April 28, 2022
“Understanding customers” feels a bit like that meme about men understanding women: an intimidating, super-thick book that you’re supposed to read end-to-end before even trying.
But in real life, you can kickstart your understanding of both customers and other genders with few basic rules, such as:
— first and always: don’t be a jerk,
— try to find and/or create mutual value,
— because it’s never about “me! me! me!”.
Within a startup company, you can translate these into “be respectful”, “don’t waste customer’s time”, and “be empathic” – and they will take you a long way. Whether a specific commercial deal (/relationship) can work in the short term, is only secondary to your long-term commitment and reputation. So absolutely! make sure you get the basics right.
But then, as a startup company, the chances are that you will need in-house sales & marketing expertise. To quote a classic, “Most startups don’t fail because they can’t build a product. Most startups fail because they can’t get traction.” As an entrepreneur, you don’t always have the resources to hire an expensive sales & marketing professional. Even if you did, how can you assess their expertise? Our approach: “get dirty” and start learning!
Where to start, then? When consulting companies of various sizes on their sales & marketing, we see three frameworks being most deployed, that make the biggest impact on entrepreneurs’ understanding of customers:
— Clayton Christensen’s “Job to be done”
— April Dunford’s “Positioning”
— Geoffrey A. Moore’s “Crossing the chasm”
For many, Clayton Christensen might not need introducing, as he “is the architect of and the world's foremost authority on disruptive innovation”.
When looking into “What products will customers want to buy?”, one of his main insights is that “customers hire products to do specific jobs”. (Duh!) Whether as B2B or B2C customers, everyone has needs (/”jobs”)to be solved, and they look to buy products/services based on their own context(be it financial, social, emotional or other).
Christensen illustrates this concept with milkshakes. For the morning commuters, a milkshake is “hired” to make the commute less boring; maybe to delay the hunger; definitely to not endanger their work clothes while “using” with only one free hand. Their alternative: crunchy bagels or a greasy sausage. But in the afternoon, parents will get their kids a milkshake at the end of a full meal as a replacement for other sweets, and feelgood about it. Their alternative: triple-chocolate cookies (with extra chocolate on top).
So, how is this relevant for you as an entrepreneur? Understanding why the customers buy (/”hire”) your product should give you better insights into who your actual competition is, and how to improve your product to beat them. For example, you might want to put extra fruits in the morning milkshakes to make it less boring (not to make it healthier!).
How do you actually pull it off, to get these insights ?Our solution: when talking to customers (either existing or potential) be candid about what you know and what you don’t; ask open-ended questions that don’ tguide the customers; make it all about them and the value they expect. And oh! don’t be afraid to ask those stupid questions. But make sure you educate yourself before the meeting, relax, and -yeah- don’t be a jerk.
Knowing that customers will get to choose between your milkshake and other companies’ bagels might seem intimidating and disarming. But guess what? You can (and should) pick your best customers, too. How? Through market segmentation and positioning.
If these two concepts sound like confusing marketing buzzwords, it’s because they are. To make it simpler, let’s hijack a Marina Abramović quote: “If you’re a baker, making bread, you’re a baker. If you make the best bread in the world, you’re not an artist, but if you bake the bread in the gallery, you’re an artist. So, the context makes the difference.” And here’s Warren Buffett: “How do you beat Bobby Fischer? You play him at any game but chess.”
By deliberately choosing your position on the market, and therefore which game to play and which customers to serve, you suddenly have a better chance to sell your milkshakes or bread.
And again: how do you do that? April Dunford’s “Obv!ously awesome” lays down a 10-step positioning process that literally starts with “Step 1: Understand the customers who love your product.”:
— Make a short list of your best customers. If you’re a startup that only gets to do demos, look for patterns with the audience that’s most excited about your product.
— Talk to them and try to discover: What would they do if your product did not exist? What are your products’ attributes that they love? What’s the value they get from those attributes?
— After talking to more than one best customer: Are there any characteristics that make them a group? Are they part of a specific market or niche? Are their actions part of a trend?
(Whoa. That’s a truck full of questions, right? Don’t worry, it is actually easy when you start talking to people.)
When using your resources (time, effort, money) to only serve the best customers, your startup should achieve several things:
— clients’ higher satisfaction levels, and ideally their public reviews and recommendations,
— lower costs as you will not burn resources on customers that are not a perfect match,
— higher margins as happier clients will be willing to pay more than the “meh!” ones.
Whoever your best customers are today, there’s a high chance that they will not be the same in 12 months. Your product will(hopefully) evolve from an MVP, to a cool gadget, to a mainstream solution; while your target markets will switch along the lines of innovators, early adopters, early majority and so on.
You might already be familiar with the Technology Adoption Life Cycle, but it’s worth emphasizing that, along your product’s evolution, different customer groups will have different needs; and that “Crossing the Chasm” from one group to another is rather difficult:
— First, innovators will be interested in the techy/gadgetry part of your product. They will love to be the first to discover it, play with it, and recommend it to others. Your product can be barely functional, but if it’s perceived as potentially groundbreaking, game on!
— Then, the early adopters will want to be the first to use your product at larger scale, despite it being imperfect. Their main target is to build their own competitive advantage on their own market, so they will be willing to accept some pain from an underdeveloped product.
— Third, the early majority will only buy new solutions that are fully functional. Not only that your product needs to be reliable and safe to use, but it will need to come with all the “accessories” (service, support etc.).
Why is this important for you as a startup? These (and the following) groups all have individual mechanics and incentives that demand you to constantly reinvent yourself, your product, and your market approach. You might start as a one-person company, see traction and hire sales staff to ride the wave, only to be smacked by the next group with different rules.
Our take: be aware of the market dynamics, know where you fit in your customers’ journey, and be ready to adapt.
— Get the basics right. They can get you a long way.
— Understand customers’ version of why they use your product. It might be different than what you think.
— Choose to serve and empower your best customers first. Both you and them will be happier.
— Nothing is forever. Customers evolve, just like your product, and you will constantly need to reinvent yourself.
The author, Alex Ion is the Founder and Owner of GrowGrow.at.
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