Customer Research:
1. Customer Development is about Testing the Founder’s Hypothesis
2. All I had done was proudly go out and get customer input. Isn’t that what I was supposed to do? No.
3. Any idiot can get outside the building and ask customers what they want, compile a feature list and hand it to engineering. Gathering feature requests from customers is not what marketing should be doing in a startup. And it’s certainly not Customer Development.
4. In a startup the role of Customer Development is to:
test the founders hypothesis about the customer problem
test if the product concept and minimum feature set solve that problem
5. This is a big idea and worth repeating. Customer Development is about testing the founder’s hypothesis about what constitutes product/market fit with the minimum feature set. Thereby answering the questions, “Does this product/service as spec’d solve a problem or a need customers have?” Is our solution compelling enough that they want to buy it or use it today? You know you have achieved product/market fit when you start getting orders (or users, eyeballs or whatever your criteria for success was in your business model.)
6. The time to start iterating the product is if and only if sufficient customers tell you your problem hypotheses are incorrect or point out features you missed that would cause them not to buy
7. If you’re lucky you’ll find this out early in Customer Discovery or if not, when no one buys in Customer Validation.
8. You’ve just listed the reasons why startups are not done by accountants with spreadsheets. It’s an art.
Customer Development is not a giant focus group. At best it is a way to inform an entrepreneurs instinct and reduce risk.
9. With that in mind, the last thing you want to do is be hard selling your idea to them. Instead, you want to interview your customers to understand their problems. You can learn how to do customer development interviews here.
10. don’t worry about scaling right now. Just do whatever it takes to find people and the scalable methods will emerge later.
11. Takeaways: 1) you don’t need an “idea” for a product. In fact, it can be better not to have one. 2) The best ways to choose a customer segment are access (existing relationships), market research, passion, and customer development based on hypotheses about which customer segments have the biggest problem. In this case, the customer segment was chosen based on market outreach. 3) Customer development interviews can allow you to gain extremely valuable customer insights. At this stage, you want to get your customers talking as much as possible. It’s important not to ask leading questions that get them stuck on a potential product.
12. Takeaway: If you’re truly solving a problem for your customers, they will be more than happy to talk to you. In fact, they will be eager to help.
14. To avoid spending time and money building something that wasn’t truly of value to our customers, we wanted to get even more data and conviction. Interviews and conversations are great, but the bias is for customers to agree with you. Asking a customer pay, and having them do so, is the ultimate form of validation.
15. Next we created three separate e-mail templates - one for each of the three value propositions described above. The e-mail very briefly described the value proposition and included a call to action, which was a link to a landing page we created where they could sign up for early access to the product. We created a sense of legitimacy for the company by building a website using tools like Squarespace that make it easy for non-technical people to build a professional looking site in hours. We then divided the e-mail addresses into three equal groups and sent one of the e-mails to each group
16. 1) The bias is for customers to agree with you. Structuring interviews in such a way as to avoid this is important. Getting commitment for payment is a way to distinguish between bias and reality. 2) Experiment and customer interview results are rarely cut and dry. Use them to give you guidance not necessarily specific answers. Some creative thinking and instinct is still required.
17. We then sent a second e-mail to those had signed up on our landing page to receive more information about the product. The copy in this e-mail about was about managing investment returns. The call to action was “We’re launching in two months at a price of $15 per month. Sign up now at just $5 per month to get early access.”
18. The value of getting commitment for revenue is not the actual money, it’s the validation. We knew we were closer to finding product/market fit because users were enthusiastic enough to use their credit cards.
19. Within weeks we went from a blank canvas to paying customers. It’s easy to throw product ideas against the wall, build them, and see what sticks. The Casual Corp process is designed to streamline the process of identifying and solving a problem for a customer, and reduce wasted time and resources.
20. The way to get startup ideas is not to try to think of startup ideas. It’s to look for problems, preferably problems you have yourself.
21. I had originally planned restaurants in Palo Alto as a proof of concept and had idly thought of simply walking up and down University Ave and asking passerby or sitting in a Starbucks and offering to buy people coffee in exchange for their time. Of course, this isn’t very effective or efficient.
22. First, I joined all the Meetup groups with users and interests that would be interested in my startup idea and invested in its success. Second, I messaged 36 users (12 per day, as is the Meetup policy limit) and received 5 responses, or a 14% response rate, which isn’t exceptional but isn’t too bad either. I’ve stopped messaging users because I had begun getting similar, repeated feedback
23. So I then simply focused on just messaging members who were most recently active on Meetup groups (last visited a Meetup group in the past 2 weeks vs. in the past year).
