Customer and Market Research

A recent question posted on a site I frequent asked about the use of vaporware as a means of measuring customer interest in a product prior to actually building the product. If you are unfamiliar with the concept of vaporware, the definition from Wikipedia reads:

Vaporware describes products not released on the date announced by their developer, or announced months or years before their release… Vaporware first implied intentional fraud when it was applied to the Ovation office suite in 1983; the suite’s demonstration was well-received by the press, but was later revealed to have never existed.

The current usage, though, is more along the lines of creating a website promoting a product, and seeing how many customers attempt to purchase it. This tactic can be used to determine how much interest there is in the product, and whether or not the price is suitable.

The risk, of course, is that once a tactic like this is used, any trust between the company and the potential customer is lost. The customer has been led to believe that they were purchasing a product, only to find out that the product does not exist. While this is not fraud, since the customers are not actually paying for anything, it isn’t honest.

However, the problem remains as to how to go about measuring consumer interest in a product that has not yet been created.

One approach, perhaps a bit naive, is to go out and find some customers who are willing to pay for your product. Ask them for prices they would be willing to pay, and use that as the basis for your business model and income projections. The problem, however, is that until a customer is asked to put out money for a product, any statement they make regarding pricing has to be taken with a grain of salt. This is, in fact, the basis for the statement “Put your money where your mouth is”.

Customer surveys in which information about the potential product is provided, and general statements regarding pricing have similar problems. While this can help narrow down the range, it does not validate that a particular price will work, for the same reason as asking customers to name a price won’t work unless they are prepared to back that statement with cold hard cash.

The approach that does work, though, is to find some actual customers who will state that not only will they purchased your product at a specified price, but will actually lay out at least some of the money up-front. Such validation indicates that these users are prepared to believe in you and what you can build, and that they see a specific value in what you’re building.

The risk, of course, is that if the product does not get built, you have to return the money. Be careful using this approach to ensure that quantifiable milestones have been defined for the product development, and that it is clear how the product can be assessed objectively to determine whether or not it has met the goals defined during the research stage.