New Product Niche? Validate It Without Spending Money

When you hit upon a new product idea, the first thing you need to do is some research. If you’ve subscribed to our ‘Launch In A Week’ e-mail course, you’ll receive step-by-step instructions on how to measure market demand and analyze competition for your product niche. This is important because it lets you know whether the product will be a profitable one. You don’t want to start selling products that no one wants, or that are already being sold by more established competitors.

Sometimes, measuring market demand and researching competition are not enough. Let’s say you want to create a new product, one that isn’t on the market already. It could be an entirely new product niche, or an existing product but with enough of a twist to make it different, or even just a regular product but with a different business model.

The 3Doodler is an example of a new product niche. It’s the world’s first 3D Printing pen. The Snooperscope is an example of an existing product with a twist. It’s tough to determine whether either product would sell well using the above research technique. Do you really want to spend thousands of dollars designing and manufacturing these devices only to find that no one is interested in them, or that they aren’t willing to pay the price?

Dollar Shave Club is a highly successful e-commerce store that sells razor blades using a subscription model. Now, had they been selling razor blades with a regular e-commerce model, their initial research might have told them that the competition is too strong, even though there’s a huge demand. You don’t want to go up against companies like Gilette when you’re just starting out. Plus, razor blades can be found at any convenience store. So Dollar Shave Club changed the game. They used a subscription model that put them in a different category with little competition.

In these scenarios, regular market and competition research won’t work. There isn’t enough existing data to tell you whether your new product will be successful or not. Even if you think the idea is cool and that everyone would want one, you don’t know what price people are willing to pay. So how do you determine if you should take the plunge? You set up an experiment.

The Lean Startup methodology teaches us to experiment before committing our time and money to an idea. They advocate the use of an MVP. A Minimum Viable Product that’s shipped out early to test if there’s a market for the product. You then receive feedback on the MVP and iterate to create the next version. Rinse and repeat till you have the perfect solution.

However, the MVP concept works best for software startups. You can’t afford to rinse and repeat as often as a software company when you’re manufacturing something. What you can do is determine purchase intent and price points by pre-selling a product, i.e. selling it before it’s been manufactured.

That’s where Kickstarter and Indiegogo come in. The 3Doodler and Snooperscope used these crowdfunding services to pre-sell their products so they knew people wanted them.

But there’s a problem. To be on Kickstarter or Indiegogo, you still need to make a commitment. You still need to have an actual product or the means to create an actual product because people are paying real money for it. Which means you still need to put in some time and money.

What if you’re at an even earlier stage than that? What if your product is still just a concept? You don’t want to commit unless you’re absolutely sure about your idea. You don’t want to spend any money until you know the product can make you money.

Fortunately there’s a very simple experiment you can set up to validate your idea. It’s quick, easy and costs next to nothing. You don’t even need to manufacture anything.

Here’s what you need to do –

Step 1 – Set up a site

Since this is just an experiment, you don’t need to set up a full-fledged site. A simple landing page will do. Fortunately, the magic of the internet makes this even more simple and you can have a functional page in just five minutes using any of the following services –

  • Instapage – From a purely financial perspective, Instapage offers the best value for its low prices. You can start for free but the paid plans come with custom domains, A/B testing and e-mail integrations. Instapage also makes it easy for you to design your own page through a drag-and-drop system, on top of their existing templates. They are used by over 31,000 business including companies like Intuit and Avis. Use this if you’re on a budget.
  • LeadPages – LeadPages helps you create mobile responsive landing pages. They are easy to set up and can be embedded on any site. You can pick one of many templates and customize it for your product. You can get by with their $37/month price tier, but if you want A/B testing you’ll need the $67/month tier. They do have a 30-day money back guarantee if you aren’t satisfied. Sites like Duct Tape Marketing and Greenpeace use them. If you’re targeting users on their mobile devices, this might be a good option for you.
  • Unbounce – Unbounce have been around for a while and are probably the most popular landing page service. They have over 80 templates for various site types with integrations to various services. You can A/B test to your heart’s content because they offer unlimited tests on all plans. The free plan comes with the Unbounce branding so to remove it you’ll need to shell out at least $49/month. If you love A/B testing, have multiple users, or manage multiple landing pages, this service is for you.
  • Lander – Used by companies like Gameloft and Cisco, Lander is extremely user-friendly and has great service. They’ve got all the standard features and all plans come with unlimited landing pages and unlimited A/B tests. You can start at $9/month, but the e-mail integration only kicks in at the $50/month tier, making it the most expensive service if you’re looking to build a mailing list.

