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Validating Your Market

Google Trends graph of Catan and Settlers of Catan

Having a cool new product isn’t enough, people need to want it too.  If you are introducing a new product or service that people don’t even know they need you will be spending most of your time educating your customers as to why they would need your product or service in the first place.  Educating consumers is an extremely costly and difficult process and you should avoid it whenever you can.

Instead, validate your target market before you invest a great deal of your own money to ensure there is actually demand for that product or service already.  If you have a product that has clear market demand, and little to no competitors, then you may just have a winner on your hands.

Validating your market is actually a very simple process, and most of the time can be done for free .  Here is how I did it for the Hexels:

First step, use the Google Adwords Keyword Tool to see how many people are searching for topics around your market.  For the Hexels, I knew that my target market was gamers who play the Settlers of Catan, so I used the terms “Settlers of Catan”, and “Catan”, to see on a monthly basis how may consumers self-identified themselves as being interested in Catan.

Adwords Keyword Tool results for Catan search

So on a monthly basis there are 90K+ people searching for “settlers of catan” and 200K+ people searching for something based around “catan” in the United States alone (Local Monthly Searches usually denotes your country of origin, in this case the US).  If we could capture even 2% of the smallest number listed here (90K+ consumers) that is 1,810 potential customers every month.  That’s a pretty good number of people.  Lets say we plan on selling our product for $35-$50 to those 1,810 people every month.  That means on a monthly basis we would be doing $63K-$90K in sales which puts our yearly sales numbers at $760K-$1.08M in sales.

As a bonus, the approximate CPC(Cost Per Click) is pretty low so advertising on Google is a very real possibility for our marketing in the future.  As a comparison, the term “web hosting” has an approximate CPC of $14.24.

So far everything is looking pretty great!  We have a large market to work with and based on our estimated sales we should have plenty of capital to work with as well.  Our next step is to check Google Trends for the long-term feasibility of our product.  There may be a market now, but if there is evidence of a steady decline we may not want to enter this market at all.  Google Trends works on a scale of 0 to 100.  Where 100 is the highest highest number of searches for one of your search terms over a specific period of time.  Google Trends works best as a comparator of search terms and market interest over a period of time and cannot inform you as to the number of searches happening (that’s why we use the Adwords Keyword Tool first). We can use the same search terms we used on the Google Adwords Keyword Tool, so “Settlers of Catan” and “Catan”.

Google Trends graph of Catan and Settlers of Catan

It appears that interest for the Settlers of Catan was a bit higher in 2004-2005, but since 2007 has been pretty steady with seasonality peaks even appearing (in this case they are consistently appearing around Christmas time).  It’s been 6+years without a significant sign of decline in market interest, so I think it is pretty safe to say we have found a good market to work with.

You can even find regional interest based on country, state, metropolitan area, and city to find exactly where you would want to advertise your product.  In the case of the Settlers of Catan, if you had only one place you could “open shop” it should probably be Salt Lake City, Utah.

Google Trends state regional comparison of Settler of Catan interestGoogle Trends metro regional comparison of Settler of Catan interest

 

As a comparison, lets use Google Trends and look at the results for “web hosting” again.

Google Trends graph of web hosting

Ouch, I don’t really want to get into web hosting anytime soon.

 

5 Responses to “Validating Your Market”

  1. Dan says:

    Awesome breakdown, Tim!

    Have you used Facebook insights for similar assessments? If so, how do they compare to Google in terms of usefulness and accuracy.

    Also, would you progress with any further market validation? It’s fairly common to build a bare bones landing page and run AdWords traffic to it (a la Tim Ferriss’s 4 Hour Work Week) to get an idea of conversion rate.

  2. James says:

    Your initial numbers are quite high I believe. Your numbers assume that you would sell one unit to every single person who searches for “Settlers of Catan” every month.

    Assuming, that let’s say next month, you sell a unit for $35 to each person who did a Google search for “Settlers of Catan”. The month after that, how many of the people doing a search for Settlers of Catan were part of last months results, and already has your product?

    Then let’s realize that you’re not going to sell one unit to every single person who does a Google search for Settlers of Catan.

    These things considered, I think your estimate of $760K-$1.08M seems overly optimistic.

    Otherwise I liked this breakdown. Was very informative and easy to follow.

  3. Nathan says:

    Dude, are you still making Hexels? I can’t find where to buy, just remnants of a cool project

  4. Chris says:

    As a backer of the Hexels Kickstarter project who underestimated the demand for these things in my circle of friends, I certainly hope that you’re remaining optimistic about this product’s future and will soon make them available for purchase again. I’m going to need a few more sets or I may lose some friends to green eyed jealousy.

  5. Linda Harms says:

    Tim, I just discovered your Catan Hexel product and I’m blown away with the practicality of the product. I want to order them, but cannot find a vendor. Can you direct me to a source? Or will you be at Origins, GenCon, or PAXPRIME? I demo for Mayfair and will be at all three. PLEASE contact me ASAP. Thx

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