Starting a company is easy, getting people to actually buy your product is a different story
High growth companies live in a constant state of extremes and uncertainty.
Recently, Slack, a corporate message and chat software company, went from nothing to a $4 billion valuation in around 2,5 years. That’s a pretty impressive achievement for a bunch of founders who were recently still working from their homes.
Stewart Butterfield had to say the following about it at the Digital-Life-Design conference in 2015:
These and others (think of Instagram, Rovio, AirBnB, Uber, etc.) “overnight” success stories are a big inspiration for a lot of people to start their company.
Even though these stories are mostly the only ones heard in the media, the chances of you and your idea hitting it big are very slim. In 2013, Paul Graham, the head of Y Combinator (YC) and an early investor in for example AirBnB, revealed their numbers of YC in a tweet:
Out of their 511 companies YC had chosen at that time, using a selection procedure that is even harder to get into than getting into MIT or Harvard University, even after having the amazing benefits from the mentors at YC, their connections, and their financing, the startup success rate of YC was still only 7.2%
So why are all these companies failing?
You know what the biggest reason companies fail? They are trying to solve a problem that doesn’t exist. People don’t care what you’re doing. They just don’t think the problem is big enough for them to start paying for your solution.
Basically, you’ve got a lot of assumptions which you need to get validated.
In other words:
Throughout the lifetime of any successful organisation, customer feedback is critical.
But how do you get customer feedback if you’re just starting out, and you don’t have any customers yet? A lot of startups just start building and hope that whenever they build something beautiful the customers will come running, waving their credit cards and all will be well.
The better way, of course, is to try to find validation for your idea before you start building, making sure you are not wasting your time.
So how did we get and how are we still getting more and more validation at Inbound Rocket? How did we start from a blank canvas, and come to the conclusion this idea we were having might be more than just an idea?
Time to talk to you about Customer Development.
First things first: What is Customer Development
If you’ve never heard about the term Customer Development before, don’t be scared. Behind the impressive words is a very simple process. However how easy the process might seem on paper, the execution of the process is a lot more difficult, especially for first-time entrepreneurs.
Brant Cooper and Patrick Vlaskovits provide this definition in The Entrepreneur’s Guide to Customer Development:
“Customer Development is a four-step framework to discover and validate that you have identified the market for your product, built the right product features that solve customers’ needs, tested the correct methods for acquiring and converting customers, and deployed the right resources to scale the business.”
Their four-step process includes customer discovery, customer validation, creating your company and building the company.
They also offer this short explanation:
“At an abstract level, Customer Development is simply about questioning your core business assumptions.”
If we try to break it down even further, we could say that Customer Development is the process of identifying, finding and talking to your customers to validate the assumptions you’ve made about your business. Assumptions about the problem you are trying to solve, assumptions about your potential buyer personas, etc.
So keeping your customers in mind while starting your business and as your product develops is clearly vital. But the question remains — how do you go about this?
No doubt there are a bunch of ways you could approach Customer Development, and your methods will depend on what works for your business. We want to look at some basic ideas in this post that you can adapt to work for you.
We start by writing down all of your hypotheses and assumptions about the problem, your solution, and your hoped-for economics (i.e. how you’ll make money). After you’ve created this list, it is time to start learning the truth about all these assumptions (small tip: review this list regularly because it will change over time).
So now we created our list of assumptions, let’s begin with one of the trickiest questions: where are your customers, anyway?
Where to find your customers
This is a tricky one, each business is different, and thus, there is not a one stop answer for all of you out there. The answer to this question could never actually apply to everyone. So instead of “answers” we are going to give you some actionable steps to help you get started with this process yourself — after all, the experience is the best teacher. Plus the sooner you start finding potential customers, they can provide clues as to where you can find more. Which means the sooner you get started identifying, the better.
In one of our earlier blog posts on our site, we talked about buyer personas. Those buyer personas, next to having a clear idea to whom to write your (content) marketing are your customers! However, in the beginning, you don’t have traffic to your website or traffic to your newly found Facebook page or Twitter account of course. So where to start?
#1 Tap into your social network
This is, of course, the first place to start looking for people to have a conversation with. Just by posting on your social networks and asking people if they’re interested in talking to you, you can already get your first set of people!.
In the particular case of Inbound Rocket, just by asking people if they are running WordPress on their blog or their company website we immediately had a couple of people willing to talk. Of all your connections on LinkedIn and Facebook combined I’m pretty sure you can easily find already 4–5 people would potentially be your ideal customer.
