Episode #25: How to Validate Your Product Idea Before You Spend Serious Money On It

Episode #25: How to Validate Your Product Idea Before You Spend Serious Money On It

In this episode of the Predictable Designs podcast I’m going to share with you various ways to validate your product idea before you begin spending serious money to develop and prototype it.

You need to validate upfront that people will pay for your product and that it will sell well once you finally have it available.

This is a critical early step that way too many entrepreneurs skip entirely or rush past.

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Links mentioned in the show:
The Hardware Academy


Podcast Transcript:

John Teel: The very first step in the research stage is to validate your product idea. Unfortunately, this is an area where a lot of entrepreneurs– They skip over this part. A very typical flow is that you have an idea, you maybe do a quick research to make sure that it’s not already a patented idea or a product that you’ve seen on the market.

As soon as you don’t see that there’s any competition for it, then the typical flow is okay, you’ve done your market research and now you’re ready to jump right into developing and making a prototype.

I’m going to show you that that’s not the way to do it. Instead, it’s much better to fully validate the product and make sure that this is really worth pursuing because all these other stages, the design and prototyping stages they’re a lot of work, it’s a lot of money, a lot of time you’re going to spend. It’s really worthwhile that you spend this time upfront to validate that the product is a good one. One of the ways to do that is you research the competition.

Now, this is where most people have it backwards. They think researching the competition, they think it’s a good thing. If they find no competition, you don’t want any competition.

That would be the way it’s thinking, but that’s actually wrong. Ideally, you want a product that has some competition, but it’s competition that you feel like you can do better than them. The reason this is by having competition, they’ve proven that there’s a market for this product.

If you see another company out there that has a product that’s similar to your idea and you can tell that they’re selling them and making some money, then they’ve done some of the validation for you. They’ve validated that there’s a market for this. Now. you just have to do a better job at serving that market than the competition.

Whereas if you do a search and you don’t find any competition, then that may not be a good thing. It means that no one has validated this before you are going to be taking a much higher risk by being the one to try to bring this to market and to validate it. This is exactly why a lot of times it’s best to be the second to market and not the first to market.

There are lots of examples of this throughout product development history of people that made it to market second were the ones that ultimately succeeded because they were able to capitalize on what was learned by the first company and was the first to market. If you can be the second to market, then you can learn all the things that the first company did and you can improve those. Then you can do your product introduction and actually beat out the competition that was already there.

It’s really important to have some competition upfront. It’s not always required. There are some really innovative ideas where it may be totally unique, no one has ever done this before, and I’m not going to say don’t pursue that, but just be aware that that’s going to be a higher risk and potentially a higher pay off if it’s a truly innovative idea that no one has ever done, but just be aware that by being the first year, the one taking the risk in so many ways, it’s better to be second.

If I’m going to climb Mount Everest, I don’t think I would want to be the first person to ever do it because there are so many unknowns and so much risk associated with it.

It would be much better to be the second, regardless of whatever that activity is because now someone has proven it’s possible. That just naturally lowers the risk for you.

Start off with research the competition and ideally find some competition that’s got something similar, but that you think you can do a better job on executing than they can. The second step to validating your idea is you have to be able to share your idea. There’s no way you can validate an idea if you keep it totally in your head, you cannot be overly secretive.

That is the worst-case thing that you can do when bringing a product to market is to be overly secretive. I’ve never known any product to fail because they weren’t secretive enough or that has failed because someone stole their idea before they were able to get it to market. It just doesn’t happen.

That’s so low probability of happening. The greater probability is you don’t get feedback from others. You don’t seek out help from others.

You try to do all this inside your own head and you ultimately never even make it to market because there are so many obstacles that you’re not even aware of or that you bring a product to market that no one wants because you didn’t validate the idea upfront because you were too secretive.

Don’t be overly secretive. No one steals unproven product ideas. They wait until you prove it and validate it and actually have some revenue generated by it. Then that’s when they’ll be interested in trying to copy, but by then you’ll have a headstart and you can just focus on outperforming them.

I understand that desire to be secret with your idea. I was in that boat with my own product, I totally get that. If that’s a concern with you, then there are ways around that.

First of all, I would recommend that you get a provisional patent or more technically correct a provisional patent application. A normal patent, a utility patent will cost you probably at least $10,000. You’ll need an attorney. You can expect to take a year or more sometimes years to get the patent. It’s a very involved process and it’s never something I recommend that you do early on.

It’s just too much of a drain on your time and your finances and your energy when you really need to be focusing on the market and the customer and meeting the demands and the needs of the market and not on your idea or protecting it.

