SaaS Product Validation Techniques


Ryan Battles  •   Entrepreneurship

Validating SaaS Idea

Product validation is the crucial foundation for building a successful startup, a process that cannot be taken lightly. Many applications have been built and have consumed many hours and dollars only to discover that potential customers don’t really see enough value to whip out their credit cards.

Almost every product owner thinks they have a validated product, otherwise they wouldn’t invest so much energy into building it. However, if they were all correct, the failure rate of entrepreneurship would be much lower. The fact is, our own hunches are not enough. We must have a strategic approach to validating our SaaS applications.

What You Need to Validate

So, we know we need to validate our idea. To what extent? What exactly needs validation?

The Potential Audience Pool

If you find a product useful yourself, then you’ve started with a pool of one. You need to ensure that there are many others out there like you who would also be interested in purchasing what you are building. As we’ll find out later in this post, there are some cool ways to do this with online tools.

The Pain Point (Is it Valid?)

In a previous post, I outlined some tactics for finding your audience’s pain points. If you already have a pain point in mind, it can be validated by following some of the steps outlined in that article, namely, finding the pain point mentioned numerous places online (forums, comments, etc.). The more people are complaining about the pain point, the more solid your validation.

The Correct Solution

You’ve got an audience, you’ve got a common pain point, and you’ve got a solution. Is this the solution people are looking for? This is really hard to know exactly until you launch a minimum viable product (MVP) and get feedback. However, there are some ways to get some pretty good hints as we’ll see later in this post.

The Audience’s Perceived Value of that Solution

The final validation point a critical, yet often overlooked. Even if you’ve found a huge audience, with a big pain, and you’ve crafted a killer solution for it, if the audience doesn’t perceive this solution as valuable, they won’t pay for it.

Nathan Barry (@nathanbarry), founder of ConvertKit, wrote about how he received early validation from people who were very excited about the idea, but in the end never opened their wallets. As Nathan observes:

Verbal commitments, sometimes even contracts, mean nothing until money has transferred hands. - Nathan Barry

Dan Norris (@thedannorris) from Informly and WP Curve also shares a handful of Tweets that he received concerning an early version of Informly, while they were overwhelmingly positive, none of these tweets ended up coming from someone who converted to a paying customer. One such tweet:

“Hey Dan! Informly is amazing! What an epic idea. You can manage everything that matters from one place” (didn’t end up becoming a paid customer)

Now, I have no way of knowing what this user’s reasoning was for being so excited for the product and yet not converting, but I know I myself have been excited about products…but not quite to the point of paying for it.

If I told you that I would give you a $10 bill if you would just give me a $1 bill, you’d certainly do it. Everybody would. You need to have an idea that is almost as clear as that so people will think it is a no-brainer to subscribe to your app.

Note: I know that a lot of the perceived value comes from product positioning and marketing copy, but those jobs will be a lot easier if the value is super-obvious from the app’s value pain-point solution.

Dangers of Ignoring Product Validation

Every entrepreneur has a certain set of assumptions. It is inevitable. The key is to question your assumptions, and this takes humility. Some of your assumptions are going to be wrong. Most products fail because they don’t provide enough value for people to want to pay.

When you solve a real pain point, everything else works in your favor. Suck at marketing? That’s okay, you’ll still get sales. Does your app have some bugs? That’s okay, users will stick with you because they’re so excited that you might actually solve their pain point.

Validation also helps you refine. It isn’t just for a yes/no “will this work” question, sometimes through validation you discover a slightly better pain point solution. The key here is to truly listen to what people are excited about. Again, forget what you are excited about.

What Validation Isn’t

Validation is not large volumes of website traffic. It’s not people saying “That’s a cool idea”. Validation isn’t even generating social buzz or scoring a handful of major press mentions. The only way to validate your idea is to find real people who will pay you real money for it.

Justin Jackson (@mijustin), host of the podcast Product People, shared on his blog:

Early on, a company I founded received a lot of press (primarily newspaper coverage, magazine articles, blog posts). But we couldn’t convert that hype into paying customers. - Justin Jackson

One of my former ventures was based around delivering gluten-free snacks by mail on a recurring basis. Many people loved the idea, and we received a lot of social shares and followers. We were even covered in Time, Wired, and TechCrunch amongst other publications. However, in the end, we closed our doors due to a lack of sufficient orders. We just didn’t nail a pain point by providing sufficient value.

Okay, enough of the warnings. Let’s get into how to actually validate this stuff, starting with validating a large enough audience pool.

Validation via Audience

One of the best tools for validating the size of your potential audience is to use Facebook’s Campaign Builder to estimate the potential reach if you were to advertise on Facebook. You don’t have to advertise on Facebook to gain insight from this, because if there is a valid audience pool on Facebook, there is a valid audience pool period.

This tool will also tell you whether the audience definition is too broad, too narrow, or just right. For example, with Harpoon we have a target audience in mind for the product, so plugging that demographic data into the Campaign Builder, we can see that the audience is well-defined and an appropriate size:

Facebook Campaign Builder

Validation via Survey

Once you have a target audience validated, one approach to validating the point point/solution assumptions that you may have is to conduct a survey. Now, this method should only be a part of a validation solution, because as mentioned previously, until people are ready to open their wallets, your product isn’t validated. However, many people have found success by validating some early assumptions with surveys.

