3 Equations & 3 Unkowns: Target Customer is Key Initial Value

Written by Sean Murphy. Posted in 1 Idea Stage, 2 Open for Business Stage, 4 Finding your Niche, Customer Development, Favorites

I mentioned in “3 Equations 3 Unknowns:  Customers, Features, and Message” that we spend a lot of time on the early customer stage. It requires very different sales style than you’ll see later on. It’s a conversational sales style. It’s much more about understanding the problem.

You’re trying to solve three equations, three unknowns:

  1. Are you talking to the right people?
  2. Do you have the right features?
  3. Do those features translate into benefits that are going to be useful to them?

The customer discovery interview process can be tough to master. You are trying to determine if the customer has a problem that they will pay you to solve with your technology: do you have the right features and do those features translate into useful benefits.

But we actually see team often go wrong with the first question: are you talking to the right people. And this error is much harder to recover from. You can do a poor job interviewing the right prospect and get some feedback that allows you to iterate. But a great job interviewing the wrong prospect will tell you very little. Improving targeting, or at least validating you can identify a prospect, has a big impact.

When someone is describing their offering at the a Bootstrappers Breakfast we will often take them through the “Three Question Test” as a group exercise. We will say,

“OK, we have assembled a brain trust for you this morning, you have 12 people around the table who would like to help you. Please give us three questions that have yes, no, or number answers and tell us the combination that would indicate that you could offer the person they are talking to clear value.”

It’s harder than it looks. Most folks start with  something like “Do you want to save money on your car insurance.” This question is worthless. Any question that you can append “, you moron” to the end of is not a good question because it does not disqualify anyone (I suppose if you didn’t own a car you would not want to save money on your car insurance). The next iteration tend to start out much too broadly, ignoring geography, industry, customer firm size (whether measure in headcount, revenue, or some other transaction count), title(s) of buyer, and pain points that are actually symptoms that a potential customer is experiencing.

On this last point you don’t go to your doctor and say “I think I have diabetes” you say “my vision is sometimes blurry and I am getting really thirsty and I feel tired all the time.” Business prospects don’t want “a better website” they want “more leads from their website” or “fewer calls to the hotline–because the website allows customers to solve their own issues.”

3 Equations & 3 Unknowns: Customers, Features, Message

Written by Sean Murphy. Posted in 3 Early Customer Stage, Customer Development, Demos, Favorites, skmurphy

We posted the interview I did with Floyd Tucker of DreamSimplicity about a month ago but in the last two days I have had two people comment to me directly and one tweet about my “three equations and three unknowns” answer:

@dorait Sean: Startups are trying to solve 3 equations with three unknowns – http://bit.ly/dq7Sqd

Here is the relevant excerpt from the transcript:

FLOYD TUCKER:  […] Can you tell me a little bit about the early customer stage?

SEAN MURPHY: We just spend a lot of time on this.  It’s a very different sales style than you’ll see later on.  It’s a conversational sales style.  It’s much more about understanding the problem.

You’re trying to solve three equations, three unknowns:

  1. Are you talking to the right people?
  2. Do you have the right features?
  3. Do those features translate into benefits that are going to be useful to them?

Here are three strategies that founders often use to answer these three interrelated questions, the likely results that ensue, and how we help them make key adjustments to get early customers and early revenue.

Current Strategy: Demo the product to anyone who will sit still. And by demo I mean explain how the product works.

  • Likely Result: On a statistical basis you may ultimately encounter a visionary customer who can intuit the benefits and determine that it’s worth the risk to work with you. One symptom we often see for this is that we ask a team how they have found their customers and they say that the customers have found them.
  • Our Fix: This is also why we are huge fans of Peter Cohan’s “Great Demo” methodology (see Great Demo Workshop Sept-15 2010) because he addresses the need to talk to the right target about a problem they are interested in solving in a way that they understand by stressing a few key features.

Current Strategy: Talk to a number of  target customers, compile a large wish list of features, return to BatCave and start work on a one year roadmap.

  • Likely Result: The one year roadmap  takes much longer than anticipated. But the founders don’t leave the BatCave until they are within two weeks to two months  of running out of money.
  • Our Fix: Trim the feature set to a minimum set that firms will pay for. Possibly offer consulting mixed with product licensing to enable engagement with an immature product to address cash flow issues. Get out of the BatCave for further conversations to discover and validate potential customers an ongoing basis.

Current Strategy: Talk to a number of target customers  about a challenge they face (e.g. saving money, increasing productivity, reducing certain kinds of errors).

  • Likely Result: When the prospect agrees that they have the need be unable to explain specific features that can actually achieve it, or be unable to explain how the particular person you are talking to would be accomplished in particular for the person you are talking to. This is the GEICO “Would you like to save money on your car insurance?” pitch without the ability to offer a quote specific to their car, driving record, and other relevant particulars.
  • Our Fix: Focus very specifically on what your product capabilities mean for who you should talk to and how it will make a measurable difference in a problem or challenge they are willing to spend money to address. Adjust your target and connect the dots very quickly and specifically to the benefit. This is component of compelling demos is also covered in Peter’s workshop.

Understand, Believe, and Act

Written by Theresa Shafer. Posted in Books, Consulting Business, Favorites, Startups

The sales process may seem like a simple exchange – you convince a prospect to accept your product or service in exchange for their money. However, there are a number of overlapping processes running to get you to that point.

A few thoughts about one of them: the process that prospects go through to decide if they are going to buy from you. Jerry Weissman has framed this as Understand, Believe, and Act.

First a prospect must understand what you have to offer. This is straightforward when your product is a better, faster, cheaper version. But this is much more difficult when it is an innovative technology. Demos and sales pitches become critical. We joke that “If you are looking for smarter prospects who will understand your offer, then maybe your demo sucks!” Sadly, this is often the case (we have even had to apply it to our pitches from time to time).

Presenting an innovative technology in a way that’s understandable to a prospect is never easy. The language, the problems, and why it is better must be grounded in the prospects world. If you give a prospect a feature list, some will be able to “get it”, but not many. To reach most prospects, you must start from a problem that they know they have, and offer a solution they can understand.

Secondly, prospects must believe that your innovative technology will actually deliver them the benefits you promise. New technology always brings risk. They may risk losing their job–or at least putting a “dent in their career”–if you don’t deliver! The first people who will trust you are folks with whom you already have a prior shared success. They know you can deliver. Usually these people are the source for your early sales. When your first clients say “I used it and it worked” to their friends they give you credibility. Eventually you must get to strangers referring other strangers to buy. Testimonials on your website are critical for prospects believing your claims. Testimonials, like your demo, must be in the language customers use and from people who are credible.

Only after they understand and believe will customers ever act. But they act on their own cycle, whether it’s a certain point in the product development process, a certain time of year, or a phase of the moon. It’s their timing! Your challenge is to make sure they remember your offering when they are looking for it. For this reason you need a method of reminding those people that you have a solution. We call this percolating. This is the function that applications like Salesforce provide: you can set up a sales campaign to remind you to contact everyone who is percolating every 6 weeks or so (or whenever they wanted to hear back from you next). Another method we have seen work well are newsletters. If you can help your prospect and send them something useful every 6 weeks, people will join the mailing list and remember you when they have a problem you can help them solve. Be there when they are ready to act.

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