What is MVP?

by | Apr 26, 2023 | Uncategorized

Introduction

Developing and launching a new product or service is never an easy task. There are many factors to consider (conquering the market, acquiring new users, perfecting your offer and many others), and one of the key elements of a successful startup is building a Minimum Viable Product (MVP).

In this article, we will share with you everything you need to know about MVP, how to develop, test and improve it, in order to successfully bring new products to market.

Let’s go.

What is MVP?

A Minimum Viable Product (MVP) is a basic version of a product that has enough functionality to SATISFY THE NEEDS of early users and GATHER FEEDBACK for further development and improvement. The goal of the MVP is to test the basic assumptions about the product and its compatibility with the market, in order to determine as efficiently as possible which directions of development are the best for further investment of resources.

MVP is a very important tool for startups and entrepreneurs, because it allows faster and more efficient access to the market, while reducing the risk of failure and reducing costs.

Eric Ries, entrepreneurial guru and author of the books “Lean Startup” and “The Startup Way”, is a big proponent of MVP development. His description of the MFA’s purpose reads:

“A company will create an MVP when it wants to test a potential product or service with consumers with little effort, in order to gather data and insights that will help the company decide whether to launch a more comprehensive project.”

How to make an MVP?

MVP is popular among companies that are new to the market. It is common for companies to launch a new product with a minimal budget, in order to test the viability of the product in different situations. If the product fails, the company can correct its problems and errors afterwards, without incurring significant losses.

For company owners or entrepreneurs, the biggest fear is investing in a product that no one wants. That is why it is very important for them to build a viable product (MVP) as soon as possible. A sustainable product helps them understand what customers really want and encourages them to continue developing and improving their products or services.

  1. IMPLEMENT the first viable version of the product,
  2. You VALIDATE this version on the market and
  3. TRACK THE METRICS essential to your product’s success.
Figure 1: MVP Creation Process

Implementation of MVP

The first step on the road to a successful MVP is creating a viable version of the product that will meet the basic needs of your users.

To successfully implement an MVP, follow these steps:

  1. DEFINE YOUR PRODUCT – If you have a product idea, the first thing you need to do is determine what problem your product solves.

    Example:

    People often don’t have time or don’t know what to eat, and local restaurants have a hard time breaking into the market. A solution the company could offer would be a mobile food ordering app that allows users to quickly and easily find and order food from local restaurants.
  1. PREPARE PRODUCT REQUIREMENTS – Before you start designing your product, define the functions it will have. This will help you better understand your product and align it with the needs of potential customers.

    Before starting the development of the app, the company would first make a list of functionalities that it wants to include in the MVP, such as restaurant search, menu browsing, food ordering, order tracking and restaurant rating.
  2. IDENTIFY PRIORITY PRODUCT REQUIREMENTS (PPR) – The highest priority features are called Priority Product Requirements (PPR). Identifying the functions that are KEY to MVP is crucial because you will focus on them initially.

    In this step, the company would analyze the list of functionalities and identify the ones that are critical to the MVP. Some of the key features would be: restaurant search, menu browsing, food ordering and order tracking. Other features, such as restaurant ratings and recommendations, would be left for later product development.
  1. FIND DEPENDENCIES BETWEEN PPR AND OTHER REQUIREMENTS – When developing a product, it is important to identify high priority requirements, but also the ways in which they depend on other, less important requirements. Discovering these dependencies will help you make development as efficient as possible and make future improvements easier to implement.

    For example, a company would determine that order tracking depends on successful food ordering and communication with restaurants.
  1. BUILD THE PRODUCT – Produce an MVP and offer it to early adopters. Make sure the product includes the features that matter most.

    In this step, the company would offer early customers an MVP with key functionalities: restaurant search, menu browsing, food ordering and order tracking.
  2. COLLECT FEEDBACK AND IMPLEMENT CHANGES – When you launch a new product, be sure to collect feedback from your users. Based on that information, modify the product according to the needs and desires of your users.

    In this step, the company would collect feedback from users to understand their needs and wants. Based on the feedback, she would improve her app, adding new features and improving existing ones.

MVP validation

Now that your MVP is built, how do you know if it will be accepted in the market?