#2 Go to local meetups
After you have talked with these initial set of potential customers, you will start to develop slowly an idea of who your ideal customer could be. With this in mind start looking at local meetups with people fitting this demographic and start having conversations with the attendees
Just because you don’t have a fully functional product just yet, this doesn’t mean you can’t get your website up and running. The key on any website like the one you just launched, is to try to be as inspirational and authoritative as possible.
As Rob Fitzpatrick explained in this brilliant blog post, It’s the CEO’s job to email the first 1000 sign ups. As he explains and please read the entire post, emailing your first 1000 signups has the following advantages:
- First, it ferrets out early evangelists. They’ll respond to your one line email with a book of suggestions and use cases. Treasure them.
- Second, a non-negligible percent of your otherwise silent cancellations will get in touch with deal breaker feature requests and support crises.
- Third, your users with sales potential will identify themselves by reaching out. If you email all your trial users, the ones who are seriously considering a purchase will jump at the chance to talk directly to the CEO or founder.
How to reach your potential customers
So you’ve worked out where they spend their time, and now you want to approach your potential customers and get their input on your whatever it is you are starting on. There are all sorts of methods you could use, but let me just tell you what we are doing here at Inbound Rocket.
phone calls / chats
After our initial reach out to people via our social networks we got around 15 people respond to our initial question there and wanted to chat it through. We had four main questions we wanted to get answers from when talking to them and it took on average 20–30 minutes per call.
Another great tool to use is #startup, a global startup community for like-minded people running on slack. The community has over 1800 people, so there were bound to be people struggling with our problem who wanted to share a bit of their experience. Chatting with these founders gave us even more insights.
An introduction or referral is a great way to open the door to someone you want to talk to since a mutual acquaintance or friend can encourage your customer to be more receptive to what you have to say. Pointing out that you’re after feedback only and are not selling anything is likely to make your friends more likely to introduce you, as well as making your customers more comfortable to chat with you.
Always finish every talk with the question, do you know more people with this same problem. People, whom you think could be interested to share their experiences?
What to ask your potential customers
Similar to the problem of finding the right people to ask questions to, this one depends a bit on the problem you are trying to solve and is therefore really specific to your particular use case.
To give you an example at Inbound Rocket, whenever we have a conversation with a potential customer we always have these four questions in the back of our mind for which we are trying to get an answer:
- What’s your (online) current marketing process?
- What tools do you use?
- How could they be better?
- Do you know somebody that has the same problem?
So how to find out what your questions are?
#1 Dig into the problem
Regardless of the problem you’re attempting to solve, the better you understand it, the closer you’ll come to fixing it. Dig down deeper into the problem by asking why, listening intently and asking follow-up questions.
Try asking how the people you’re talking to notice the problem and whether they’ve attempted to fix it themselves.
#2 Explore the competition
You may have found other companies out there who are offering a similar product to what you want to offer. Try to find out your potential customers experience is with those products. What are the features they liked/disliked and how they figured out about that company?
Sometimes you’re talking to people, and you find out that the pain with this particular problem is so big that they already hacked together a workaround or a simple solution themselves. This is a really strong indicator that you are trying to solve a pain which has yet to be properly solved by any potential competitor.
Of course, the workaround of one person might not be suitable for everyone, but this is an excellent place to start generating ideas for a potential solution.
3) Find out what they are trying to get done
It might sound a little bit irrelevant, but try to ask as many questions as you can about the situation and the instances when they are having this particular problem. Ask them to “walk you through” the last time they encountered the problem and what they did to try to solve it.
Understanding the job they were trying to do and how they “fixed” it gives you a really good indication of the outcome they’re looking for.
For example, you might find out that their company only has old browsers installed on their office computers. Some online tools they need to use for their daily activities might not have enough support for older browser and hence are a real pain to use for them. Trying to have a better browser compatibility gives you a strong advantage.
Just get started
Of course, this is only a small introduction into what Customer Development is and only a handful of different strategies that you can use to try to ask the correct questions to learn and validate as quickly as possible. There are lots and lots of different strategies to try to find those first customers and have a conversation with them.
There’s no excuse to start building anything without having talked to at least a handful of customers. Even if you have a fully-fledged product, customer feedback can help you continue to improve your business. So get out there and start talking to customers!
What are the tactics you are using within your company to reach out those first set of customers? And how are you validating that you’re on the right track? Leave a comment below and together let’s help out other founders who might be struggling!
This article first appeared in a different form on the Inbound Rocket blog.