How to validate a minimum viable market for your startup idea
How to validate a minimum viable market for your startup idea
This post is one of my Multi-Part Product Guide series. You may also like my top-rated guides such as—Product Monetization, Test Willingness To Pay & When To Kill An App Idea.
In the early stages of building a startup, it's important to start small by focusing on a niche market, rather than trying to immediately enter a large market. Doing this will help you uncover specific customer needs, test product-solution fit, and validate assumptions before expanding the product features or additional offerings.
What is a minimum viable market?
The smallest market size that recognizes the pain point and is willing to pay for your solution
The smallest market size you can adequately serve (have enough people to respond to your solution)
The smallest market size to which you can effectively reach out, promote, and sell
The smallest market that can sustain the revenue or profitability for your business
Step #1: Discover problem areas
If you don’t have a startup idea yet, this is a great way to start. Instead of generating a startup idea from thin air, you can approach it from the market problem perspective.
The first step is to identify the problem areas you’re interested in solving and dig deeper into other smaller segments within the same problem area.
For instance, if you’re trying to solve productivity problems for remote workers, here are some subsets of the larger issues to consider: e.g. virtual meetings, document search, collaboration, and task management.
If it’s a sales problem for online businesses, it could be: customer acquisition, lead generation, conversion, retention, and optimization.
Example:
🛍️ Amazon initially focused on building an online store for selling books before expanding to other product categories and becoming the largest online retailer globally.
💳 Stripe initially solved a problem for developers to integrate payment before expanding its solutions to all businesses.
🏠 When Airbnb first started, they initially focused on solving the accommodation problem, rather than trying to tackle the entire travel and vacation market. They did this by offering air mattresses for rent in people's homes during conferences and events when hotels were fully booked.
Step #2: Define your target customers
Next, consider who are the specific target customers who might be experiencing the problem in Step 1. You can also further slice your target audience into unique sets of users.
E,g., if you’re solving a task management problem for remote teams, you may want to narrow down your use cases to a specific department, such as the design, development, or sales team.
Once you have a general idea about your target audience, it's important to learn more about their needs and pain points. You can do this through various methods, such as:
🗺️ Conducting market research: This involves analyzing industry reports, competitor analysis, and market trends to understand the demand for similar solution and the needs of your target audience.
🗣️ Talking to potential users: Reach out to 10 to 20 potential users and engage in 1:1 conversations to learn what they are trying to accomplish, how they are currently solving the problem, and what their biggest frustrations with current solutions are.
✍️ Surveying your target audience: Use surveys to collect data on the preferences and pain points of your target audience. This can help you identify specific features that would be most valuable to them.
Create a user persona profile
Next, organize all the information you know about your customers in one place. Create an ideal customer profile to include things like:
Demographic background: Age, gender, income level, education level, job title, location, etc.
Responsibilities: This can be related to their job or personal life.
Values: What do they prioritize and value the most in their life or work?
Core needs: What are the essential needs that your product can fulfill for them?
Goals and motivation: What are their short-term and long-term goals? What motivates them to achieve these goals?
Challenges and frustrations: What are the obstacles they face in achieving their goals? What frustrates them the most?
Step #3: Ideate a solution to the problem
Once you have identified the specific problem areas and the target audience, the next step is to brainstorm solutions that cater to the niche market you have discovered.
When ideating solutions to a problem, it's important to consider multiple solutions and pick the most feasible, viable, and desirable solution. Here are four simple questions to help guide your ideation process:
What is the goal or desired outcome that users are trying to achieve?
What are the values customer are potentially seeking?
How might we deliver those values through the solution?
What are the pros and cons of each solution?
Example:
Let’s say you’re trying to help busy professionals lose weight in natural and healthy ways. Your target audience is health-conscious with high-income and values physical appearance. Here are some possible solutions to brainstorm:
Solution 1: Personalized meal kit delivery for a healthier weight.
Pros—Provides a healthy and balanced diet to prevent unhealthy weight gain.
Cons—May not address underlying issues that cause weight gain such as stress, overeating, and health issues.
Solution 2: DNA-based nutrition program.
Pros—Provides personalized and tailored nutrition plans based on an individual's genetic makeup.
Cons—Genetic testing may not always be accurate or provide a complete picture of an individual's health and nutritional needs.
Solution 3: A holistic weight digital clinic backed by a team of doctors, coaches, and nutritionists.
Pros—Offers a comprehensive approach to weight management that addresses various factors that contribute to weight gain such as stress, sleep, diet, and lifestyle.
Cons—May be costly and require a significant time commitment to follow through
Step #4: Validate the minimum viable market
Validating your minimum viable market is essential to determine if your solution is viable and if there is a market demand for it. The best way to do this is by testing your solution with your target customers.
Here are some ways to test your solution:
(1) Value proposition test:
Create a landing page to test if your offer resonates with your target customers. Include components on your landing page that communicate your customers’ problems, solutions, features, and benefits.
(2) Experiment:
Conduct a minimum viable test before building an actual product. If you're building a digital clinic for weight care, consider manually offering 1:1 wellness coaching before creating the MVP. This way, you can see whether users are benefiting from your solution and getting the results they desire.
(3) Minimum viable product (MVP):
Create a functional initial product that delivers value to users. For example, you can stitch together live video software, messaging features, appointment scheduling tool, and a website to deliver the weight expert coaching marketplace. This will help you test the demand for your solution and identify any areas that need improvement before expanding the MVP features.
Update 2024: The Ultimate Idea Validation Framework
Working on new product ideas? I’ve combined various tactics, frameworks, and processes to determine whether your product ideas have the potential to be monetized.
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