Article
Market Validation: What It Is
and
How It Works
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Market validation is a term often used to describe one
or more stages of market research
and evaluation. The process is used by mature companies to explore a new market
or test
a new product line as well as start-up ventures researching the introduction
of their first
product.
For a new venture, market validation is conducted during
all business development
stages – investigative, developmental, and commercialization. Because each
of these
stages requires a different type and depth of market information, the validation/research
approach will also vary.
Market Needs Assessment. In
the Investigative stage of a venture, a market needs
assessment is first conducted to identify and estimate the size of a potential
market, and
establish marketplace need and competitive sustainability. Basic research techniques
are
used to broadly evaluate the industry, target market, competitors and environment
forces
that can affect the product as well as the enterprise itself. The deliverable
is a summary
report based on secondary and some primary research sources. This report is
usually
included in the business plan.
Market Study. In the Developmental stage, a market study can first be used to demonstrate or support product and financial feasibility by identifying price ranges and feature points required by the target market. This is the study most often term “market validation” — product concept, positioning, and buying drivers are tested in the potential target markets. Actual buyer feedback purchasing behavior information is captured, along with favored product attributes and usage situations.
In
contrast to a market needs assessment, a market study provides a deeper
understanding of the target market and more depth about competitive positioning,
market share estimates, product capabilities, corporate resources to support
market growth, and a review of the competitive readiness of the company.
Additionally, it investigates
go-to-market strategies and identifies critical functional elements that can
help align product design to customer requirements and verify the product roadmap.
Marketing Plan. Marketing
planning is often viewed as another form of market validation
that occurs in the Developmental stage. During this phase, the marketing approach
that will
drive the venture is developed. The marketing plan distills all marketing decisions
down to
those that will have the greatest impact in driving the venture’s success.
It results in a
comprehensive strategic document that outlines the who, what, where, when,
why and
how of the product, its target markets, and strategy for connecting with the
target.
Marketing Action Plan. In
the Commercialization stage, the marketing function becomes
production oriented and tactical, generating communications and tools that
support sales
and distribution. A comprehensive marketing action plan is developed to manage
and
assess all projects.
The focus is on gaining market share and increasing profitability. Customer feedback is critical to building satisfaction and improving product performance. Additionally, Marketing engages in ongoing marketplace assessment and identifying new markets and opportunities for the product.
The marketing function is critical to the success of a
new venture. The various validation and
research studies test corporate capabilities, evaluate competitive sustainability,
and verify
market understanding and acceptance of the product offering.
By engaging in market validation and research early on,
a company can better identify its
unique position, determine buyer requirements, and collect relevant feedback
before final
product introduction. A continued emphasis on market validation in the commercialization
stage ensures the enterprise has the information needed to flexibly respond
to the changing
needs of the marketplace. 
