Validation Experiments & Hypotheses
Transform assumptions into actionable experiments with clear success criteria
🎯 Critical Hypotheses Framework
🔴 Hypothesis #1: Coalition Value Proposition
We believe that independent local businesses
Will pay $29-59/month for coalition loyalty participation
If we provide access to customers from 20+ neighboring businesses
We will know this is true when we see 60%+ signup rate from qualified prospects AND 80%+ month-2 retention
- 79% of consumers want to support local businesses
- Starbucks Rewards has 31M members
- Small businesses struggle with individual loyalty programs
Entire business model fails - no revenue from core product
🔴 Hypothesis #2: Consumer Cross-Business Usage
We believe that local shoppers
Will redeem points at different businesses than where earned
If we provide unified points across 20+ local businesses
We will know this is true when we see 40%+ cross-business redemption rate
🟡 Hypothesis #3: Neighborhood Density Threshold
We believe that coalition programs
Will drive meaningful consumer engagement
If we achieve 15+ businesses within 0.5 mile radius
We will know this is true when we see 3+ visits per user per month
🟢 Hypothesis #4: Business Association Partnership
We believe that downtown business associations
Will champion LocalPerks to their members
If we provide economic impact reporting and joint marketing tools
We will know this is true when we see 3+ associations sign licensing agreements
🧪 Experiment Catalog
🔴 Experiment #1: Business Association Discovery Calls
Hypothesis Tested: #1 (Coalition Value) + #4 (Association Partnership)
Method: Semi-structured interviews with downtown association directors
- Identify 15 downtown associations in target cities
- Cold outreach via LinkedIn + email with value prop
- Schedule 45-minute discovery calls
- Present coalition concept, gather feedback
- Gauge interest in pilot program
Success Metrics
| Fail: | <20% interest |
| Pass: | 40%+ interest |
| Home Run: | 60%+ + 2 pilots |
Timeline: 3 weeks
Cost: Time only
🔴 Experiment #2: Business Owner Value Prop Interviews
Hypothesis Tested: #1 (Coalition Value) + #3 (Density Threshold)
Method: In-person interviews with local business owners
- How do you currently retain customers?
- What's your biggest challenge with loyalty programs?
- Would you pay $X to access neighboring customers?
- How many coalition businesses would make it worth it?
Target Sample
- 30 business owners
- Coffee shops, restaurants, retail
- 3 different neighborhoods
- $50 gift card incentive
Timeline: 4 weeks
Cost: $1,500
🟡 Experiment #3: Paper-Based Coalition Pilot
Hypothesis Tested: #2 (Cross-Business Usage) + #3 (Density Threshold)
Method: Manual coalition using paper punch cards with 10-15 businesses
- Partner with 10-15 businesses in one neighborhood
- Create unified punch card (earn anywhere, redeem anywhere)
- Track usage manually for 6 weeks
- Survey customers weekly about usage patterns
- Measure cross-business redemption rates
Key Metrics
- Cards distributed: 500+
- Active users: 100+
- Cross-business redemption: 40%+
- Business satisfaction: 7/10+
Timeline: 8 weeks
Cost: $2,000
🟢 Experiment #4: Consumer Landing Page Test
Hypothesis Tested: Consumer demand for local loyalty coalition
Method: Landing page with email capture + Facebook/Google ads
- A: "Earn rewards at all your local favorites"
- B: "Support local, get rewarded everywhere"
- C: "One app, all your neighborhood rewards"
Target Results
| Traffic: | 2,000 visitors |
| Signup Rate: | 8%+ target |
| Cost per Lead: | <$15 |
Timeline: 3 weeks
Cost: $1,000
📊 Experiment Prioritization Matrix
| Experiment | Impact | Effort | Risk if Skipped | Priority |
|---|---|---|---|---|
| Business Association Calls | ● Critical | ● Low | No distribution channel | 1 |
| Business Owner Interviews | ● Critical | ● Medium | Wrong value prop | 2 |
| Paper Coalition Pilot | ● High | ● High | Unknown user behavior | 3 |
| Consumer Landing Page | ● Medium | ● Low | Higher CAC | 4 |
| Pricing Survey (Van Westendorp) | ● Medium | ● Low | Suboptimal pricing | 5 |
| MVP Wizard of Oz Test | ● High | ● High | Tech assumptions | 6 |
📅 10-Week Validation Sprint
WEEKS 1-2
Discovery
- • Association outreach
- • Interview recruitment
- • Landing page setup
WEEKS 3-4
Interviews
- • 30 business interviews
- • Association discovery
- • Landing page traffic
WEEKS 5-6
Analysis
- • Interview synthesis
- • Pilot neighborhood ID
- • Paper pilot design
WEEKS 7-8
Pilot Launch
- • Paper coalition start
- • 15 businesses onboard
- • Consumer recruitment
WEEKS 9-10
Evaluation
- • Usage data analysis
- • Go/No-Go decision
- • Phase 2 planning
🚦 Go/No-Go Decision Framework
❌ NO-GO
Critical Failures:
- <40% business interest
- <20% cross-redemption
- <$20 willingness to pay
- No association partnerships
Action: Pivot or exit
⚠️ CONDITIONAL
Partial Success:
- 40-60% business interest
- 20-30% cross-redemption
- $20-40 willingness to pay
- 1-2 association partners
Action: Iterate & re-test
✅ GO
Success Criteria:
- 60%+ business interest
- 30%+ cross-redemption
- $40+ willingness to pay
- 3+ association partners
Action: Build MVP
🔄 Pivot Triggers & Contingency Plans
🚨 Trigger #1: Businesses Won't Pay
Signal: <40% willing to pay $29+/month
Pivot Options:
- Freemium Model: Free basic, charge for premium features
- Consumer Revenue: Subscription or transaction fees from users
- Enterprise Pivot: Focus on business associations only
🚨 Trigger #2: Low Cross-Redemption
Signal: <20% cross-business usage
Pivot Options:
- Discovery Focus: Emphasize finding new businesses
- Social Features: Add friend recommendations, reviews
- Gamification: Challenges to visit multiple businesses
⚠️ Trigger #3: Density Problem
Signal: Need 30+ businesses for engagement
Pivot Options:
- Category Focus: Start with restaurants only
- Franchise Model: Partner with chain franchisees
- Mall/Center Focus: Target shopping centers
✅ Success Scenario
Signal: All metrics exceed targets
Next Steps:
- MVP Development: Build consumer app
- Pilot Expansion: 3 neighborhoods, 60 businesses
- Fundraising: Raise $500K seed round