The key challenges to getting your first ten customers relate to understanding the customer buying process and managing the startup learning process for need, impact, customer definition and message.
Why is it so hard to get your first ten customers?
The product is ready for customers to use. You have announced it and put a complete set of documentation on the website.
There’s just one problem: no one is buying it.
How can this be when the concept was so good and development went so well? A few weeks ago, you were expecting to have some sales or at least serious interest.
What makes closing your first few customers so difficult may have little to do with the product itself. Prospects may not fully understand what it is you’re offering. They will consume the description and demo before they evaluate your product directly, much less purchase it.
They may understand what you are promising but may not see the value because the problem isn’t important enough or irritating enough to merit investing in a new solution. They may not see the path to value: they may understand what you are promising and see the need but may not believe the product will work, or the effort to confirm that it works is unlikely to pay off.
Startup Learning Process
We like to use the analogy of a combination lock to describe the early startup learning process: there are four key aspects of your product that need to be in sync:
- Customer segment
Fundamentally, this startup combination lock requires four correct settings to open. To keep it open as your product and customer needs evolves they need to stay in sync.
It’s not enough for you to believe that a customer needs your product; your customer needs to believe it as well. You have to look at the situation from the customer’s perspective and ask questions that help them to diagnose the problem. Your ability to work from symptoms, from the customer’s perception of a situation, and ask questions that enable them to diagnose the problem is the essential starting point for any sale.
Without clarity on need, entrepreneurs risk falling into the trap of selling a cure for the wrong illness–or worse, trying to sell the same cure for whatever ails a customer, whether or not it’s a match for their needs.
This can lead to an abrupt end to sales conversation when the customer determines you are not trying to understand their perspective. Even if a customer decides to evaluate your product, if you have not made an accurate diagnosis, then you get a short email or phone call that lets you know they have stopped the evaluation because the results don’t work for them.
Similarly, a doctor would run through a detailed checklist of questions and tests to elicit symptoms and confirm their diagnosis before prescribing a course of treatment and offering a prognosis.
All else being equal, you should focus efforts on customers who have the need and are in the most pain. There are three reasons:
- Customers in a lot of pain are less likely to live with the problem and therefore more likely to make a purchase decision and to make it quickly.
- People who are in pain are willing to accept a partial solution. A solution that’s not perfect, but that leaves them better off than before they started talking to you. And leaves them better off than any other solution available to them. Most new products have shortcomings. If you target customers in pain, they are more likely to tolerate your shortcomings, especially if you can commit to reducing or removing these shortcomings in the near future.
- The more pain they are in, the more impact removing or reducing it has, and therefore the more value that your product can offer.
Determining need is not enough. You also have to offer a brand promise, which is a commitment to deliver measurable value to their business with your product.
Your product’s impact is the results on a customer’s business that flow from their deployment and use of your product. It’s your product’s effect on their need, which is the customer’s view of the value that you deliver.
But the impact is relative: the customer measures the value of your product based on not only the “before and after” enabled by your product but also compared to other alternatives that are available to them.
Assessing impact is much harder for a customer when your product relies on a new paradigm or approach and requires additional inputs, translation of existing data, and modifications to existing workflows. This migration effort delays the time to initial value. This delay increases their perception of the risk or likelihood that you will fail to deliver the value you have promised.
The larger this migration effort is and the longer it takes, the higher your risk that the customer abandons their evaluation, pilot, or early use of your product. Events may intervene during a long migration, or unanticipated costs or problems may occur before they see the benefits that you have promised so that they do not persevere to “after.”
Need and impact are highly dependent upon the customer segment that you serve. So the same need and impact can manifest itself very differently depending on the segment. A small firm in one location, for instance, sees a problem very differently from a large firm operating in many locations. The customer’s industry may be highly regulated, very safety conscious, rapidly growing or static or shrinking, etc.
A critical test for defining your customer segment is whether members will be guided by purchase decisions that other members make. It’s the boundary for references, case studies, testimonials.
The smaller the customer segment, the fewer the number of buyers in it, the more likely it is that prospects will be guided by your existing customers’ purchase of your product. Your ability to use current customers as useful references means that you can quickly establish a dominant position in the absence of serious competition. Becoming the market leader for a small segment has considerable advantages, but the drawback is that it can place very real limits on your size.
A common approach to navigating this limit is to target a sequence of niche segments that are related.
There is also a tension between targeting smaller firms or organizations that can make a decision quickly but whose purchase sizes are smaller and larger organizations who can make large purchases but take a much longer time to close a deal.
For example, selling a product directly to a school district would mean operating within a very narrow window of opportunity once a year (their annual budget cycle). This budget cycle means you often have to wait a long time for them to make a final decision. But the adjacent market of homeschool teachers or private tutors has a much faster decision cycle, and you can quickly tell whether something is off. By starting with the smaller customer segment as a proxy market, you can better measure outcomes, narrow down your target niche, and debug any significant issues before expanding into the bigger “real” market.
“The brain processes meaning before detail. Providing the gist, the core concept, first was like giving a thirsty person a tall glass of water. And the brain likes hierarchy. Starting with general concepts naturally leads to explaining information in a hierarchical fashion. You have to do the general idea first. And then you will see that 40 percent improvement in understanding.”
John Medina in “Brain Rules“
Your message is the description of your product that the customer consumes before choosing it or passing it by. Your message is all of the content that customers may choose to review before directly evaluating or using your product: website content, product brochures, demos, videos, case studies, application notes, etc.