What you can do is you can go with the provisional patent application and this will give you protection in the US, other countries may have something similar, but this is in the US I’m referring to the provisional patent application.

That will give you protection for one year for your product and the cost is only– We’re only talking a couple of hundred dollars to get a provisional patent application. You do not need an attorney.

There’s no really complicated paperwork or documentation that’s required like there is a full patent. It’s just a pretty simple form that you’ll fill out on the United States Patent and Trademark Office. It’s something you can get really quickly. Start there and what this will do is protect your idea for one year.

Then at the end of that one year, you should have been able to validate your idea and make some progress. You can decide at that point, do you want to proceed with getting a full patent and going down the route of hiring an attorney and spending significantly more money?

That’s one route. Definitely get a provisional patent no matter what. It’s a no brainer, it’s so cheap and it will give you one year of protection. The other thing you can do is to use nondisclosure agreements with anyone that you share this with.

There’s a template for this inside the resource section inside the Academy that you can use. That can be a good way to eliminate the risk of you sharing something with other people that you’re looking to get feedback to validate your idea.

A nondisclosure agreement can be one way to do that. In general, don’t worry too much about being secretive and protecting your idea. That’s what every entrepreneur does when they have an idea.

They focus on protecting it and as I said, once you’ve been through this process and all the real obstacles and the things that are going to be really difficult for you to overcome, you realize that the whole secret aspect of it is just such a low probability.

Yet there’s a 0.1% chance that someone’s stealing your idea is what’s going to make your company a failure, but yet that’s what most people will focus 99% of their attention on is protecting that idea when that’s not really a significant risk. You have to share your idea to get feedback.

There’s just no way to validate a product if you’re not willing to share to seek out feedback from others. In addition to getting feedback from the end-user or potential end-users, you also should get feedback from any retailers, distributors, or sales representatives that work in your industry.

For instance, if you have an electronic product, of course, you could go to your local Best Buy and talk to the manager there. Just showing your product idea, perhaps a prototype if you have it depending on your stage, but just seek out and get their feedback.

There’s still just one person, and you can only put so much confidence in the opinion of one person, but that one person that has a lot of experience in retail sales and pure type of product to know what does well and what doesn’t do well. That can be a really good strategy.

Keep in mind a lot of these store managers, they tend to be very busy. They’re not going to want to give you a whole lot of time. You may have to visit a few stores before you can find one that’s going to be really helpful, but this can be really useful data.

It will tend to be very unbiased data, but very educated data as well since they have so much experience in retail sales. You can do the same thing with distributors of the product or sales representatives if you can find them, but obviously, retail shops are more customer consumer-facing, they’re easier for you to find. That’s where I would start. You can even talk to the retailers and also ask them what distributors and sales reps that they use while you’re having this conversation.

Then you can reach out to those distributors and sales reps to get their feedback. Then also in the future, there’ll be good resources for when you’re ready to actually start selling the product. Another way that you can validate your product idea is by building a proof of concept, a prototype.

This is typically a prototype that you can get build using an Arduino or a Raspberry PI and off the shelf components, potentially a Breadboard in some cases, but generally it’s going to be off the shelf boards that you’ll connect together using a development kit of some sort.

This can be really good for validating that your product solves the intended problem, but validates the concept of your prototype, but it doesn’t necessarily on its own validate that there’s an interest or that your product will actually do well in the market, but a proof of concept regardless of that is still very useful to prove your concept.

You can also use this proof of concept, especially if you have a product where you’re able to make the proof of concept prototype look pretty similar to a final prototype. It can’t just have an Arduino and wires sticking out everywhere. You’ve got to have a neat enclosure and everything enclosed inside of there.

Then you could use your proof of concept prototype to get feedback from other people. That’s one way to use a proof of concept prototype to validate your ideas to get it to a point where it’s presentable and show it to people. It may not be to the level that you’re willing to use this to seek out investments yet from angel investors and such, but it can be a good way to get some very early feedback and validate your product idea.

Next, we’re going to talk about building an audience and this becomes such a critical aspect of everything that you’re going to do in regards to validating your idea, but in regards to marketing it, developing it, and then eventually selling it.

Building an audience is going to be key. In fact, this is so important that I’ll be doing a really in-depth training course just on building an audience, but it’s essential that you start as early as possible building an audience. It takes a long time to build an audience.

What most people do is they start with– Their focus is on a working prototype. They’ll spend one to two years doing that. Then they’ll begin thinking about, “Okay, now I’ve got a prototype.” Then they’ll start thinking about marketing and perhaps building an audience because they don’t really think, “How can I build an audience if I don’t have a prototype yet,” but that’s the wrong way of thinking. You need to start building your audience from day one.

