Validating Willingness to Pay
Validating willingness to pay is a step that's easily overlooked. Your goal here is to get users to commit to buying your product. At the very least, you need them to express a strong interest in it. Willingness to pay is the cornerstone of the fabled product/market fit.
There are many 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.
Here's how you can build a validation website
There are tools available now that make it incredibly easy to launch a simple website and validate willingness to pay.
First, get a simple site up and running. If you're technical, you can choose to design and code this yourself, but most users will be better off using a template site builder.
A single page site should be more than enough for validation, especially for your very first step. But if you want to gradually iterate and add more pages and content to increase fidelity and gather more learnings, that's an option too.
Some good options for building your validation site are:
- Squarespace for great-looking websites.
- Webflow gives lots of custom control over your design and is good for single page sites.
- QuickMVP is a helpful little suite of tools for creating landing pages to validate ideas and products. It simplifies both the landing page creation process and also setting up adverts and gathering statistics. If you're a non-technical user this is a good solution.
There are a few elements which you'll definitely want to include on your simple website:
- Explain what your product does, clearly and concisely.
- Highlight your product's unique selling points.
- Address any key concerns that users had during testing. If they were worried about security, performance or comfort, explain your solutions for this.
- Add a direct 'call to action' to bring users to the checkout and payment part of the website. This should be clear and unequivocal--something like “Buy now for $99”.
- Make sure your payment page has an email collection form so that you can gather emails from prospective customers. MailChimp is a good option here.
- Instead of confirming the user's order, you should show them a “Sorry” page which explains why you're conducting the experiment. This way, you make sure they don't have false expectations about receiving the product.
- Make sure you have analytics running on the site so you can track how people are interacting with it. Google Analytics is simple and free.
Once you have the validation site up and running, you need to drive traffic to it. You do need to be a little bit cautious about doing this within your network of friends and family though. You don't want to fall into the same trap of collecting 'false positives' who sign up just because they know you personally.
You'll probably need to spend between $100 to $500 on ads to bring enough users to your page for validation. This can seem like an expensive overhead to the testing process, which is why we leave this validation stage till the very end. Think of it this way: $100-500 is a far safer and less risky overhead than spending thousands of dollars building the actual product. Plus, if the product idea is strong, this money isn't wasted. You'll be building up a great list of interested users who will be likely to sign up for your product when it actually launches.
Facebook and Google AdWords have robust targeting possibilities that let you showcase your solution to the right audience, which you would have identified in the “Validate the Problem” phase. You can also further optimize your ad by factoring in data from your initial ads, such as number of clicks, likes and shares received and the location of people engaging with it. Getting started with an ad campaign on Facebook or Google AdWords is pretty straightforward. We won’t cover the steps for setting that up here, but some Googling should get you on your way to quickly creating an ad campaign.
We'd recommend keeping a close eye on a few metrics:
- Conversion rate: how many visitors ended up attempting to buy the product.
- Total 'sales': it's interesting to learn where these sales came from (geographically).
- Cart abandonment rate: in a real online store, this is typically between 60-80% (68% is the average). This means that almost 7 of the 10 people entering the checkout process didn't end up completing it.
To go deeper, we might also suggest:
- A/B testing: experimenting with different headlines and content to see how it affects conversions. However, this only works if you're driving thousands of visitors to the website in order to get statistical significance to your findings.
- Speaking to your customers: once you've gathered someone's email address, you'll be able to send messages and newsletters to them and explain how your product is evolving. But you can also reach out to them directly and ask them a few questions to help understand their needs and motivations. This can be a great way to learn more from your potential users.
Start as a concierge service
There's another technique that you can use in addition to or instead of the spoof landing pages method: the concierge method.
The concierge model is very closely aligned with the lean prototyping we talked about in the previous chapter. The basic principle is that before you actually build software, you should try to fake the service and manually carry out each user request.
Let's consider another example from the real world. We decided to build our own product, PingPong, to help users gather feedback and conduct interviews. The technology behind the product is not incredibly complex but it nevertheless will require a decent investment into design and development in order to launch a strong product. Elements of the business model, like invoicing and billing, will need to be figured out. We'll also need to build a product which is secure and reliable enough to allow lots of users to sign up and run their tests. There's a lot of work that goes into a successful product and at this early stage, we still have a lot of unvalidated assumptions about what users really want.
Instead of going all out and building a service that users can sign up for directly and use, we’ll go the concierge route. Thus, the only way for paying customers to sign up for now is for them to agree that we’ll manually fulfill their order. Eventually, the product will take over and perform these tasks automatically. Of course, there is always the risk that a manual service won’t be able to scale with the demand and you’ll have to turn down customers; while this is a whole other problem for you to tackle, rest assured that you’ve hit upon a crucial problem.
This can feel like a huge time commitment, but in fact, this is critical learning. We manually run the service at the beginning and build deep relationships with our first few customers. Since we're communicating with them a lot, we ask them questions about their needs and expectations and use their feedback to fine-tune our business model before we build out the full product. This is a great way to validate exactly what users will be willing to pay for and maximize user value.
As an additional bonus, operating as a concierge can mean that you're making money right from day one!
Spoof landing pages
We've found that the best way to validate here without getting caught out by people who aren't really prepared to pay for your product is to build a spoofed marketing site.
This might feel like a slightly misleading technique. But in our opinion, as long as you're not actually taking people's money for something you won't deliver, users will be understanding of your motives.
It's a very common technique because it works so well. Let's take CheckMaid.com for example. It's an online service for finding and booking home cleaning services. But when they first created their website, there wasn't a real business behind it. As founder Alex Brola said:
“We actually validated [the idea] without having any cleaners to do the cleanings. We threw up a site, a booking form, a phone number, and ran some [pay-per-click] ads through Google and Bing, and saw what the conversion rate would be had we actually had cleaners.”
Tailwind (a Pinterest analytics tool) used a similar technique to try and make sure that people other than their friends and family would sign up:
"We 'validated' our first (failed) product by having friends and family tell us how wonderful it was. [It] felt great, but they didn't use it. When we started Tailwind, we took a different approach -- asking complete strangers who didn't care about us at all to [sign up] and pay before our product was even built. We created a sign up page, bought some AdWords traffic and people actually started offering to pay us! We didn't actually charge them, but we learned we were onto something."
Validating willingness to pay using a spoof landing page is definitely something you need to be careful about. If you do it wrong, you could damage your brand and create a huge amount of user frustration. The key is to present your marketing content and display a visible “Sign up” or “Buy now” link. When the user clicks the link, you would display a message explaining why the service is not yet running, and offer them the option to enter their email address to receive updates when you do launch. Also, a good idea would be to reward these early users by saying they’re entitled to discounts or other rewards for being early supporters. We’d recommend not going any further than storing the user’s email address (so that you can contact them later) and possibly their general location if that’s relevant to your product (to gauge regional demand). Make them aware as early as possible in the process that the product is not available. Many laws, especially in Europe, prohibit misleading advertising — be very careful not to take payment or sensitive personal details in a misleading way. If you’d prefer to avoid a spoof landing page, you could opt for the concierge route, which is less ethically sensitive and often a good alternative.