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Market Validation Part I – Three Questions to Consider when Evaluating a New Product Launch

Jeff M
NI Employee (retired)

At NI Alliance Day earlier this year, the partner team at NI hosted a slew of both technical and business sessions for our partners.  One session for LabVIEW developers was called “The Addressable Market for LabVIEW Add-ons”, where we shared some adoption data for the LabVIEW Tools Network.  Due to the innovation from our partners who are using LabVIEW in some pretty interesting and exciting ways, this online marketplace continues to see more than 2X growth in both web traffic and downloads.  In addition to all the new partner products, there’s also been some great work by the LabVIEW R&D team to enable hooks into LabVIEW itself through APIs, which contributes to this growth in LabVIEW Add-ons by allowing more places for developers to extend the environment.

The question I get asked all the time, is "Should I build this product?"  And going back to Alliance Day, there was a critical topic that we didn’t get into during the sessions  – Market Validation. This topic is critical for every product company to understand, and it’s the motivation for this blogpost. If the market validation stage of product development is overlooked, the success of your product launch is left to chance.  I’m really interested to hear your personal experiences with market validation, so drop me a comment below or shoot me an email at jeff.meisel(at)ni.com with what has worked for you. During this post I’ll share some simple things that I've learned along the way when performing market validation. 

First, consider the analogy where you are captain of a ship planning a trip in unknown waters with treacherous conditions.  Wouldn’t it be nice to have a strong plan in place, and understand as much as possible about what lies ahead?   If you talk to the local fishermen and they aren’t going out to sea, that tells you an important piece of information.  Similarly, if you check the weather information, and realize a storm is coming – you may decide that leaving shore is not the right decision.  Now, it doesn’t mean that you have to cancel the trip entirely.  One possibility is to change the timing of departure or reroute your travel path.  Both options are better than going into the oncoming storm.  And if you lose some money by scrapping your original plan and creating a new one, well at least you didn’t lose your entire ship or put yourself in harm’s way.  The same goes for new product development.  Through market validation, a systemic approach can be used to evaluate market opportunities before investments are made.  If the product is a bad idea, it’s good to know that early. 

Basic Guidelines for Market Validation

Rob Adams, author of “If you Build it Will They Come?” provides some good insight into some basic guidelines.  His book is a quick read and Adams offers a blueprint for how to perform market validation.  For example, one rule of thumb is that you'll need to allocate 10 percent of development budget to Market Validation.   Why?  If the product isn't going to work,  it’s better know with a 10 percent investment versus 100 percent investment. 

Three critical questions to consider when applying market validation in evaluating a new product launch are:

  1. Is there a clearly defined need?
  2. Can you deliver the right product to meet that need?
  3. Are customers willing to pay?

The following diagram shows a basic view of market validation, which we can expand further in future discussions:


Market Validation

Talk to People, Rinse, Repeat

Wrapping it all together

If you’re not willing to invest the time in doing market validation, that’s a red flag and illustrates that it may not be a good idea to build the product in the first place.  In addition, if you don’t know if there is a market need for your product, what the right features are, or if customers will pay -- don’t build it.  Or at a minimum go back to the drawing board before proceeding. For example, the pricing model is something that you can tweak in order to see if customers would be willing to pay under different terms.   But the question “Is there a need?” is something you can’t get around – so always start there first. 

In a future Part II blog post, we’ll look at some best practices on how to perform Market Validation for your product.    As mentioned, feel free to email me some of your strategies for market validation – I’d love to learn about them.

More Resources:


LabVIEW Tools Network

NI Alliance Partner Network

References:

Book Reference - Rob Adams "If You Build it Will They Come?"

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