Your message is the easiest thing to change about a product, certainly compared to features, but it’s perhaps the hardest to get right. When it’s not right, you experience a distinct lack of interest or silence because prospective customers tune you out. You may have perfect clarity on need, impact, and target customer segment. Still, unless you can eloquently and effectively communicate this understanding, all that work will be for naught.
The message is where first-time entrepreneurs seem to struggle most because it requires them to step away from the developer mindset and describe their product from the customer’s perspective.
We had a client that offered a portfolio management tool. Their messaging suggested a complete portfolio management solution when their tool actually worked as an add-on for other existing software. They solved a particular problem that valuable enough for a few portfolio managers in some larger firms to pay for it as an add-on. But for the prospects lured with the promise of a replacement tool, the idea of spending more money without actually replacing their old portfolio management system did not make sense.
Additionally, some entrepreneurs write their product description in the future tense. They describe what their product will be capable of when fully realized instead of communicating what it can do today. They describe the capabilities of the future version. “It will do this” and “It will do that.” So the customer purchases the perfect non-existent product and is very disappointed when the current incomplete version arrives.
Customer Buying Process
What makes acquiring customers in these early days extra difficult is that your discovery and learning processes are intertwined with their buying process. Even as you debug and rework your startup, you are still interacting with prospects and developing relationships. So you will need to follow the customer buying process as well.
The basic customer buying process follows a simple three-step process: understand, believe, and act.
Understand: Customers first need to understand what problem your product solves and its impact on their business. For example, a company builds a website to attract prospects and support customers, not win a contest for the most beautiful website. The messaging for a website creation tool or service should tell a customer they can generate more leads, increase customer satisfaction, or cut support costs.
Believe: If they understand that they have the problem and what your product can do, the next step is to search for evidence that enables them to believe your brand promise. Evidence can take the form of case studies of other firms similar to theirs and the results you have achieved for them. It can be testimonials from satisfied customers; it can include independent certification or audits by trusted third parties or trial use that allows a prospect to verify the impact directly.
Act: Now that a customer understands what you can do and believes you, they need to find a reason to act. This usually is a date or event that will make the problem worse or their realization that the situation is deteriorating and unlikely to improve. They may choose not to act because they have a more severe problem to solve, your cost is higher than other alternatives available to them, or they are uncertain that you can help their specific situation.
We have multiple complex processes going on with the startup learning process where you are trying to figure out the combination lock, and you have the customer buying process. You have to manage both of these while managing the risk involved. There are risks from both the buyer’s perspective and risk from the startup perspective that must be understood and managed.
Buyer Perception of Risks
The early customer has these key risks with being your first customer. The startup team may not fully understand the problem, so they deliver an incomplete solution. The startup may not fully understand the limits or constraints that the customer faces, so they provide a tool that cannot be deployed into production. They don’t worry so much that the startup team is not telling the truth, but they do worry that the startup team does not know what they don’t know. Cost of evaluation migration, the path to proving the value in their operation involves too much effort or risk. They also worry that when things go wrong, and they know that they will discover problems in a new product, will the startup respond and fix them in a timely fashion.
The customer is worried they may have accidentally wandered into an IKEA. They wanted a table just like in the showroom that was perfect for their needs. But what they got was a three-dimensional wooden puzzle that they might not be able to solve. Worst case, they assemble it, but it collapses during their next Thanksgiving dinner, and they’re at fault.
From the startup perspective, their most significant risk is that the buyer may not fully understand their needs or requirements–they may be an unreliable narrator. Knowledge of what’s needed may be spread among many people, and you don’t consult all of them. Or the people you do talk to may be mistaken or accidentally omit an essential aspect of their situation.
The second-largest risk is that the buyer does not understand the full cost of the workflow you are proposing. The buyer’s team may lack key skills needed for the new workflow. Or current expertise may be obsoleted because it’s not required for the new workflow. For example, in transitioning from constructing clay models and testing them in a wind tunnel to relying on three-dimensional fluid dynamics simulations to assess problems with a new aircraft, the engineer who was an expert at clay models no longer has as valued a role.
Your first few customers represent a unique challenge–an ongoing juggling act of moving parts and pieces. None of this is easy. On their own, each variable or setting of the combination lock is already complex and prone to complications and exceptions. Compiled together across two intertwining processes and two sets of risks: it’s no wonder entrepreneurs struggle to get their first customers.
The good news is that once you’ve deciphered the combination code, you can unlock access to a particular niche and do well. And as your understanding of customer needs evolves and becomes more diverse and more complex, so too do your explanations, case studies, and product, enabling you to address a wider range of customer needs.
At the end of the day, you have to do two things:
- Manage technology adoption risk
- Create processes that build a sales pipeline and close customers
Related Blog Posts
- Landing Your First Ten Customers – Video, Slides, and other Resources
- Your First Dozen Enterprise Customers
- Understand, Believe, Act
- If You Need Smarter Prospects, You Need a Better Message
- A Simple Sales Schema
- For New Products Prospect Objections Are Valuable Data
Image Credit: (c) firebrand3 (licensed from 123RF Stock Photo)
This post was re-published to LinkedIn on Tue-Apr-20: https://www.linkedin.com/pulse/why-so-hard-get-your-first-ten-customers-sean-murphy