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Module 8

Market Testing

Location, Date - The Next Economy Incubation

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WARM UP

Photo by Daniel Öberg

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RECAP

PREPARE activities

Photo by Elodie Oudot

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MODULE 8

Market Testing

OVERALL OUTCOME

LEARNING OBJECTIVES

To be able to advance your concept and prototype by testing it in the market

Learn about why we test
Lean Canvas learning methods
Learn how to measure, analyse your data and implement improvements
Learn how to implement proper planning methods

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MODULE 8

Market Testing

RECAP

PREPARE activities

PRESENTATION

Why / How / What

GROUP DISCUSSION

Why is it important to test in the market?

CREATE TESTING STRATEGY

Key Performance Indicators

Benchmarking

What is success?

HOMEWORK

WRAP UP and

PREPARE

xx minutes xx minutes xx minutes xx minutes xx minutes

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GROUP DISCUSSION

Why do we test in the market?

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What is it?

Market testing is a way to test the waters to see how well a product, service, or offering will perform…or not.

Get to know the value of your product
Understand where there is or isn’t added value
Gauge the interest of the market
Gauge the usability of your product
Gauge your customer’s interest in the product
Gauge the messaging of your product (how to market it?)

Market Testing

Unsplash - Júnior Ferreira

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Market Testing

Why?

(Relatively) cheap way of getting feedback on a prototype
Provides information that you can use to make key decisions
Getting to know your customer in an informal way
Creating your first customer base

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Market Testing - Lean Canvas

Routine

An idea becomes a design

Money is needed to start production

Start production in batches

Big inventory

Marketing campaign & start of sales

First clients start buying the product

Lean

Study the problem

Verify the solution

Experiment

Learn – Build – Measure

Testers become potential customers

Sales by product improvements

The Lean Canvas was designed for startups and has components specifically targeted to support the lean startup process. Lean Canvas is utilized to validate your ideas and concept. Companies often move to business model canvas when they have validated the business or are already a traditional business.

"The Business Model Canvas was proposed by Alexander Osterwalder based on his earlier book: Business Model Ontology. It outlines several prescriptions which form the building blocks for the activities. It enables both new and existing businesses to focus on operational as well as strategic management and marketing plans. The Lean Canvas, on the other hand, has been proposed by Ash Maurya as a development of the Business Model Generation. It outlines a more problem focused approach and it majorly targets entrepreneurs and startup businesses." (Canvanizer)

The Lean Canvas is simpler and less complete than the Business Model Canvas. Whereas the Business Model Canvas tries for provide a complete model of a business, which can be used for testing and search in lean startups, the Lean Canvas is more focused on being a one page summary with "simple" business models.

Validation Through Experiments: These boxes are full of guesses, at least for now. We want to replace those guesses with evidence, and that come from validating each point with an experiment. For example, we can use pre-orders to validate that our customers are real and that our prices are acceptable. We can create a prototype to see if our solutions can genuinely deliver our Unique Value Proposition, and to see if our Cost Structure is realistic. We can conduct customer interviews to see if people genuinely care enough about these problems to pay for a solution. We can trial a series of solutions, to see if our Unfair Advantage is real, or if there are multiple ways of serving our customers. Remember, a failed experiment is a success – it saves an incredible amount of time, money and energy, and gives you insights that will lead you towards a model that genuinely works.

Keep Iterating

As good as this canvas might look, we don’t want to fall in love with our first idea.
Good ideas survive competition, and by creating and testing lots of ideas, the great ones rise to the top.
This doesn’t have to be hard work – you can start by changing one or two elements of the first Lean Canvas.
For example:

Keep the customer the same, but focus on a different problem
Keep the problem the same, but focus on a different customer base
Keep the same Unique Value Proposition, but focus on a different solution
Keep the same Unique Value Proposition, but focus on different revenue streams
Use totally different Channels, like doing everything online or everything in person
Focus on a different part of the Value Chain
Use a combination of existing solutions to solve a customer’s problem

What usually happens is that you discover that most alternative models don’t work…but two or three might.

This means you go into your next round of validation and prototyping with three good ideas, taking the emotional attachment away from that first idea and making you a better judge of their potential.

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Market Testing - Lean Canvas

Routine

An idea becomes a design

Money is needed to start production

Start production in batches

Big inventory

Marketing campaign & start of sales

First clients start buying the product

Lean

Study the problem

Verify the solution

Experiment

Learn – Build – Measure

Testers become potential customers

Sales by product improvements

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Market Testing - Measure the right results

Ideas

Data

Product

Learn

Improve

Measure

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Market Testing - What’s the Plan?

Ideas

Data

Product

Learn

Improve

Measure

Ideas

Data

Product

Learn

Improve

Measure

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Market Testing - Measure the right results

Relevant

Actionable

Responsibility

Predicting

Measure as much data as possible, but report only relevant data

Create a clear set of actionable data (i.e. what do my customers think of the price?)

Make someone responsible for the data collection and analysis

Focus on predicting metrics, that way you prove or disprove a hypothesis (i.e. my pricing is too high)

Improving results starts with creating visibility and measuring metrics based on the indicator you chose

TIP

Measure

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Methods of testing & data collection

Interviews
Surveys
Online surveys
Focus groups
A/B testing
…..

Market Testing - What’s the Plan?

Methods differ greatly in terms of effort and expense; the amount of prior knowledge necessary; and the degree of detail, significance and reliability of findings.

