What is the best way to "Validate Willingness to Pay"?
There are multiple ways to validate willingness to pay, but one of the big challenges is that we can’t necessarily trust people’s words. We all know those people who say “Of course, I’d totally do that!” but who then drop out when the time comes to commit. As far as possible, we want to get people to put money behind their words.
We can basically use two strategies to validate people "willingness to pay"...
- Fake the Product Launch (ask for payment, don't charge but observe conversion ratio)
- Ask Prepayment for Closed Beta (more transparent, involves real money)
In your experience, what is the best way to validate this aspect of idea validation? Is there any other strategy which I should consider too?
As far as I know, talking to users can also be a great source of validation.
The problem is: Users are most of the time not honest to you. So, you have to ask the right questions.
According to "The Mom Test" by Rob Fitzpatrick, the best questions to ask are about the past. As we humans are generally more optimistic of the future.
So, ask: "What else have you tried to solve X?", "How do you solve X currently?". If the problem (that you try to solve with your product) is worth it, they already tried to solve it somehow.
According to Fitzpatrick the best is at first to not let your potential user know about your idea.
When they know about your idea, you can determine their commitment (and therefore their willingness to pay) also by other factors: time, reputation and money (but you already mentioned that).
Example of time commitment: User is always there for you to give you feedback, using your trial for an extensive period of time.
Example of reputation commitment: Your user gives you a public testimonial or intros you to another person (e.g. a friend, boss, ...).
Hope that helps you somehow!
EDIT: some line breaks
I highly recommend that book "The Mom Test", I am currently reading it and it is like he observed the mistakes I made when talking to users and telling me advice. All of my assumptions about talking to users have been broken since I started that book.
This book has been recommended multiple times, I guess I ought to read it.
This might be a cliched answer, but in my experience you can do this in 2 different ways:
Launch with an MVP and see how many people are willing to pay. Whenever I'm building a product I like to hack together a functional MVP (it doesn't have to be perfect) in the least amount of time possible, release it into the wild and observe how it performs. There's the saying, "fail fast, learn faster" - that's the best way to validate if people will actually pay for your product, IMO.
Having a loyal audience, sort of like the 1,000 true fans theory. With One Word Domains, I had around 500+ newsletter subscribers whom I've been sending out weekly newsletters for about a month and a half before I started rolling out premium features, and I've seen a 10% conversion rate since - which is super encouraging, just imagine the feeling you get when you see the notification on your phone that a $50 purchase has been made! So yes, definitely build a strong audience, provide value, before asking for money.
Good luck!
There's actually two questions in here, I find it useful to pull them apart:
First, what kinds of things do they pay for. This is easiest to determine through observational research, not asking/validation.
If you have a well defined audience, the fastest and most reliable way to figure out what they pay for is to look for examples already in the market.
These kinds of clues can teach you a LOT about audience buying behavior.
Now, will they buy YOUR thing? There isn't really a reliable way to "fake" this (and as others have pointed out, faking stuff is a great way to break trust before you've even started).
In my experience, the best options are to either do a pre-sale or to create and sell the tiniest version of your thing that addresses a single VERY specific pain/problem without all of the other "must have" features.
If you do the research on an audience's problems before you come up with an "idea" you can skip over the entire validation process and start creating things that solve peoples' problems from the start instead of having a solution in search of people with that problem.
Dont lie - go with # 2
Get them to pay you to build it. Anything else is an expensive hobby. 😉
One thing is trying to find out if a similar product exists out there and people are already paying for it
Option 1 is a bad idea as you want to build a trustworthy relationship with your customers anyways. How can you make people commit to buying a shitty product in the beginning without trust? If you shatter that apart right in the beginning you will have already failed before you even started.
you can have fair results with questionare and build on that some statistical analysis on the data you have receivied
Check out the Mom Test, as others have recommended. When deciding prices its also helpful to remember you can change them at any time.
First, are there any people who told you that they have the problem that you're trying to solve? Sorry, but if you pitched the product and they said that what you're building is cool/nice/useful/etc, that's not real validation. Like someone on this thread already suggested, the MOM Test is a fantastic (and quick) read on this topic.
Second, once you have an audience with a problem needing to be solved, build the smallest sellable product that a customer could use. If they don't buy it, then it could mean that your product is not solving a big enough problem for them or they cannot afford it. Again, talk to them and understand why they don't spend money.
If you solve a pain-point, people will pay up. Think about why people say they would pay and then bail? Was their problem solved by some other means? Or you weren't solving a painful problem at all?
And if you happen to be on the other side of the fence, then real world test comes into picture. Will people pay for this thing? One way to find out is get them to use it and then ask them to pay.
Also, UX matters a lot. Some win hearts. So its more like a bunch of variables of the equation rather than a definite strategy.
Thanks everyone for your input.
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I'm not sure it is really about honesty, many people don't really know themselves if they would open their wallet when comes the time.
You arent going to target friends family and random people, you should try and identify an audience, target market, and identify a price point
Ask them to be completely honest, friends and family are harder as they associate their emotions can come into place
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I agree, this gives a bad impression even when they are not being charged. It is not ideal, especially when you are aiming to go big, but for a small-scale user testing, this is a valid tool of validation (not necessary purely ethical).
I think with the right copy it's all ethical and wouldn't be a problem at all.
Would that copy tell them in advance that they won't be charged, or is it the copy that appears after they've committed to purchasing the product and keyed-in their payment details?
I think I would just track conversions on the CTA. Make the user fill in the details and redirect them to a "waitlist" page when they click "proceed to checkout". I would definitely avoid filling actual billing information.
Personally I would be disappointed to make the emotional decision to invest in a product, only to then discover it was a landing page to gauge interest.