client guides · 19 Dec 2020 · Updated: 30 Oct 2022

Full Guide on How to Build an MVP

Tatsiana Kerimova

Tatsiana Kerimova

Chief Executive Officer

how to build a minimum viable product
Illustration by Amir Kerr

Facebook, Zoom, Tinder, TikTok, Uber, Spotify — today, all these companies are the giants of their industries. However, that wasn't always the case. There was a day when all these platforms had minimal functionality and a primitive user experience. 

Although it can be hard to imagine, Facebook was initially designed as an online directory with the sole purpose of connecting Harvard students via a social network. The website had limited features that allowed students to search for their classmates and check their friends' friend lists.

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The MVP version of Facebook

Later on, the platform extended its reach, adding more universities. Eventually, they opened up their platform to anyone who was older than 13. Now, Facebook is the biggest social network worldwide, with more than 2.93 billion monthly active users as of Q2 2022.

When looking at Facebook's trajectory, we can learn that steady growth has the potential to lead to unbelievable success. In the tech world, this type of approach is known as building a minimum viable product.

What is a Minimum Viable Product?

MVP is an abbreviation for “minimum viable product.” As you may already know, a minimum viable product is a product that is created and released with minimal functionality rather than as a full-fledged solution. 

The use of MVP can be traced back to 2001, when Frank Robinson first coined the term. Later, the term MVP was popularized by two American entrepreneurs, Steve Blank and Eric Ries. 

At the core of the MVP development stage lies the idea of creating a product with just enough features to be functional. Later, when early adopters try the product, the owner collects user feedback to make further integrations based on the needs of the target audience.

Therefore, building an MVP allows entrepreneurs to assess the viability of their product based on customer experience. In the end, there are two possible paths: scale up with the client's needs in mind or shut the project down at an early stage if the product doesn't appeal to its target audience.

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Why Start From an MVP?

Why would you launch a product with limited functionality when you can offer your target users a bundle of full-fledged features from the very beginning? Well, there are many reasons why startups and established brands may be in favor of developing an MVP or minimum viable product first, including:

Idea Validation

You can never know for sure if your mobile app is going to deliver value to the market before testing the MVP idea. Starting with only functional features allows you to determine whether your business idea will stand a chance in the market. Creating an MVP first also helps you clarify if your potential customers and the market are interested in the product.

Lower Costs

Each additional feature contributes to more time and money for development. It's always better to prioritize features, implement the core ones, and enrich the MVP product with the additional functionality later to cut the initial development costs and reach the ROI earlier. Therefore, within MVP product development, you can build the simplest product version using the least amount of resources and get valuable feedback from early adopters.

Related: How Much Does it Cost to Develop an App

Faster Time to Market

Full-fledge applications require a lot of time to develop. According to McKinsey, successful innovators rely on small launches where a product is tested and refined in a real market setting. This helps both drive your product to market faster and make meaningful changes.

The same approach is manifested in creating an MVP. When building a minimum viable product, you can access the target market early, secure your place in the niche, and outperform your competitors.

Data-Based Scalability

You can't know for sure what features users want and need. Often, the users themselves don't always realize the pain points they want to fill with the product. An MVP allows users to try the mobile app early and leave user feedback for you to gather. Based on this feedback, you can make a more informed decision on further MVP enhancements.

Early Marketing

It's never too early to start marketing. With marketing, the sooner, the better. An early marketing approach allows brands to engage with early adopters and drum up their interest in the final product.

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Benefits of an MVP Development

In addition to these five reasons why many opt to build an MVP first, there is an extra advantage for startups seeking third-party investments. For instance, imagine you are an investor who is ready to make a hefty donation to a promising developing project. Which option would you invest in — a theoretical idea or a viable, tangible product? The latter, of course, has more potential to attract investors.

This model is probably how Cobble, a decision-making app for couples, managed to gather $3 million in seed funding in just over a month. The app that was launched in June 2020 helps couples to find date ideas that satisfy both partners. Although the startup still needs to develop an Android mobile app and work on marketing, Cobble's MVP amassed over 2,000 target users in the first six months, which are critical figures for investors.

There are billions of ambitious startup founders who have a million-dollar business idea, but only a percentage of these founders will research the market needs and users' needs to work out a business plan. Furthermore, entrepreneurs who end up building a real product, like Cobble, are even rarer. 

Entrepreneurs who move forward into developing an MVP tend to stand out, as they can prove that their idea can survive in harsh market conditions. Hence, investors are more likely to gain profit or at least reach an ROI. An increased likelihood of acquiring an ROI is a significant benefit of using an MVP, as 75% of venture-backed businesses never return cash to investors, according to Harvard Business School lecturer Shikhar Ghosh

However, no approach is perfect, and that doesn't exclude MVPs. Limited functionality raises the risk of losing some customers who aren't satisfied with the offered MVP functionality. To eliminate this threat, you need to think through the features you plan to include in your MVP so that your product solves a problem of potential users and its features contribute to usability.