As soon as you do some of the very early validation steps for your idea, then start building an audience and you don’t have to start selling your product to this audience. You don’t even have to mention your product. In fact, you shouldn’t probably mention your product. What you want to do is you want to provide valuable free information content for people that you think could potentially want to buy your product in the future.

When building an audience, the first step– I’m going to just cover these really quickly. Like I said, there’ll be a more in-depth training course in the future, but the first step is you have to create a website. Everything begins in business– For online business, you need a website, obviously.

Then the next step is once you have a website, you need to create a blog or provide some type of free valuable content. It doesn’t have to be a blog, which is mainly written words, but you could start a podcast or a YouTube channel. The point is that you have to focus on just providing immense value and you just have to give, give, give without taking and you have to do that for quite a while.

Typically, six months to two years is what you can expect it to take to build an audience. That’s why you should do this from day one. Simultaneously, while you develop your product is be building your audience.

Once you’ve created this blog and you’ve got all this great content, then Google will start sending you targeted traffic to your website. Then you’ll need to start collecting email addresses of those people that are interested in your content and then that’s how you’ll build up your audience.

Your audience should be essentially a list of email addresses. Don’t over-focus on social media instead focus on building your audience of email addresses because that’s where the power is for online. Any type of online business.

For instance, if your product is a pet-related product, well, then create a website and a blog where you talk about pets or pet ownership or pet dieting or pet walking or anything that relates to your product without just being pushing and talking about your product. Just educate the people and build up a relationship with them.

That’s always key for business, any type of business, whether that’s online or one-to-one you need a relationship first with the person. You can’t just ask them out of the blue, “Buy my product.”

You need to focus on that relationship, build that audience, and focus on that relationship while you also build your product. Another example is if your product is music-related, then write about teaching how to play an instrument or how to play an instrument. Just don’t get stuck in the loop of thinking that you have to talk about your product, start building an audience.

In fact, like I said, that’s the opposite. Start just educating them, just providing value without talking about your product. First of all, just doing this and the feedback you’ll get from them, you will learn so much. I suspect by the time your product hits the market, you’ll have tweaked it based on a lot of the feedback that you’re getting from your audience.

Then that’s going to make the product just that much better and that much more likely to sell. Once you have an audience, some of the other strategies you can do is you can [unintelligible 00:15:33] survey.

Ask your audience. There’s two types of questions you can ask your audience. You can say, “Would you buy this product?” Is one type of question. Then the other type of question is a little more open-ended and that’s seeking feedback on what type of product features, specifications would meet their needs.

You can use this audience and this survey for gathering both of those pieces of information. Do keep in mind that a survey is going to be limited in regards to the question of “Would you buy my product?” Because until money is exchanging hands, there’s not a whole lot of meaning behind someone saying, “Sure, I’ll buy your product.”

First of all, it’s just human nature to say– Want to yes to people or give them positive news, but in reality, there’s no way you’re going to buy this product or you may even say, “Yes, sure, I would buy it. I think that would be useful.”

Then once it’s finally available, you walk past it a hundred times in the department store never giving it a second look. Just be very cautious with using surveys. You may find you survey an audience and 70% of the people say they would buy your product. Well, trust me. It’s not going to be that high. It’s probably more likely 7%, not 70%. Just take these results with a grain of salt.

Now, if you conduct a survey and you ask people, “Would you buy my product?” And only one out of a hundred people says yes, then that can be an indicator that you’ve got some serious problems and you want to rethink your market and your product.

In general, I tend to find the better use of surveys is for getting feedback to improve your product based on feedback from your audience. Another technique that you can do to validate your product idea. This is one that I believe I had seen recommended by Gary Vaynerchuk and it’s a little black hat. If you know the term black hat. It’s a little bit sketchy, but I see the value in this. It’s really an easy thing to do.

I really see the value of it with validating hardware ideas. It’s something that I want to discuss. Creating a sales page test, basically, you want to create a page on your website that makes it seem like your product exists now and is for sale.

No coming soon or this is in development, but show a picture of the product ideally being used or just a picture of the product, but you want to make it seem like this is something that can be purchased right now. You have a big “buy now” button for 99.99 buy now.

Even though you really, of course, don’t have the product for sale, but what this allows you to do is it allows you to measure real interest in people wanting to pay for your product.

Obviously, the visitor, they don’t know your product’s not really for sale. When they hit that buy now button, that’s a big indicator that they really want to buy your product and they want put their money down.