To successfully validate your MVP, follow these steps:

  1. CROWDFUNDING – This is a great way to test whether your product is viable in the market and allows you to raise funds. Sites like IndieGoGo or Kickstarter allow you to pitch your MVP and raise capital that can help you get your business off the ground. In addition, you get an estimate of the market value of your idea.

    Using the previous example , in this step, the company could create a detailed video that shows the main idea behind the product, the app’s functionality, and how the app would facilitate the food ordering process. Also, they could offer special benefits (like a discount on the first order) to those who support their project. This approach allows the company to see how interested potential users are in its idea before fully developing it.
  1. ORDER PAGES – You can pre-sell your product to your potential customer base by involving them in the early stages of product design. If they like what they see at this stage, they can buy the MVP before it’s even developed. This allows you to gather feedback and understand market demand.

    A company could create a demo version of its app and allow interested users to download, test, and provide feedback. In return, users who provide feedback could receive exclusive discounts and offers when the app is officially released into production.
  2. BETA TESTING – Find a group of early adopters who are willing to test your MVP and give you feedback. This approach helps you to improve the product before introducing it to a wider audience.

    The company could find a group of local restaurants and individuals who would be willing to test their MVP and provide feedback. Also, it could organize events or meetings with these beta users to discuss their experiences and suggestions for improvement.
  3. SURVEYS AND FOCUS GROUPS – These are classic methods of gathering product feedback. Surveys can give you insight into the opinions of potential users, while focus groups provide a deeper understanding of their needs and wants.

    In this step, the company can create a survey to be sent to potential users, exploring their food ordering habits, preferences and expectations from the food delivery app. Also, you could organize focus groups with potential users to discuss their needs in more detail and find out what would motivate them to use your app.
  4. SOCIAL MEDIA AND BLOGS – Use social media and blogs to spread the word about your product, gain attention and get feedback. These platforms allow you to communicate directly with your target group and understand their needs.

    The company could start a blog or open social media accounts, where it would regularly post content related to food, restaurants and delivery. In addition, she could run sweepstakes and promotions to gain attention and feedback from her target audience. This would allow her to build her online presence and increase interest in her service.

Track Metrics that are critical to your product’s success

Finally, you need to track the metrics that matter to your product’s success. These metrics will help you better understand your users and the market, so you can adjust your strategy quickly and efficiently.

After building the MVP, it is necessary to monitor various METRICS FOR MEASURING SUCCESS :

  1. USER COMMUNICATION – This metric is about measuring interaction and communication with your users. This may include answering customer inquiries, customer support and social media responsiveness. The goal is to maintain a high level of customer satisfaction and provide fast and efficient support.

    To track these metrics, you can use Zendesk . Zendesk is a comprehensive customer service platform that offers a variety of tools and features to communicate with customers via email, social media, phone, and even live chat. With Zendesk, you can track a variety of metrics such as response time to inquiries, customer satisfaction, and support team effectiveness.

    Apart from Zendesk, there are other similar tools like Freshdesk, Intercom and Help Scout that also offer features for managing customer communication and tracking relevant metrics.
  • USER ENGAGEMENT – User engagement measures how active users are and how often they use your product or service. This may include the number of sessions, time spent within the app, interaction with features and user retention rate.

    Google Analytics is one of the most popular tools that can help track these metrics. Google Analytics provides detailed information about user behavior, demographics, traffic sources and many other aspects of the application. This allows you to understand how users use your app, what holds them back, and where there are opportunities for improvement.
  • PERCENTAGE OF PAYING USERS – This metric shows how many users are paying for your product or service. It is an important indicator of monetization and the overall value of the product to users.

    To track this metric, it is enough to compare the number of payments with the number of downloads.
  • NUMBER OF APP DOWNLOADS – This metric shows how many times your app has been downloaded from digital stores, such as the Google Play Store or the Apple App Store. It is a key indicator of the popularity and demand for your product.

    To track these metrics, you can use the App Store (Google or Apple), and you can use an app like App Annie . This tool is useful for tracking mobile app performance, including downloads, rankings, revenue, and more.
  • PERCENTAGE OF ACTIVE USERS – This metric measures the number of users who regularly use your product or service. Active users are key to sustaining your company’s growth and success.