How to Build an MVP?

So, how do you build a minimum viable product? Don't start by rushing into hiring the MVP software development team.

Before you move forward, there are many factors you should consider. In our next section, we will provide a detailed guide on how to create a minimum viable product with maximum efficiency.

Determine the Problem

Every product is created for a purpose — to solve a particular problem. In other words, every product delivers real value to customers, making their life easier.

For example, Airbnb allows users to find affordable accommodations around the globe, and  Uber app provides an accessible service to quickly get a ride. Both entered the list of unicorn companies and have successfully moved to the next stage: IPO. Specifically, Uber went public in 2019, and Airbnb in 2020, as well. 

Both Airbnb and Uber were able to solve a problem with their services. When developing your minimum viable product, you should know that it should solve one of these two types of problems: an existing problem or an artificially-modeled one.

An Existing Problem

This type of problem means that the target audience lacks a solution. For example, Whatsapp was created to help people reach each other. 

Whatsapp's co-founder, Jan Koum, was always missing calls when he went to the gym. That's why he decided to launch an app that features statuses to let others know whether a person is currently available to talk.

An Artificially-Modeled Problem

With this type of problem, the main idea is to introduce new user behavior that will provide a better experience. The world is continually changing, and we always see changes in politics, economics, and technological capabilities. And, as the world changes, the market needs to evolve, too. 

Let's consider the current COVID-19 pandemic and quarantine. These worldwide changes provided an opportunity to introduce a brand-new customer experience. 

For example, people have started to opt for digital analogs of traditional services, and businesses have launched numerous products for online, remote collaboration. In particular, there has been a rise in video communication platforms

Usually, introducing a solution for an artificially-made problem means higher marketing and functionality costs because you are delivering a new experience to your potential customers. In these cases, you need to clearly explain the benefits of your product to your audience and provide maximum user-friendliness.

The ultimate factor to keep in mind when solving an artificial problem is the product's use. The application should be useful, or you risk joining the club of startups that failed due to a lack of market need, which is the top reason why startups fail

Analyze the Market

The next step is to carry out a market analysis, and through this process, you can scan for competitors. You should know whether alternative solutions exist, and if they do, you'll need to determine your product's distinct features.

High competition means that you need to stand out from an array of similar products. For example, you can distinguish your product using a better design or cleaner functionality to address users' needs.

Alternatively, the key to success may be offering a new solution to an existing problem. By using the competition to your advantage, you can demonstrate the value of your product and show how efficient it is compared to others. 

Although your initial focus should be on the primary market, don't forget to analyze other markets, too. With a global mindset, you reduce the risk of failure in foreign markets if you expand in the future.

Related: What Types of Apps Make The Most Money

Target the Audience

At this stage, you should be able to precisely describe the buyer persona and successfully market your minimum viable product. Here, age, sex, location, interests, and other valuable marketing and development data must be generated. 

It makes sense to set up a group to test the MVP application and provide you with their insights. You can even hold a pre-launch before the official release. During the pre-launch, you can select a handful of clients to try your product, get feedback, and make any necessary adjustments to the app before the full launch.

Additionally, if you are looking to spot early evangelists, you can create and promote a landing page with a full product description. On your landing page, have an area where those who want to try your product can leave their phone number and email address. 

If you don't know how to drive the prospect to the site, check out what Dropbox did. Dropbox launched a demo video about their product. As a result, the beta waiting list increased 15 times overnight.

State a Business Model

In the context of building an MVP, a business model can be defined using three aspects:

  1. Value proposition — The value proposition is about what consumers will gain and is based on three previously-mentioned factors: the problem, the peculiarity from market analogs, and the audience.
  2. Monetization — Monetization affects functionality and the overall idea. Although you may not include it in your MVP 1.0, you will in future updates. Planning your monetization strategy helps to minimize future mistakes and additional costs.
  3. Distribution — Before you start building an MVP, think about how you want to distribute the product. Find the most cost-efficient and direct ways for your product to reach the end user.

Identify a User Flow

Here, the task is to identify a user flow that covers a user's whole journey from their initial interaction with the product to a successful outcome. For example, in e-commerce applications, the primitive user flow typically looks like this:

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The Primitive User Flow in eCommerce Applications

Of course, each step listed above includes sub-steps, like browsing different product models or viewing product photos. All in all, identifying a user flow is one of the most time and energy-consuming stages.