All the above services allow you to quickly set up landing pages. They are easy to use and customize, so if you don’t have any technical know-how, don’t worry. Pick one based on your budget and needs. A/B testing will be useful to determine price points for your product, while e-mail integrations will help capture leads. You can still run an experiment without either, so if you’re on a tight budget, pick a free plan. Otherwise, shell out a bit of money, or take advantage of the 30-day trials and get a plan that has those features.

After you pick one, create an account and set up your page.

Step 2 – Add your product

Now it’s time to add your product to the site. You may not have an actual product ready. Even if it’s just a prototype or a concept, it’s fine for the purposes of an experiment.

Let your product be the central focus of the page. The moment people land on your page, they need to see what it is you’re selling. If you have a video or image of the actual product, upload it to the site. If not, create an image using a software like Photoshop. Write some compelling copy and an in-depth description to go along with it.

Finally, add a ‘Buy Now’ button. This isn’t going to be an actual purchase button so don’t worry about payment processors. The button will simply lead to a page that says something like, “Thanks for your interest in our product but we are currently sold out. Please leave your e-mail address with us and we’ll contact you when we have stock.”

This is where it helps to have e-mail integration. You can capture leads and follow up with them later, or contact them if you actually do decide to go ahead with manufacturing the product.

The real point of the button is to track clicks. Your landing page service will have in-built analytics to track conversions. You can also integrate Google Analytics to tracks clicks. Every click means someone is willing to open up their wallets and purchase your product. You see, they don’t know that you don’t have a product. From their point of view, you have an e-commerce store selling a product and if they click ‘Buy Now’ they’ll be asked to fill in their credit card information.

Step 3 – Drive traffic

This is probably the only part of the whole process where you might need to spend some money. Don’t worry though, you won’t be spending as much as would if you actually manufactured your product.

The quickest way to drive traffic to your site is through paid advertisements. You could do the whole organic free traffic thing if you’re dead broke, but that takes time. It’s best to throw some money into ads, generate some quick traffic, and quickly test your product.

Google and Facebook ads are the best options. Google let’s you reach a larger audience, but Facebook ads are usually cheaper. Check out our quick primer on Google AdWords to set up your first campaign.

You’d probably want to run the campaign for a week and get as many clicks as you can. At a budget of $15/day you’ll be spending $105 in a week, so set your budget caps in Google and Facebook accordingly. Also make sure your bid for each click is large enough. You want to get as much traffic as you can in this week, so if you’re not getting clicks on your ads, you’ll have to increase your bids.

Once your ads are set up, start tracking clicks. AdWords will give you a tracking code which you can then integrate into your landing page.

Step 4 – Make a decision

You’ve got your pseudo-store set up, you have a product, you have traffic and you’re tracking everything. At the end of the week, you should have enough data to determine whether the product is a hit or not.

The ultimate metric here is your conversion rate. At the start of the experiment, decide what a good threshold would be. Let’s say you think that 10% is a good conversion. This means that you need at least 10 out of every 100 visitors clicking the purchase button on your site. Anything less is a no-go and anything more is the green light for you to start manufacturing.

Try experimenting with the site a bit and see how many conversions you can squeeze out. Change the copy, change the design. Use the A/B testing tools from your landing page service to create multiple tests and try to optimize conversions. You can test out different price points too, and find the price which is most profitable for you.

Next Steps

At the end of the experiment you should know if the product is a good one or not. If it didn’t do well, dump it and move on to the next idea. Rinse and repeat.

If it did well, then you have a winner on your hands. You can go ahead and find a manufacture if you haven’t already. At this point, you can consider Kickstarter and Indiegogo to make some pre-sales before the first batch of the product has been manufactured. If you used an e-mail marketing integration in your experiment, then you already have an initial set of leads with purchase intent that you can pre-sell to.

We’ll be coming out with guides to help you find manufacturers, run pre-sales campaigns, and ship products around the world. For now, set aside a couple of hours to set up our validation experiment and find a profitable product niche. Sign up for our ‘Launch In A Week’ e-mail course and learn how to set up a fully functional store to sell your new product.

Good hunting!

 

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