    To track these metrics, it’s enough to use Google Analytics or Amplitude.
  • TOTAL VALUE PER USER (LTV – Lifetime Value) – LTV represents the total revenue that a company can expect from a user during the entire period of using the product or service. This metric helps to assess customer value and guide marketing and sales activities.

    To determine LTV, you can use Baremetrics . Baremetrics is a SaaS (Software as a Service) revenue analytics tool that allows you to track various financial metrics, including LTV (Lifetime Value). Baremetrics gives you insight into LTV through customer segmentation, revenue growth tracking and spending pattern analysis.

    Besides Baremetrics, you can use other SaaS analytics platforms like ChartMogul or ProfitWell, which also allow tracking LTV and other key financial metrics.
  • USER FEEDBACK – Collecting feedback from users is key to understanding their needs, wants and possible problems with a product or service. These metrics may include ratings, reviews, and direct feedback via surveys or interviews.

    To track these metrics, you can use Hotjar. Hotjar is an analysis and feedback tool that allows you to visualize user behavior on your site through heatmaps, session recordings and surveys.
  • NET PROMOTER SCORE (NPS) – NPS is a metric that measures how willing users are to recommend your product or service to others. A high NPS indicates customer satisfaction and the likelihood of business growth through referrals.

    Here you can use the Intercom tool. This customer communication platform allows you to collect feedback, provide support and measure customer satisfaction through Net Promoter Score (NPS) surveys.
  • NUMBER OF NEW USERS – The number of new users measures how successfully you attract new users and how quickly they adapt to your product or service. These include conversion rates from registration to first use of key product features, as well as the speed at which users become engaged or paying users.

    To measure these metrics, you can use the already mentioned Google Analytics or Amplitude tools.
  • CAC (CUSTOMER ACQUISITION COST) – CAC is the cost a company pays to acquire a new customer. This metric includes all costs associated with marketing, sales, and support invested in acquiring new users. The goal is to reduce CAC in order to achieve greater profitability and business sustainability.

    HubSpot: HubSpot is a comprehensive marketing platform that offers tools to track CAC, conversion and other metrics related to new customer acquisition and retention.
  • ARPU (AVERAGE REVENUE PER USER) – ARPU represents the average revenue that the company generates from each user. This metric helps understand how much revenue your product or service generates on a per-user basis. ARPU can be a useful metric for optimizing pricing, bundles, and monetization strategies.

The choice of tool depends on your needs, type of business and budget. Start with the ones that best suit your goals and add additional tools as your business grows and develops.

Successful implementation of MVP

MVP can be successfully applied in various industries:

  1. TECHNOLOGY – In the technology sector, MVP is often used to test software or applications. Software development can be an expensive and time-consuming process, and through MVP you can save time and resources.
  2. SERVICES – MVP can also be used for services. For example, hotels can develop an MVP that includes core services and accommodations to test demand before investing in additional amenities.
  3. MANUFACTURING – Manufacturers can use MVP to test and optimize their manufacturing processes before committing to mass production.

Many companies, already known to us, achieved their success by starting from MVP:

  1. Instagram – Instagram was originally developed as an MVP called Burbn, with a focus on geolocation and sharing information with your connections. However, user feedback indicated that the key feature they wanted was photo sharing. This led to the development of Instagram as we know it today.
  2. Airbnb – When the founders of Airbnb first launched their idea, they created a simple website to test the demand for alternative accommodation in San Francisco. Through the MVP, they gathered feedback and understood the needs of their users, leading to the success we know today.
  3. Dropbox – Dropbox was initially launched as an MVP with basic file syncing and sharing functionality. Its popularity grew due to its simplicity and efficiency, which led to the development of additional functions and services.

Conclusion

The Minimum Viable Product (MVP) is a key tool for startups and entrepreneurs who want to TEST their ideas in the market, REDUCE RISKS and COSTS of development. Through MVP, you can quickly and efficiently collect user feedback , improve your product or service, and adapt to market needs. The application of MVP in various industries and successful examples show how important this concept is for the development and success of startups.