Before you launch a company it’s essential that you check if there is demand for your product. Doing so can save you weeks or months of lost time. In this article I’ll show you how to use tools like Google Keyword Planner, Twitter search, and Reddit to validate demand.
A couple nights ago my friend and I decided to launch a company. We got the urge that many entrepreneurs will be familiar with, and took the leap.
What set this night apart from the countless other nights of creative ideas was simple: we acted. By the end of the night we had a live website. 24 hours later we had a functioning “product.” This “move fast, and break things” attitude is one of the most valuable assets any successful entrepreneur has. But even the fastest moving of founders should do a bit of planning before spending weeks or months building a company. One of the most important pieces of the planning process is “Demand validation.”
What is demand validation?
First things first, before you ever build a website, product, or start building a brand, it’s essential to determine whether or not there is any demand for what you intend to build. My mentor Alberto likes to say, “Make sure you’re building the right it, before you build it.”
How to test for demand before starting your company
One of the best ways to test demand for a product is to see if people are searching for your product. My friend and I wanted to build an ETF for the cannabis industry (basically an easier way for people to invest in cannabis).
The first thing I did was use Google’s Keyword Planner tool to look at a couple key metrics:
- How many people are searching for cannabis investing?
- How competitive are the keywords in that industry?
- How much do ads cost for each search?
The first thing I did was open up Keyword Planner and entered a few search terms
Immediately I saw that there were people searching for this. On about 5 search terms there appeared to be somewhere between 1,500 and 15,000 people searching.
These results were promising, but they weren’t very specific. I wanted to know more precisely how many people were interested in cannabis stocks.
I opened up Ubersuggest to find related search terms and keywords.
Then I opened up Keywordtool.io to figure out exactly how many people were searching for those terms.
BEAUTIFUL! Tens of thousands of people search every month for cannabis stocks.
This page validated that I wasn’t the only person who was thinking about investing in the legal cannabis industry.
Using Keywordtool.io I was able to validate another hypothesis which was that more people would be interested in investing as the election drew nearer (since many states were expected to pass new legislation). I was able to validate this by looking at searches by month.
A quick note on using Google Search to validate demand
It’s important to note that this validation method only works for certain companies. It works for companies that hope to be first movers in a market that already has pent up demand (e.g. cannabis investing).
It doesn’t work for products in competitive industries. The reason is that search traffic won’t tell you anything new. For example if you want to build a better dishwasher, you don’t need to validate that demand for dishwashers exists. As another example, if you want to start a video conferencing company you don’t need to validate that coworkers want a seamless, easy to use video conferencing app. For an idea like this I refer you to option #2.
Validating demand by finding pissed customers
Using that same example (and an industry I’m very familiar with), here’s how I’d recommend validating demand in a crowded space.
First, I’d go on Twitter to look for people complaining about existing products. I’d go to Twitter Search and enter in a term like “video conferencing sucks.”
From this basic search I’ve validated that there is a pain point. People online are complaining about video conferencing products which implies there is a gap in the market to be filled.
(As a side note, building a video conferencing product that doesn’t suck is no easy feat. I worked at a company in the industry and learned that first hand).
Going back to my cannabis investing example, here’s how I used Reddit to validate demand.
First, I went to Reddit Search and entered my search term. In this case I entered “How to invest in marijuana.”
Next, I picked a thread with lots of upvotes and comments (as this indicates interest). In this example, I found a thread of people talking about how they invested in the industry and people asking for their advice. This was further validation that:
- Demand exists for the product
- Problems (mainly, the complexity of investing today) exist that need to be solved
Wrapping it all up
The idea that you should check if people want your hypothetical product before building said product seems obvious. But I can’t tell you how many entrepreneurs make the mistake of building a complex product before ever validating demand.
In the next article I’ll go over how to set up a Google Adword campaign to further validate demand. In that article we’ll go over:
- How to set up a simple Adword campaign
- How to launch a landing page to explain your product to visitors
- How to collect and analyze statistically significant data to decide whether or not to build your product or not