Browse Definitions :
Definition

market validation

Contributor(s): Weiting Liu

Market validation is a series of actions that an entrepreneur carries out early in the product development life cycle to verify there is a need for a new product, product feature or service. The approach an entrepreneur uses to validate a potential market depends upon what product or service is being designed and how soon it needs to get to market. Questions to be asked at the beginning of the process include: 

  • Does the market for this product or service already exist?
  • What problem will this product or service help solve?
  • What strategies will be used to find customers for this product or service?

During market validation, the business owner investigates how well an idea resonates with potential customers by asking for direct feedback from the target market. This step is often carried out through surveys and questionnaires, but it can also be carried out through informal 1-1 conversations. 

Why market validation is important

Many startups fail because someone has a brilliant idea for a new feature, product or service but there is no genuine customer need. An important goal of market validation is to verify the TAM, SAM, SOM (Total Available Market, Serviceable Available Market and Serviceable Obtainable Market).

  • TAM is the total market demand for a product or service.
  • SAM is the customer segment that is within geographical reach
  • SOM is the customer segment within geographical reach that are likely to become customers.

Market validation plan

An effective market validation plan includes mechanisms for getting direct feedback from the target market base before a minimum viable product (MVP) is developed. The purpose is to give entrepreneurs the confidence they need to proceed with an idea by gathering qualitative data the provides stakeholders with a clear understanding of the potential market and customer base.

To be most effective, the plan should also includes follow-up surveys, interviews and questionnaires once the MVP becomes available. The data gathered during this phase can help the entrepreneur address potential concerns about customer retention, as well as acquisition. A common question asked in market validation surveys post-MVP is: "How disappointed would you be if this product, product feature or service suddenly disappeared?"

This was last updated in September 2019

Continue Reading About market validation

Join the conversation

1 comment

Send me notifications when other members comment.

Please create a username to comment.

Why should market validation be an important part of every startup business?
Cancel

-ADS BY GOOGLE

File Extensions and File Formats

SearchCompliance

  • risk management

    Risk management is the process of identifying, assessing and controlling threats to an organization's capital and earnings.

  • compliance as a service (CaaS)

    Compliance as a Service (CaaS) is a cloud service service level agreement (SLA) that specified how a managed service provider (...

  • data protection impact assessment (DPIA)

    A data protection impact assessment (DPIA) is a process designed to help organizations determine how data processing systems, ...

SearchSecurity

  • spyware

    Spyware is a type of malicious software -- or malware -- that is installed on a computing device without the end user's knowledge.

  • application whitelisting

    Application whitelisting is the practice of specifying an index of approved software applications or executable files that are ...

  • botnet

    A botnet is a collection of internet-connected devices, which may include PCs, servers, mobile devices and internet of things ...

SearchHealthIT

SearchDisasterRecovery

  • business continuity plan (BCP)

    A business continuity plan (BCP) is a document that consists of the critical information an organization needs to continue ...

  • disaster recovery team

    A disaster recovery team is a group of individuals focused on planning, implementing, maintaining, auditing and testing an ...

  • cloud insurance

    Cloud insurance is any type of financial or data protection obtained by a cloud service provider. 

SearchStorage

  • DRAM (dynamic random access memory)

    Dynamic random access memory (DRAM) is a type of semiconductor memory that is typically used for the data or program code needed ...

  • RAID 10 (RAID 1+0)

    RAID 10, also known as RAID 1+0, is a RAID configuration that combines disk mirroring and disk striping to protect data.

  • PCIe SSD (PCIe solid-state drive)

    A PCIe SSD (PCIe solid-state drive) is a high-speed expansion card that attaches a computer to its peripherals.

Close