24. your targeted audience is key. Knowing who your users are (especially getting a group of beta testers and early adopters!) and going to them and soliciting feedback should be one of your first steps in validating a market need.
25. If you want to build an online service, and you don't test it with a fake AdWords campaign ahead of time, you're crazy.
26. Our goal is to find out whether customers are interested in your product by offering to give (or even sell) it to them, and then failing to deliver on that promise. If you're worried about disappointing some potential customers - don't be. Most of the time, the experiments you run will have a zero percent conversion rate - meaning no customers were harmed during the making of this experiment.
27. And if you do get a handful of people taking you up on the offer, you'll be able to send them a nice personal apology. And if you get tons of people trying to take you up on your offer - congratulations. You probably have a business. Hopefully that will take some of the sting out of the fact that you had to engage in a little trickery.
28. that doesn't necessarily mean you don't have a business, but I'd give it some serious thought. Products that truly solve a severe pain for early adopters can usually find some visionary customers who will pre-order, just based on the vision that you're selling. If you can't find any, maybe that means you haven't figured out who your customer is yet.
29. The harder customers are to interview, the harder they’ll be to monetize
30. From personal experience, finding customers who are willing to be interviewed is daunting.
31. The process of finding customers to interview is a preview of what it’ll take to sell to our customers. Will we need to stand out on the street, do cold calls, create meetups? Just getting customer interviews is a test in-and-of-itself!
32. Don’t pitch a product, try to solicit feedback, etc. This is entirely about you earning trust by providing value – free of charge.
33. The downside of the Webinar Honey Pot is simply that it takes time. Time to know the space, time to get the word out about your webinar, etc. That said, everything in a B2B play takes time, so it’s good to get used to it now before you bet the farm.
34. Finding customers to interview is a challenge, but one that will immediately tell you if you’re on the right track.
35. Since Nick and I talked, I’ve done a couple dozen interviews this way and the results have been fantastic. Nothing like “getting out of the building” at home, at midnight, with an ice cream sandwich in hand
36. When we interview Sam, we want her to tell us what problems she has with remote coding – no cheating.
37. So who keeps you honest and tells you when you don’t have a business? Your customers and your hypotheses.
38. There may come a time you need to face the fact that the earlyvangelists you thought you had are actually just very polite users. Face the fact that your product won’t be able to make money or scale. Face the fact that your hypotheses are all wrong. And ultimately, face that fact that it’s time to majorly rewrite your vision. The sooner you face these facts the more chances you’ll have to course-correct and win.
39. Specifically ask the client how he/she perceives the price, the quality, the performance and the convenience of the solution she/he is currently using. The definition of these four criteria depends on the context (see example below), be sure to bring your own context to your questions.
* Price: purchase fee, setup, fee, subscription fee, license fee
* Quality: relevance of results, infrastructure availability, customer service quality
* Performance: response time, delivery time, travel speed, quantity of items, number of results
* Convenience: easy to use, easy to carry on, easy to park, easy to access, easy to order
40. Most people are surprised when I tell them I don’t have a desire to expand the business. I really enjoy being able to work hands on with two new startups per quarter. If I built a large team to fill the current void of specialists, I’d be too busy managing the team. This would mean less time learning how to improve my customer development approach.
41.
Lesson Learnt:
- 8. Startups begin with hypotheses about a customer problem or need
- Founders talk to customers to discover and validate whether the total solution solves that problem or addresses that need
- If, and not only if, there are no “buy signs” from the customer or customers repeatably point out missing features, does the product change
- Collecting feature lists and holding focus groups are for established companies with existing customers looking to design product line extensions
1. This week I validated a market problem/need, sourced 10+ beta testers, talked to users and solicited feedback from Meetup groups and Reddit, researched and began to focus on product/market fit, found my rhythm and struggled with focus. Next week will be focused on building the MVP, product differentiation and monetization.
In order to avoid wasting effort and money on tactical growth drivers, the following steps need to be completed first:
- Validate the product/service is gratifying a reasonable percentage of users.
- Create a value proposition that will attract the right type of users and pull them through the conversion funnel to gratification (and ultimately a transaction).
- Eliminate friction from the conversion funnel.
- Fine tune a business model that supports scalable customer acquisition channels.
References:
http://steveblank.com/2009/11/30/customer-development-is-not-a-focus-group/
http://www.slideshare.net/dmc500hats/startup-metrics-for-pirates-march-2009
http://notes.casualcorp.com/post/55805301226/how-to-go-from-zero-to-revenue-in-under-five-weeks
http://paulgraham.com/startupideas.html
http://jasonevanish.com/2011/11/27/the-lean-product-life-cycle/
http://ask.goodproductmanager.com/2011/10/11/how-do-i-set-up-customer-interviews/
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