Hiten Shah (@hnshah), co-founder of KissMetrics and CrazyEgg, has used surveys with many of his products to discover a pool of potential users in his target audience, from which he reaches out to for a specific conversation on exploring their pain points:

You need to find out if people really do have the problem you think they have or if they don’t care at all. -Hiten Shah

Hiten is kind enough to share some of his actual surveys used in the past on his blog, Hitenism.

Validation via Competition

Another valuable method of validating whether there is a pool of people willing to pay for a solution is to run some searches through the following sites:

  • Amazon.com - Are there products centered on this audience and need?
  • Skillshare.com or Udemy.com - Are people teaching courses on this pain point?
  • iOS or Android App Stores - Are there mobile applications built that address this pain point?

If there are successful products/books/courses/apps out there attacking this pain point, then you at least know that the pain point is valid, with a sufficient audience pool. Many people are afraid of competition, and are excited when they find an idea with no rivals. This can be dangerous, as there might be a reason why there is no competition in this space.

There are already a handful of online invoicing applications for Freelancers to choose from, so why build Harpoon? We are building the app because:

  1. We’ve seen that this is a valid space, as Freshbooks (a competitor) claims to have 5 million people using their tool.
  2. A number of people that we’ve interviewed are looking to move away from Freshbooks due to one reason or another, some of which we are solving with Harpoon.
  3. Many other freelancers that we’ve talked to haven’t even heard about Freshbooks or similar, so the market is not yet saturated.

Now, this isn’t to say that we are aiming to take Freshbooks head on…far from it. If we simply copy Freshbooks’ exact feature set we would have to somehow outdo their marketing and feature development, which has a team of over 150 people already and many years of experience. However, there are plenty of ways to differentiate ourselves through marketing message, product feature mix, and exact audience targeting that we can definitely build a sufficient client-base to support our much smaller team.

Validation via Sample Group

If you know 10 ideal candidates for your application, call them up and talk to them specifically about your product idea. Now, most people like to be polite, so they will probably be more enthusiastic about what you are telling them then your average customer. A surefire method to find out if your idea has some legs is to ask them for money up-front for a pre-order.

If you don’t have 10 ideal contacts, then go to Meetup.com and find a local meetup that might consist of your target audience and start conversations there.

You could also do as Patrick Mackenzie (@Patio11) did with his app Appointment Reminder, and go door to door to potential businesses. Patrick visited a handful of salons in Chicago and interviewed key decision makers in person to gauge interest, validate his assumptions, and gather useful feedback.

Grab Some Quick Traffic with Landing Pages

A useful tactic outlined by Tim Ferriss (@tferriss) in The 4-Hour Workweek is to create a landing page for your product, even if it hasn’t been built yet, and gauge interest by how many people sign up to be notified when it is ready. You can drive traffic to this site by posting links wherever your target audience hangs out:

  • Facebook groups
  • LinkedIn groups
  • Twitter hashtags
  • Subreddits
  • Niche Forums

You could even take out short-run advertisements with the following:

  • Facebook Ads
  • Google Ads
  • LinkedIn Ads
  • Promoted Tweets

The above tools allow you to narrowly define your target audience, so you aren’t wasting money advertising to people without even a remote interest in your product. Also, many of these tools offer a free credit when you are signing up for a new account, usually about $50-$100.

Now, in order for these landing pages to be the most effective, you have to craft them as close as you can to actually selling your product. For example, a button that says, “Buy now for $40/month” is a better indicator of true purchase interest than a button that simply says, “Get an email when we launch”.

Brian Casel (@casjam), founder of SweetProcess, gives the following advice:

Pretend it’s a paid product before it really is. Don’t say “coming soon” or “beta” or “get on the waiting list”. Present your landing page and call-to-actions as if they are buttons to sign up for a paid plan. -Brian Casel

Now, I said that this is the most effective way to craft your landing page, but even counting the number of people who click the “Buy” button isn’t going to give you fully accurate picture of how many will open their wallets for your solution. You also need to factor in people who may abandon their shopping carts, or people only interested in kicking the tires during a free trial.

According to Rob Walling (@robwalling), founder of Drip and author of Start Small, Stay Small, you can:

Assume you will convert 2% and 5% of people who clicked “Try now”…Assume 40% of the people who clicked “buy now” would have completed the purchase.” - Start Small Stay Small, p86.

Services for Creating Landing Pages

Fortunately you don’t have to be a developer and designer to get a landing page up quickly and easily, there are a handful of services that offer drag-and-drop creation of landing pages designed to capture contact information with a call-to-action:

  • ConvertKit - Starts at $50, build landing pages as well as drop-in forms, also provides built-in campaign and auto-responder emailing (this is the solution I currently use)
  • Launchrock - Free, limited to “launching soon” type pages.
  • Unbounce - Starts at $49, Free plan available
  • Instapage - Starts at $17, Free plan available
  • LeadPages - Starts at $37
  • QuickMVP - Currently $29/mo (limited time), 30 day free trial.
  • KickoffLabs - Limited free plan available, other plans start at $29/mo, provides built-in campaign and auto-responder emailing

Each of these services offer a slightly different feature set/complexity, so you’ll have to weight each one against your desire to get to know a more complex app that might have more power (like LeadPages), or a more streamlined solution with less flexibility (like QuickMVP).

Conclusion

No matter which method you employ to validate your solution, the important point is to approximate as closely as possible how valuable your solution is to your audience’s pain points. If people see immediate value in your solution, they will be eager to whip out their wallets and sign up. Your marketing efforts will be easier, your customer churn rate will be lower, and your customers will be eager to share your solution with others.