List the Essential Functionality

A typical problem that startups face is an abundance of product features that aren't necessary for a minimum viable product. That's why when you create an MVP app, you should distribute functionality into several updates, starting with just the essentials for the initial launch. 

There are several methods to determine which functionality should be included in MVP 1.0. The most effective way to accomplish this is through feature prioritization

Prioritization starts when your team brainstorms and results in creating a backlog of all the possible features. Then, each feature is categorized according to its priority and the extent to which it affects the product's value. Each feature will be determined as one of the following:

  • Influences value;
  • Might influence value;
  • Doesn't influence value.
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MVP Prioritization Matrix

Functionality that doesn't influence the app's value should be postponed for later updates. The features that might influence value should also be held on to or substituted. For example:

  • If you are interested in offering all social networks for authorization, you can choose the most popular social network among your target audience. Alternatively, you can opt to only offer email or phone authorization instead.
  • Instead of creating a separate page for feedback, leave an email address so users can send their feedback or provide a pre-filled feedback form.

Here, you shouldn't sacrifice analytics services. To make a reasonable decision on what functionality you're keeping in your MVP, consult marketing specialists about what metrics are essential. For example, you should track the pages that users leave on instead of monitoring how much time is spent on signing up.

Planning the MVP Development

A successful MVP development process should go smoothly; the work should be aligned, the product should be high quality, and the budget shouldn't be undermined. Here, the key to a smooth MVP stage is prior planning. 

Before you start to create an MVP, you need to determine whether you will develop your product or turn to an app development agency. At this stage, consider overall expertise and budget. Then, start working out more in-depth development details by answering the following questions:

Sometimes, it may be too complicated to answer these questions alone. If this is the case for you, consider involving professionals in this decision-making process.

Minimum Viable Product Development

When the above questions have been resolved and MVP app development begins, you should check how the development process is going once every two weeks. During development, product owners are usually tempted to add more features to perfect the product, especially if the budget is loose. However, adding more features is the wrong approach because doing so undermines an MVP's philosophy. 

If you can afford extra features, reference your list of optional functionality from the planning stage but remember not to get carried away. Your main priority is to launch an MVP app as soon as possible to collect feedback during the MVP stage that helps you improve the final product according to the customers' needs.

How Much Does It Cost to Build an MVP?

The inevitable question of costs is one of the primary considerations for MVP owners. We, at Orangesoft, have delivered a range of MVP projects across industries and know first-hand that the estimates always vary. 

Thus, the cost of creating an MVP depends on the app's complexity, the number of platforms and features, the development timeline, and other cost drivers. Let’s estimate an MVP using one of our projects, a workout app, as an example. 

FeatureDevelopment time, hoursBackend development time, hoursApprox. cost, $
Sign in / Sign up42323700
Adding personal info32162400
Profile56183700
Home screen72325200
Workouts96567600
Nutrition96406800
Dashboards / Reports96728400
Notifications24202200
Subscriptions56565600
Architecture56324400
Server interaction & API462300
Database24162000
Admin panel15611013300
Total75646060800

Based on our estimates, developing an MVP for a workout app will cost you around $60,800. Keep in mind that this estimation includes basic costs related to the development stage. 

You’ll also need a team of business analytics, QA engineers, designers, and project managers to get your MVP up and running. These activities are priced separately and aren’t included in the estimation above. You can contact our team to get an accurate estimate.

What to Do After an MVP Launch? 

MVP software development process uses the Build-Measure-Learn cycle, a term coined by American entrepreneur and author of The Lean Startup, Eric Ries.

Using this methodology, you develop a minimum viable product, meet customers' needs in the shortest time frame, and then continue improving the product. The principle is as follows:

  1. You have a hypothesis based on which an MVP product is built.
  2. Consumers use the product while you measure their feedback.

You learn from the results, which leads to a new hypothesis. Here, you'll find yourself at the beginning of the Build-Measure-Learn cycle again.

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Build-Measure-Learn Cycle

After your MVP launch, follow this methodology. Collect the feedback, fish out new ideas, implement them, and test further. 

During the feedback stage, you should work with a test group to collect meaningful insights about the product's strengths and weaknesses. For example, you may want to survey a test group on what they would like to see in future versions of the application.

Additionally, the feedback stage is ideal for developing loyalty and transforming test groups into brand ambassadors that will spread the word about your app. Communicate with customers and share your plans for the future. 

Although revealing new updates isn't appealing to many entrepreneurs, it's a reasonable action plan for retaining customers. Here, product owners often fear that if they release news about upcoming features, their competitors will implement identical features. However, not communicating with your target customers prevents you from building customer loyalty.

Remember, competitors are always out there doing their best to outperform you. If you are open with your target audience, you can reach a level of transparency between you and your customer base, where customers will first come to you for assistance. 