It’s still not the same as them actually giving you the money because plenty of people will add something to the shopping cart, but then back out. It still gives you really strong validation that people would buy your product and it’s great because it doesn’t require that you even have a product yet.

All you need is a sales page to test it. What you’re going to need though is you obviously– They probably want to see a picture of your product. If you don’t have the product yet, your option is you can hire a designer to create a photorealistic model of your product. It looks like the real product and not just a 3D model, it’s photorealistic.

The goal is people see it and they think it’s just the products available now and it’s ready to go and I can purchase it. This can be a really good way, really quickly to validate a new idea. Now, I wouldn’t probably send– If you’ve already started building your audience, this is not something I would probably want to send my audience to because it is a little black hat. It’s a little bit sketchy.

In general, making people think something is available when it’s not is probably not going to leave the best taste in their mouth when they’re done. What I would do for this type of sales test or validation is I would send cold traffic to it. Most likely just cold traffic from Facebook that you purchased. Set up a Facebook Ad, send cold traffic to it. Ideally, you want cold traffic. You don’t want them necessarily to have a relationship with you for two things.

First of all, you want to find out how cold traffic responds to the product. That’s the main reason you would want to send cold traffic to it. You want just to find out how people that don’t have a relationship with you respond to the product idea. Second reason you don’t want to send warm traffic to it is like I said, it’s a little black hat. It’s a little bit sketchy.

I wouldn’t send your audience to it because you’re going to maybe like I said, leave a bad taste in people’s mouth and that’s not something you want to start with for any type of longterm relationship. Just send some cold quick traffic to this from Facebook and then keep that separate from your audience.

In addition to building an audience, which is mainly based on you providing just informative free content around the subject, you’re not really talking about your product, especially early on.

You’re just building an audience of people that are interested in that category of topic, which could potentially translate into wanting to purchase your product. The other type of audience is more specifically a waiting list or waitlist. These are people that have specifically specified an interest in your product and want to be notified more about it or when it’s available.

This is obviously you’re going to probably want to do this a little bit later once you’ve probably established a little bit of trust and you want to start sharing information about your product, and you’ve got something on your website where you can start talking about your product, but just like with the audience, the sooner you can start building a waiting list, the better.

Although, if you start your waiting list on day one and it’s two years later before your product is available, odds are a lot of those people on the waiting list may not be quite as anxious to buy the product as they were two years ago.

The key is just to keep in contact with them and keep that dialogue going until you do finally have your product ready for sale. A waitlist can be really good way of validating your idea. It’s a low form of commitment.

They’re not giving you any money. They’re just giving you their email address, but that’s something because they know most likely you’re going to send them more email about your product. Them giving you their email address is some validation that they’re interested in the product enough that they want to hear more about it.

If you can build up a good size waitlist then that’s going to be really pretty good validation that your ideas– At least people are interested in it. The best way to validate any product is money has to exchange hands. The sales page test that we talked about, the black hat method, no money is exchanging hands, but that’s a really easy second place because it has the illusion to the customer that money is going to exchange hands.

That’s much more better validation than someone just taking a survey, for instance, where there’s no illusion that there’s going to be any money exchanging hands. The ultimate way to validate your idea is to pre-sell your product. That means you want to sell the product before you’ve actually made it. I know that that can be challenging, but ultimately it’s going to be, there’s just no other way that’s going to compare to validate your idea than having people put down money for your product before the product is even available to sell.

Obviously, people, in general, don’t want to pay for something months or especially years before it’s going to be something they can purchase. This will require that you have a relationship with them and there’s some trust between you and the subscriber.

This is where your audience is going to really come through for you is if you want to do pre-selling your product. What I would recommend the easiest way to presale a product is on your own website.

Set something up where you can take payments or donations. Obviously, you want to offer them the best price that you’ll ever have available for your product.

The other great thing about pre-selling your product is not only is it the best form of validation that you can hope for, but it’s also upfront money in your pocket. When you’re trying to build a new product, especially once you get to the point of needing to pay for inventory and things, having that money upfront is going to be really beneficial.

I think this is a really good strategy because you get both the validation and you get some money, but yet it’s a lot simpler, a lot less complex than crowdfunding and you can just do this simply through your own website, but it will require an audience.

This will require that you have an audience and have developed some level of trust and relationship with your audience before they’re going to be willing to give you money for something they may not see for months or years.

Next, we’re going to talk about building a minimum viable product. A minimum viable product or MVP is they’re commonly called is the simplest cheapest product that you can build and actually get on the market. In most cases, it won’t be a proof of concept.

