepted that product managers should use market input to test product/market fit, perceived value, and revenue potential before developing a product launch strategy. However, though the concept is generally supported and blessed by senior management, product managers rarely use a rigorous process to develop objective and quantifiable market input to guide their major product and market entry decisions. Properly done, product/market validation will provide critical input and improve decisions on a wide range of issues including:
- Testing product features and prioritizing product development
- Profiling initial target markets
- Understanding the purchase decision process and developing the sales cycle milestones
- Determining the most compelling sales proposition
- Identifying key competitors and mapping their competitive strengths
- Assessing sales channel options
- Setting price schedules
Introducing new products and entering new markets without the confidence that comes from well-designed and thorough market input leaves managers exposed to unnecessary risks.
Product/market validations that fully address these issues are not common for many reasons. Most companies do not have the knowledge, resources, or experience in setting up and conducting these kinds of assessments. Often there is a belief that there is not enough time to get the market data and that decisions cannot be delayed. More critical is the lack of understanding of what is needed to successfully conduct these studies so managers settle for whatever information is available within their normal operations. Finally, remaining objective and using the market data as it is, not as the management team would like it to be, is often very difficult.
There are core components of product/market validation work that apply across all types of products and services and markets.
The core components
- Getting started. When do you need product/market validation? What are the most important decisions that need to be made? Do you have what is needed to do it right?
- Developing the Product/Market hypothesis. What is the product that is being brought to market and what benefits will it deliver? Who will receive these benefits?
- Designing the data collection workplan. What is already known? What new data is needed? How many resources are available? How much time is available?
- Collecting the market data. How much is needed? Who has the data that is most important? What is the best and most economic way to get the data?
- Analyzing the market data. What new insights have been gained? How can the data be used to help with the decisions that need to be made?
- Using the results to take action. What decisions are supported by the data? When is more data needed?
- Product/Market Validation best practices.
Product/market validation uses market input to improve decisions, increasing the probability that the product fits the needs of its target users and responds to those needs better than its competitors. Without it, managers often do the best they can with old information, misperceptions, anecdotes, company biases, and competitive pressure. There is a better way.
Additional Reading: The Innovator’s Dilemma, Clayten Christensen, HarpersBusiness.
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