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A Hope, a Prayer and How To Really Do Market Testing

I get exposed to a lot of new business ideas in my line of work. Besides the people who consult with me on their projects, I also sit on various boards and committees that review business plans for various government grants and awards, business plan competitions, as well as plans that are being reviewed for potential investment. I’d say I see about 60-80 a year, not counting the 30-60 my students make for their Entrepreneurship class (I teach Entrepreneurship at Concordia University’s John Molson School of Business).

Unfortunately, a lot of these business ideas are lousy. Here’s why.

The problem is that most of these business concepts are borne from “a good idea” that the entrepreneur had and figured it would make for a good business. Ask them whether they did any market testing to make sure people will want it and buy it, the frequent response I get is:

“My family and friends all think it’s brilliant.”

This is the extent of their market testing.

Uhm… your family and friends are lying to you, pal. They don’t want to waste their energy telling you that your idea sucks. Sorry, I know that was sudden, but someone had to tell you.

The truth is that they’re probably telling you what you want to hear. Or they simply have no intention of getting into a protracted debate with you about the merits (or lack thereof) of your idea. Not to mention they often don’t have the experience to assess your venture. If they think your idea is a brain fart, they are not about to tell you to your face and waste precious minutes of their life defending themselves. They know  that one day, far in the future, they’ll be on their deathbeds and they’ll want those minutes back.

So really, you have to do your own market testing- real market testing, not “friends and family” crap.  Real research means talking with potential customers. They are the only ones that matter in this whole equation. Not you, not your friends and family, not even me and my panels of business wonks, either. The only person that matters here is your customers, because in the end, they will vote with their wallets.

So before you sit down and write your plan or see anyone about your idea, talk to ten people who are not your friends and family and ask them some questions. Figure out whether they’d buy what you’ve got if it was ready today. If you get an enthusiastic response, then you’re on to something. Otherwise, your idea needs refining.

Got some good ideas for market testing? Share them with us! Write them in below.

About Danny Iny

Danny Iny (@DannyIny) is the CEO and founder of Mirasee, host of the Business Reimagined podcast, and best-selling author of multiple books including Engagement from Scratch!, The Audience Revolution, and Teach and Grow Rich.

4 thoughts on “A Hope, a Prayer and How To Really Do Market Testing

    • Consider this situation: they do want the product, but aren’t willing to pay for it. Does it really help you that they want it? I think the only question that really matters is whether and how much they would be willing to pay.

      • I like what both of you are saying. You’re both very right. There are lots of interesting and valuable products or services out there that people would want, but they cannot be delivered at a price that someone is willing to pay. As consumers, we’re always weighing the exchange of our hard-earned dollars for the improvement we’re about to buy. If it doesn’t make sense, we stick with our current solution, even if that’s to just live with the flipping problem.

        When we cover this stuff in Entrepreneurship class, we say every business concept has to pass two tests. The “market” test (does anyone want it?) and the “economic” test (can I build a business model around it?) If delivering the product at an acceptable profit means selling it a price no one is willing to pay to receive the value it provides, then it flubs the economic test — which means it’s not a good business concept.

        What’s your thought on that?

        • I guess it really depends on the situation; are we talking about iteratively testing a new product, as in Steven Gary Blank’s Four Steps to the Epiphany, or are we talking about evaluating markets for an existing product?

          If you have a financial runway, and the resources for R&D, then iteratively testing and tweaking a product/service is viable, and even necessary. In that case, knowing that people like what you’ve got is good, and all that’s left is to figure out a working business model that works.

          More often, though, I find that it isn’t a useful question, because people don’t really answer it in a way that’s relevant. Here’s why: when you ask people “do you like this?”, they ask themselves whether they’d want it given the choice between having it and not having it. In real life, though, the choice is never between having it and not having it – it’s between having it and having something else.

          That’s why I find it to be a lot more relevant to ask whether people are willing to put money on the table, so to speak; it tells you not just whether they “like” the product, in some abstract sense, but also how much they actually feel that it is (or isn’t) worth.

          Thoughts?

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