It will need to be somewhat customized because it needs to be something that can be sold on the market and is really close to the final product that you want. It’s the simplest version of your product. No extra features, bells, and whistles that you think people may want isn’t included. The only thing that should be on the MVP are the core functions that are absolutely required to solve your customer’s problems.

The reason you want to do an MVP is– The goal is to get as quick as possible to what Eric Ries, who’s the founder– He’s the founder of the lean startup movement and the minimum viable product. What he calls is the build measure learn loop.

If you build something, you get it in the market, you measure the results, you learn from those results, and then you loop back in and put what you’ve learned back into the build cycle. You keep looping through that until you end up with a product that is actually what people want.

An MVP allows you to get to that testing that build measure learn loop as fast as possible. Instead, a lot of people take the other route, which is to throw. They want to throw every conceivable feature into the product. It’s not a good way to go because it’s always a mistake if you think that you know what people want. Don’t ever make that mistake.

You can have a theory or hypothesis that you want to test about what people want. You have to think like a scientist. If you have to have an idea or a hypothesis, don’t consider it as true until you’re able to test it. A minimum viable product is all about getting to that point where you can test it as soon as possible.

Learn from that MVP, you’ll learn what the market really wants and then you can iterate on that MVP and add in the features that people actually want. As I’d mentioned, normally, an MVP will not be your proof of concept prototype. Typically, it will need to be something that looks more like the final product. In most cases, there’s going to be some level of custom design that’s required to get to the MVP.

If you’re fortunate enough to have a product that does bode well to being able to be made based off of off-the-shelf components and still look like a final production product, that’s fantastic for you if you can use your proof of concept also as an MVP, but in most cases, the proof of concept is only for proving the concept and not necessarily for proving or validating that the product will sell. Just keep that in mind.

Obviously, if you are selling a proof of concept using an Arduino and off-the-shelf components and selling it as your MVP product, you’re going to have horrible profit margins.

Odds are you’re going to be selling the product at a loss, even perhaps a really huge loss, but the numbers are small and the data is so important that if you have to pay a hundred dollars for each unit and you’re selling them for $50, obviously longterm, that’s not sustainable, but in the early days, that’s totally fine.

It’s more important to get that real customer data as fast as possible. The final strategy we’re going to look at for validating your idea tends to be probably one of the best, but also one of the most complex. Also, the one that gets a lot of attention is crowdfunding.

The ultimate form of pre-selling is crowdfunding. The beauty of crowdfunding, it’s very similar to what I’d mentioned before preselling it on your own website, except this is obviously on a crowdfunding platform.

Even though crowdfunding will be on a third-party platform like Indiegogo or Kickstarter, you cannot count on them to bring the traffic to you. You must bring the traffic yourself. Once again, there’s no point in starting a crowdfunding campaign unless you have an audience propably at least a few thousand people.

You have to have your own audience to get that momentum going to be able to get the snowball effect building for your crowdfunding campaign because no one wants to be the first to ever invest in a new product or pre-buy a new product. You have to bring your own– The people that you’ve developed a relationship and they trust you, you have to send those to your crowdfunding campaign.

They’ll make the first investments and get things going. Then once that happens, then other people that potentially just find you through Kickstarter or Indiegogo’s own search platform then they will be more likely to invest in your product. If you don’t have an audience and you try to start a crowdfunding campaign, it will just be crickets and no one will show up.

I tried that many years ago with my own products. Don’t make that mistake. Focus instead on building an audience. This is exactly what Pebble did many years ago when they were developing their smartwatch. They did exactly as I suggested. While they were building their prototype, they also were building their audience. By the time they got to having a prototype they could present and use for crowdfunding, then they had an email list of somewhere around 3,000 to 4,000 people.

Then they used that to get the momentum going on their crowd Kickstarter crowdfunding campaign. That got the initial energy going, and then ultimately they raised over a million dollars and became the largest Kickstarter campaign in history at that point. They acknowledged themselves that having this email list of their own audience to send was absolutely essential to get things started.

We’ve looked at a lot of different ways for you to validate your product idea, to research the market. I just want to reiterate, you can not skip this step. The more forms of validation that you can do, the better you will be.

The worst-case scenario you do not want to do is spend years developing a product, tens of thousands of dollars, getting it to market, and then finally find out that no one wants it.

Spend this time upfront. Don’t get overexcited. Always remind yourself this is a long, long, long journey. This is an ultra-marathon that you’re running. Don’t sprint past market research and product validation.

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