Market Validation: Smart Innovation Requires Market Facts
How do you validate the market need for your new product or service?
When planning a market launch or
a new market entry, countless unanswered questions arise about how well that
offering will be received. While it may be possible to do a reality check with
techniques such as a limited test launch, the reality is that with technology
products, the actual product development cycle is highly resource intensive, making
a test launch scenario a non-trivial matter.
Market validation is not a black and white process; similarly, it’s not a ‘thumbs up�?or ‘thumbs down�?decision. Creating the right attributes for a well-positioned solution is a complex endeavor that requires a rigorous process of mapping buying drivers and assessing the switching potential for buyers from the legacy solution to the innovation you seek to validate.
As a result, it's often necessary
to perform extensive concept testing in order to know that the eventual launch
will meet the market need. That's just the beginning. There is also a need to
know how the target market will respond beyond the early adopters. It's not
enough that the innovation be simply "better" than the legacy
solution it replaces. Even in B2B environments, it's people who make buying
decisions and humans can be highly risk averse for a variety of sound reasons.
This process of conducting a
detailed evaluation that will predict market receptivity, both quantitatively
and qualitatively, is known as Market Validation - and is also known by
other names, such as:
- Market Assessment
- Go-to-Market Research
- Pre-launch Competitive Analysis
Usually, Market Validation is a highly collaborative team
process involving several disciplines within the organization, including:
- Product Marketing
- Product Management
- Sales
- Operations
- Engineering
- Customer Support
- Finance
1st Resource specializes in Market Validation for technology
and healthcare products and has an established methodology for working
interactively with multi-disciplinary product launch teams. For more than 15
years, 1st Resource has focused on delivering unique customer and market
insights to support managers in crafting winning strategies, developing
fact-based actionable plans and creating value across the organization.
Market Validation Case Studies
A specialty instruments manufacturer was planning a new product entry into the pharmaceutical industry. Management and board of directors were reluctant to fund the launch without understanding more about likely product acceptance and price sensitivity.
The 1st Resource team probed the issues in-depth with a number of industry experts and thought leaders; conducted extensive online research; attended the major industry conference and trade show; interviewed relevant industry decision makers; and explored the value proposition in detail. Our analysis led to alternative go-to-market scenarios.
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The client’s go-to-market premise was not validated due to a number of subtle market barriers. An alternative go-to-market scenario was discovered through Market Validation and this approach led to a lucrative and strategic OEM contract with a Fortune 500 company. As a result, the firm was able to fund further development of the product and reinforce their intellectual property claim.
A boutique provider of analytics services to Fortune companies wanted to assess their potential for growth beyond where they had previously found success in the Consumer Packaged Goods industry.
1st Resource conducted a comprehensive market assessment including an in-depth review of 24 known competitors and a scan of 50 others; conducted in-depth customer insight interviews in the industries under consideration; and performed both a SWOT and Porter 5-Forces analysis.
Important areas of innovation were identified, customer value elements were validated and the customer was able to focus on the industry in which they had the most strength and experience.
A successful applications software firm that had reached near complete penetration of the Fortune 1000 needed a platform to maintain a double-digit growth pattern and become well positioned for a planned exit for the founding equity holders. The company needed to determine the best path for continued high levels of growth and position for a planned acquisition in a way that would optimize valuation for the shareholders and leverage their deep market penetration.
1st Resource developed scenarios for each of the short-listed strategies; conducted broad and deep research with existing users of the product to understand how they used the product in their workflow; determined the best case scenario for product positioning and enhancement; and lead an in-depth team process at a senior management retreat to gain consensus on the preferred strategic path.
Within a few months, we were able to bring critical strategic insight that was needed to complete the deal. The company reached exit with an industry leader as the acquiring party. Management achieved its goal of keeping the team intact through the merger, and the valuation for the transaction far exceeded standard deal metrics based on EBITDA.
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