Have you built a product people use, but you have not yet had people pay for it? If so, you are essentially subsidizing a thing you built. It may be with your own money or someone else’s, but your business is not yet self-sustaining or ready for scale.
That said, validating interest from real people and understanding what they like about your solution is a full step toward product/market fit. So whether you have an MVP with active users live or have found a clear “tip of the spear” through Idea testing, congratulations on getting this far!
Low fidelity, high value Idea testing, as described in Part 3: How do I know if I’m on the path to product/market fit with my idea? and What about finding product/market fit for a marketplace? is a way of quickly evaluating whether an idea resonates with a user via the lowest possible effort - by simply crystalizing the essence of the solution and getting it in front of real people before building the product. We often call this Level 1 or Idea testing.
When you get a clear signal of interest with one of your ideas - especially if multiple have fallen flat - you can feel confident that you have achieved the most basic level of solution validation. Real people are tangibly interested in one specific idea.
Having a free product in the market that people are using is also a type of solution validation - just at a much higher effort of having already built the product.
However you’ve validated your idea with real users, you are now ready for Level 2 or Monetization testing.
Monetization testing solidifies that you are moving into clear product/market fit territory. The progression is very simple. After you’ve validated users are interested in a specific solution you take that idea and see if they’d be willing to pay for it.
The first step of preparing for Monetization testing is deepening the validated idea for a specific user with a specific need into a more deeply conceived solution paired with pricing options. Monetization testing adds two things from Idea testing:
Once you have a more robust solution or set of solutions you are ready to put this deepened solution or set of options in front of the users you have already identified as being interested - and ask them if they would pay for one or more of the options.
Monetization testing helps deepen your understanding of the value exchange between the product and the user because the user is asked for a reaction to a specific set of solutions paired with a quantifiable price.
Getting a clear signal that users are willing to pay for a solution is the most definitive sign that you are on the path to product/market fit. Monetization testing can lead one of two places - into further pricing sensitivity testing or into prototyping.
Pricing sensitivity is a second layer of Monetization testing used to determine how much and for what items precisely users are willing to pay. Pricing sensitivity is where you can take solutions that are validated as “wanted” and “monetizable,” and push them into testing different business models (for example subscription versus a la carte) at different price points.
It is not always a required step of testing before moving into design and development of prototypes. Generally pricing sensitivity is supportable if a team is really unsure of their business model and has a fair amount of flexibility in terms of how to build the team and company. Otherwise once a team gets a clear monetization signal, it’s off to the races with a full design and prototype.
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Whether you do one or both levels of Monetization testing, once you get a signal that your users want to pay for a specific solution you will clearly see where to put your focus on designing and building an end-to-end prototype of the full solution. What testing has helped you do is to narrow down to 1-2 options that are user validated and business-model supported for design and development focus.
In prototype testing, we recommend that users can purchase some version of a complete solution. For B2B companies you can sell your solution with a services layer behind the scenes.
For D2C companies some version of product-led growth, such as enabling an MVP or lightweight version of the product to be available for self-service use and purchase on a live site is a great way to get feedback on both interest around the full solution as well as feedback on how to make it better.
To get to validated, monetizable ideas that you then feel confident designing and prototyping end-to-end Foundations can help.
