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How to Validate Your Digital Product

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How great is your product idea? Every idea is great, but not every product idea can monetize itself. The product development process is crucial in deciding whether or not your product can be pushed to production. This guide will teach you how to validate your product ideas so that you can launch your next product successfully.

Published in: Technology

How to Validate Your Digital Product

  1. 1. #UXLearn #ProductValidation @koombea, #ProductValidation
  2. 2. AGENDA: Product Validation •  Company Type: VC or no VC? •  Evaluating Your Market •  Early Stage Questions •  Trends: Traction Metrics •  Industry and Revenue Streams •  Measuring Your App Idea Jonathan Tarud, CEO Ellie Cachette, VP Product Marketing
  3. 3. Click here to read more about us.
  4. 4. VC (Go Big) or No VC (Bootstrap)? Which company to build?
  5. 5. Bootstrapped (No VC) Companies that have revenue and customers even if inconsistently Common criteria: Started with little to no cash • No formal investors or capital raised • Company growth dependent on revenues and cashflow • Might have both a product and a service in parallel (one might fund the other)
  6. 6. Companies that Bootstraped? http://www.businessinsider.com/bootstrapped-companies-2012-10
  7. 7. What is the market like for a product for this segment?
  8. 8. Click here for more!
  9. 9. *Off/Online Distribution Coffee shops, etc. Mom blogs, workplace Facebook & LinkedIn groups Websites Make a list of keywords, problems, & phrases •  Look for keywords on a channel from last exercise. •  Write down the patterns that you see. •  What reoccurring themes are there?
  10. 10. Evaluating Your Market Are there already players in your space? How close is your problem to being solved? •  How many end users are possible for you, in the world? •  What apps already exist? What prices and models are they using? •  What devices are best for your app? •  Special service? Building on top of APIs
  11. 11. •  Does your product save time or money? What value does the user gain? •  Do you know if you are aimed for the direct to consumer market or enterprise? •  Do you have the expertise for your space? Figuring out the value
  12. 12. User Acquisition What’s the BMU (Bare Minimum Users) you need for the app to be successful? Are users dependent on each other (dating sites, professional sites, sites needing inventory)?
  13. 13. Early Stage Questions
  14. 14. Early Stage Questions Questions every app or startup should be asking themselves •  Features: Could you map your features versus similar apps features in a table? How is your product different than what’s out there. •  Do you have basic materials ready for users and questions? Do you know how to troubleshoot with a user? •  How fast can your app be built and what is your advantage?
  15. 15. Early Stage Questions Q: How do I get to an MVP? A: Make a list of basic requirements Q: How do I know if people will use it? A: Ask around, don’t be shy!
  16. 16. How Fast is Fast? Most apps can be built in a few weeks depending on features and platform •  Have you started scoping your app? •  Do you know what you want? •  Have you found users?
  17. 17. Ellie Cachette, VP of Product Marketing
  18. 18. What is Product Marketing? Help customers understand their go-to-market for apps built inhouse at Koombea, pre-sales educational materials, user acquisition. Main areas of concern: •  App vertical feasibility •  User acquisition costs •  Launch costs •  Risk for user leakage
  19. 19. Trends: Traction Metrics Gaining traction is no longer is a secret but required, most verticals have existing standards. Know yours. •  Find out how many monthly signups you need or how much a competitor is getting •  Look up website traffic on Alexa.com or other engines •  Try to calculate size of competitors
  20. 20. Early  Stage   MVP  Stage   Raise  $100-­‐500  k  Family  /  friends    Val  2.5  MM  –  4MM    $500k-­‐  2MM   Val  $6MM-­‐8MM   Debt  note  cap   Equity  with  preference   Team:  2  full  Kme,  some  part  Kmers     3  full  Kme,  several  part  Kme   CUSTOMERS:  1  LOI   2  LOIs  +     PRODUCT:     prototype,  min  300  users  /  emails  /   signups       Prototype  with  metrics  90  days   Prototype  tracKon,  working   funcKonality   Working  MVP,  repeatable  user   acquisiKon     Examples of Traction
  21. 21. Early  Stage   MVP  Stage   Sales:   Several  theories  may  be  in  tesKng   Sales:   Repeatable  sales  cycle  with  some  bumps   Docs:     We  need  a  one  pager?   Docs:   SupporKng  Sales  presentaKons  online   Website  traffic:   5,000  –  10,000  Monthly  uniques     Website  traffic:   20,000-­‐100,000  monthly  uniques   Downloads  (ex:  iTunes)   300+     Downloads  (ex:  iTunes)   1,000   Sales  Advisor   VP  of  Business  Development  lined  up,   will  be  hired  soon  if  not  already   Several  Power  users,  user  tesKmonials   Top  Rated  App  in  category,  4  star  raKng   or  above   Examples of Traction
  22. 22. Industry and Revenue Streams Understanding what area or industry your app is in decides the revenue model Example: Service or delivery app Model (one time event)
  23. 23. •  These apps can usually charge 10-50% transaction fee. •  Take avg order size (trans fee) X amount of times a week your app is operating = y. •  Take avg order size (trans fee ) X amount of times your app SHOULD be operating = z. Take Z minus y and you now have whats called a goal or KPI
  24. 24. Industry & Revenue Streams Deciding on whether you should go to market or not. Calculate your GTM “Go to Market” Example: Monthly subscription for service (Hulu, health, etc)
  25. 25. •  These apps can usually charge $3.99 X $10.99 mo •  Even with assuming a years worth of subscription (no leakage) that puts user revenue at $48.00 to $132.00 a year •  How much did your app cost to build – operating costs for the year = X •  Take X and divide by 2 (two years) and divide by 12 (months) = y •  Now how many months will it take your app to get to y as monthly revenue? •  If its more than 6months you should reconsider.
  26. 26. Quiz: Measuring Your Idea Here’s a simple Quiz to help you measure your app idea. Grab a notepad or get ready to type. Does your app already exist? (yes) (no) Do you know the business model? (no, the what?- 2 ) (yes, exactly) Do you know the GTM or user goals? (yes) (no) Have you done something similar? (yes) (no) Get your exclusive MVP checklist here!
  27. 27. Quiz: Measuring Your Idea Continued… Have you started MVP? (yes) (no) How confident are you about getting users? (yes, confident) ( no, not confident) Have you found your Basic User Acquisition Costs for the first two years? (yes) (no )
  28. 28. Test Your Idea If you scored, 4: Minimum MVP You have some basic understanding of what needs to happen, know of the space you are in and have some ideas that need fleshing out. Next steps would be market research and finding expertise in that space If you scored 6: Scoping Sweet Spot You have already found similar apps, have an idea of what to do just need to know the next steps for building and executing. If you scored 8: Perfect Product Market Fit You likely haven’t figured out the small hurdles but have an idea of where the risks are and what to look for. You know your space and plan to approach it.
  29. 29. Getting started is ½ the battle. But once you feel your product is validated enough, it’s time to begin.
  30. 30. Click to email!

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