You’ve probably already heard that famous “90% of Startups Fail” stat. It’s pretty much a cliché at this point. The real question is: WHY do so many of them fail?
Well, according to CBInsights, about 42% created a product or service that no one wanted to buy. In other words, a lack of market demand is the single biggest reason that startups fail.
And the proof is in the pudding, with products like Doppler Labs, Votertide, Treehouse Logic, and Juicero all failing to meet their anticipated buyer numbers, despite having millions in funding to back them.
The jury is in on this one people, the “if you build it, they will come” mentality is just too risky for today’s complex and highly competitive landscape.
Bottom line: Concept strategy sessions are great, but only when they’re followed up with proper testing and buyer intention validation. That’s how you avoid investing in ventures that have no future.
The problems with traditional R&D
Aside from being expensive and lengthy, traditional R&D strategies can also lack clarity and objectivity. Let me explain…
In-depth interviews, surveys, and focus groups can help you learn about your customer’s “needs” or “frustrations”, but aren’t always as clear when it comes to solutions. In other words, respondents tend to have an easier time telling you about “what they don’t want or like”, but they don’t always know exactly what they DO want from a product or service.
This can lead to unclear results that don’t really give you a concrete direction forward.
In terms of objectivity, most people have a natural tendency to be agreeable, so if you ask them: “Would you buy my product?”, many of them will say “yes” even if it’s not strictly true. It’s called the “acquiescence bias” and it can result in data that unrealistically puffs up your buyer numbers.
Confirmation bias is yet another factor you have to watch out for. Basically, it boils down to the fact that people tend to “see what they want to see”. So if you’re excited about your new concept and you’re convinced it’s going to be a success, your interpretation of the data might be too optimistic.
So how can you get quick, unbiased and low-cost buyer intention data, even without an MVP?
Easy. Run a smoke test!
Why run a Smoke Test?
Simply put, early validation a.k.a. “Smoke Testing” can mean the difference between the success and failure of your new venture.
Running a smoke test is basically like a dry-run for your actual launch.
It gives you a clear picture of what your concept’s marketability, strengths, and weaknesses are before you even build it. This means you’ll have the insights you need to tweak and perfect your product or service before it hits the market.
At the end of your Smoke Test, you’ll have the answer to a very important question: Will this concept make any money?
If the answer is yes, then you can move on to the next phase knowing that you’re investing your time and effort in a venture that has real market demand.
Essentially, it’s a “sell first, build later” mentality that can help you reduce risk, improve your offering and save a ton of time and money in the long run.
How does Smoke Testing work?
The smoke testing technique enables you to validate a new product or service with real buyer intention data. Even if you don’t have an MVP. The main benefit is that you can assess the desirability of your new venture concept before you invest any actual resources in building it.
Here’s a quick rundown of how it works:
- Step 1: Define your unique selling proposition, complete with all the features and specifications that will make it attractive to your clients.
- Step 2: Create a website that explains and sells your idea as if it already exists. That means it has to be complete with images, product specs and a “buy” button.
- Step 3: Set up the right tracking tools to measure the exact data you need.
- Step 4: Set up a digital marketing campaign to attract potential clients and drive traffic to your website.
Want to set up your own smoke test? Check out our “how-to” article on smoke testing!
The main goal of the Smoke Test is to give you accurate buyer intention data by measuring the percentage of people that actually click the “buy now” button. No acquiescence or confirmation bias, just real data from real clients.
What does a Smoke Test actually “test”
Depending on how your tracking tools are set up, Smoke Testing can provide you with more than just buyer intention data. It can also help you figure out:
- Your conversion rate (i.e. people that make a purchase vs people that visit your website)
- The right price point for your product or service
- Your Cost Per Aquisition (CPA)
- Which features are most popular with your clients and why
- Who your target audience is
- What parts of your website got the most interest
You can even choose to A/B test different versions of your value proposition, marketing campaign and landing page to help strengthen your venture in the future.
The end result will enable you to decide how you want to move forward:
- Stellar results (i.e. lots of buyers) mean you have a viable product and you have a green light to move on to the next phase.
- Mixed results mean you might want to go back, tweak the concept and re-test before moving on to the next phase.
- Low response rates mean you should re-assess your concept and either change your product or service or consider moving to your next project.
This all adds up to some pretty valuable input for your business case.
Smoke testing can seem like a tricky endeavor if you’re not familiar with the technique, but take our word for it:
It’s one of the most reliable and efficient ways to validate your concept at a relatively low cost.
If you’re an entrepreneur looking to get market validation for a unique selling proposition, then we highly recommend smoke testing. Check out our “how-to” guide for some practical tips to get you started.