Before you start to collect your data in full, we recommend that you test the chosen instruments – for example with the help of a questionnaire or interview guide. During this pre-testing phase, you should focus on:�Are the questions clear and precise?�Does the choice of words match the target group’s own communication style?�Are the questions phrased positively? Are they formulated so as to avoid causing discomfort or defensiveness among respondents?�Are the instructions for those carrying out the survey clear and unambiguous?�Is the length and scope of the survey or questionnaire appropriate? Questionnaires and interviews that are too long can make respondents impatient and unfocused, which in turn has a negative effect on the answers’ utilityLess is more – at the beginning! Even for small organizations, there are methods of data collection that require little in the way of resources to use. Thus, don’t be intimidated; instead, start with small, clear measures that you can later expand. You can implement some of the data-collection methods yourself. The results may be less precise, but they will in many cases be sufficient to initiate processes of learning and improvement.

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Your Key Performance Indicators (KPI’s) determine when your test is a success

→ what do you want to test (pick and choose, don’t test it all)

→ how many people do you need to test with to be indicative of the market?

Xx people interviewed
Xx people used your product
Xx number of people reached
….

Market Testing - What’s the Plan?

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Jojo Juice

JoJo would like to test a new flavour of juice called ‘Goiji Berry delight - the super food you didn’t know you were waiting for’.

The Juice is more expensive than the other juices due to more expensive ingredients.

TESTING:

Would customers pay 150% the price of a normal juice?
Do customers enjoy the taste or is it too bitter?

Market Testing - example

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TESTING:

Would customers pay 150% the price of a normal juice?
Do customers enjoy the taste or is it too bitter 1 = sweet & 10 is too bitter?

KPI’s

50 customers to taste the new juice and ask them to pay what they would think it’s worth
50 customers to taste the juice and ask if they are happy with the 150% mark-up price
50 customers to taste the juice and rate the juice on bitterness on a scale from 1-10
50 customers to rate the likelihood that they would recommend the juice to another customer

Market Testing

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Exercise:

Your Key Performance Indicators (KPI’s) determine when your test is a success

→ what do you want to test (pick and choose, don’t test it all)

→ how many people do you need to test with to be indicative of the market?

Fill out your test:

Xx people interviewed
Xx people used your product
Xx number of people reached
….

Market Testing - What’s the Plan?

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Market Testing - Learn from the results

Ideas

Data

Product

Learn

Improve

Measure

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Based on data

Experiments

Accumulated

Biased

Use your data to be objective with learnings and decisions

Learn with small experiments: prove that your data changes, instead of assuming it will.

Build on your learnings, you’ll remember them once the same problem occurs.

Be aware you and your team are biased during analysing data; prove that you’re right

Document all learnings well, so you can find and review them once the same issue occurs

TIP!

Learn

Market Testing - Learn from the results

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Jojo Juice

TESTING:

Would they pay 150% the price of a normal juice?
Do they enjoy the taste or is it too bitter?

HYPOTHESIS:

Customers think the juice is too expensive
Customers think the juice is too bitter

Market Testing - example

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Market Testing

KPI’s	Test outcome
50 customers to taste the new juice and ask them to pay what they would think it’s worth	20 customers paid half of what they paid for a normal juice 20 customers paid double the normal price 10 customers paid normal price
50 customers to taste the juice and ask the 150% mark-up price	20 customers said it was too expensive 30 customers loved the juice and said the pricing was just right
50 customers to taste the juice and rate the juice on a scale from 1-10	10 customers rated the juice an 8 15 customers rated the juice a 6 25 customers rated the juice a 7,5 AVERAGE: 7,15
50 customers to rate the likelihood that they would recommend the juice to another customer	40 customers would recommend the juice to another customer 10 customers would not recommend the juice to another customer

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Exercise: answer below questions

What can Jojo deduct from the outcomes of her testing?
What can Jojo improve on her product?

Market Testing

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Market Testing - ideation

Ideas

Data

Product

Learn

Improve

Measure

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Exercise:

Make a list of all the improvements that Jojo can make on her product on the basis of her market testing.
Plot these ideas on the following graph based on impact (high-low change that it created) and feasibility (easy-hard)

Market Testing - Ideation

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Market Testing - Ideation

High

Impact

Feasibility

Low

Easy

Hard

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Market Testing - Ideation

High

Impact

Feasibility

Low

Easy

Hard

Pricing

125%

Creating a slogan

Add more sugar

Develop new juice

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Market Testing - Ideation

High

Impact

Feasibility

Low

Easy

Hard

Pricing

125%

Creating a slogan

Add more sugar

Develop new juice

WOW ideas

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Market Testing - Measure the right results

Ideas

Data

Product

Learn

Improve

Measure

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Market Testing - Create your improvements

Rank

Plan

Improve

Plan Implementation

Rank your improvements from highest to lowest impact and feasibility (see previous slides for ranking tool)

Plan product improvements and decide what you’d like to test (see next slides for planning tool)

Improve your product on the items that you ranked highest on impact and feasibility.

Plan implementation of improvements into your products with your team and start testing again!

Document all changes so you know what you improved and what you want test next

TIP!

Improve

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Planning

Why does planning work?

Understanding who does what, when
Creates ownership with tasks and responsibilities for the team
Looking ahead and understanding what the next day, week, year looks like
Make informed decisions on feasibility

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Planning - GANTT Chart

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HOMEWORK

WRAP UP this module

PREPARE for next module