What Are the Market Research Steps to Validate a SaaS Product Idea?

Market research is vital for validating an idea before investing resources. You must gather, analyze, and interpret information about: 

• Target market
• Competitor brands
• Industry trends 

Here’s a closer look at some SaaS market research essentials. 

• Target Audience: Demographics, purchase behaviors, pain points, and goals must all form your customer persona. This is imperative if you don’t want to ineffectively market your product.
• Competitive Analysis: Look at your competitors’ pricing, marketing strategies, product offerings, and where they succeed/fall short. Then, think about what you can do differently.
• Survey and Interview Potential Customers: Survey your target audience and conduct interviews to get direct feedback.
• Market Trend Analysis: Know what’s happening in your industry and monitor emerging trends. 
• Pricing Strategy: Perform pricing research to find an optimal price point. Think about how much customers are willing to pay, along with your operational costs and what your competitors are charging.

You do this by getting comprehensive audience information. This includes: 

• Demographics: Income, education level, gender, location, age, interests, etc. 
• Firmographics (If Applicable): Revenue, company size, industry, etc.
• Pain Points: Which challenges and problems does your target audience face, and how can you help them overcome these?
• Goals/Aspirations: What does your target audience want to achieve, and how can you help them get there? 
• Buying Behavior: Where does your target audience buy, and how do they make decisions?

Build a profile once you’ve acquired this information to build your ideal persona.

You must track your competitors and adapt accordingly; this is an ongoing process. Here are some strategies to consider: 

• Key Competitors: Identify direct and indirect competitors. 
• Product Analysis: Research pricing, features, target audience, and UX; read reviews. 
• Marketing/Sales Strategies: Analyze the channels they use and their tactics/messaging. 
• Assessing Strengths/Weaknesses: SWOT analysis is crucial for identifying where you can beat your competitors. 
• Industry Trends: Look at emerging technologies, new market entrants, and other relevant trends. 

You can perform competitor analysis with Ahrefs, SimilarWeb, and other tools. Besides reading customer reviews, you should also consider speaking to potential customers and attending industry events.

You need to validate product-market fit throughout the development phase, and here are some ways to do that. 

• Create a Minimum Viable Product (MVP): Launch a basic product with core features for early feedback. 
• Analytics: Identify friction areas by tracking user analytics. 
• Interviews: Understand users’ experiences and get qualitative feedback by talking to users. 
• Churn Rate: Consider how many people are unsubscribing, and how many are sticking around. 
• Pivot: Consider changing your product direction based on market demands.

How you price your product can significantly impact customer acquisition and revenue, and here are some aspects to think about:

• Value Proposition: Think about how much value your product gives to customers and price honestly based on this. 
• Target Audience: Consider price sensitivity and how much your audience would be willing to pay. 
• Competitive Landscape: Look at competitors’ pricing and position your product based on your value vs. theirs. 
• Cost Structure: Your pricing must generate a profit after expenses and tax. 
• Pricing Model: Pick the model that makes sense to you, whether that’s tiered/usage-based pricing or freemium. 

If you don’t know where to start, experiment to see how your customers respond to different pricing models.