Market validation is the process of determining if there’s a need for your product in your target market. Validating your feature/product idea can enable you to reasonably predict whether people will buy your product and whether it will be profitable to the company.
Validating market demand means conducting market research, and this comes in 4 parts:
- Target Market
- Market Dynamics
- Market Size
- Competitor Research & Analysis
Target market is simply a particular group of consumers at which a product is aimed. And we can divide the customers into the following segment:
- Demographics Segmentation: Age, Gender, Income
- Geographic Segmentation: Physical Location
- Behaviour Segmentation: Customer behavior
- Psychographic Segmentation: Attitude, aspirations, and thinking patterns
Market Dynamics are the macro factors that you don’t have control over, but they can make or break your product. This includes government policy, changes in consumer behaviour, buying power of your customer, growth of the market, Technology trends, and so on.
Market size refers to the total number of potential buyers for your product. It tells you and your team, how much potential business is out there and how much can be captured.
We can talk about market size without making mention of the following:
- TAM (Total Addressable Market) – total market demand for a product or service.
- SAM (Serviceable Addressable Market) – the segment of TAM targeted by your products and services within your geographical reach
- SOM (Serviceable Obtainable Market) – portion of SAM that you can capture.
Competitor Research & Analysis
This has to do with studying your competitors and comparing their features, strengths, and weakness vs yours.
The competitors could be direct, indirect, or replacement competitors. Never say you don’t have competitors there is always an alternative for the customers.
In conclusion, It is enough to discover a problem or an opportunity, we need to know if it would be rewarding for us if we solved the problem and this can be achieved through market validation.