For example, if your customer base trusts you, they will come to you first before negatively reviewing your product online. In this case, their relationship with your brand saved your reputation on the market.

Measuring Success After Building an MVP

Another important step to take after your MVP launch is to track your performance. Key performance indicators or KPIs will help you to measure the success of your product after the big roll-out. Below, we’ve curated a list of essential metrics to track.

Number of Downloads

App download data is probably the easiest way to track the popularity of your minimum viable product. As the name implies, this KPI has to do with the number of times that an app gets downloaded to a device. You can keep tabs on this metric on the app marketplace or use a standalone analytics tool.

Percentage of Active Users

Daily active users (DAU) to monthly active users (MAU) is a popular metric to track user engagement. Essentially, it's the proportion of your daily active users over your monthly active users, expressed as a percentage. Your definition of active can be based on app login or any other activity that brings value. You then need to divide DAU by MAU to get the ratio percentage. The rule of thumb is that your apps need to have a 20%+ percentage of active users.

MAU Ratio.png

Percentage of Paying Users

This metric helps you tap into the number of users who convert post-install. The percentage of paying users is estimated by dividing the number of unique paid users on day X by the total number of customers who installed the app X days ago.

Average Revenue Per User (ARPU)

Another indicator of the product’s profitability, the average revenue per user (ARPU), equals the amount of revenue made on average from each user. The percentage can be calculated by dividing the total amount of revenue generated by the number of app owners.

ARPU.png

Churn Rate

The churn rate is another measure that should be tracked closely by the MVP owner, especially if your users pay on a recurring basis. If your customers don’t stick around for too long, it means that you won’t be able to make up for your average acquisition cost. This, in turn, means that your product is loss-making. 

Churn rate quantifies the percentage of service subscribers who:

  • quit their subscriptions within a given period, or
  • uninstall or walk out of an app over time.

Abandonment rate and app churn can be used interchangeably. This app metric is usually calculated 30 days, 7 days, and 1 day after users download the app for the first time. 

The most basic calculation is to divide your lost users by the total users at the start of the period and multiply the number by 100. For example, if your application had 5000 users at the beginning of the month and lost 140 users by the end, you would divide 140 by 5000. The answer is 2.8%.

Churn Rate.png

User Ratings

Ratings and reviews allow you to look into the customer sentiment about your MVP. Users typically leave ratings and reviews on the app marketplaces to give feedback on their experience with an app. Ratings improve your app's discoverability, promote downloads, and create connections with customers. 

Also, this metric helps you plan further improvements to your minimum viable product and gives you a better idea of the lacking features.

Customer Acquisition Cost (CAC)

This index refers to the full amount associated with winning over each user of your app over a given period. Customer acquisition cost indicates your marketing performance and the effectiveness of your marketing spending and development efforts.

To calculate CAC, you need to summarize the costs of acquiring new users and divide this total by the number of users acquired over the defined period.

Customer Acquisition Cost.png

Customer Lifetime Value (CLV)

Customer lifetime value is the total amount of revenue a single app user can generate over the entire period of the relationship with your application. Unlike the average revenue per user, this indicator takes into account both the direct revenue and indirect value a user generates. 

This means that CLV will be based on all transactions a customer conducts over a given period, such as in-app purchases, subscriptions, ad impressions, and others, as well as an indirect value, such as the number of users a given customer refers to your app.

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What Is the Secret Behind a Successful MVP?

Based on the best MVP practices, we can determine the following five criteria when defining a successful MVP development process:

  1. Early planning — The more time you devote to planning, the more mistakes you catch, and the less time and money you spend.
  2. Data-based approach — An MVP and its subsequent updates should be backed up by data to reduce the risks of no market fit and unnecessary functionality.
  3. Proper marketing — Your audience should anticipate the launch; therefore, you need to devote a significant amount of resources to marketing.
  4. Only essential features — Don't try to build an MVP app with every possible feature included. Instead, build an MVP around the essentials.
  5. Highly-skilled development company — A professional IT team is your backbone when it comes to building an MVP app. Having a skilled team helps to guarantee flawless application and faster development.

If you keep these criteria in mind, building an MVP at reduced costs can be possible within a short period.

How To Build a Minimum Viable Product: Wrapping Up

All great things start from small beginnings. Therefore, you don't have to create a full-fledged product to win over the market. Instead, you can build an MVP, test the viability of your business idea, and iterate on it.

However, building an MVP requires performing thorough market research, building an accurate buyer persona, and other prep work.

If you still have remaining questions or want to receive a consultation on any details like concept development, prototyping, testing, and choice of an MVP development company, please let us know.

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