ECC Talk #6 – Will your idea sell – Getting Customer Validation

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Last week we discussed testing the value proposition and ensuring you build something that potential customers see as valuable to them. Unfortunately, even if a potential customer thinks it has value, it does not mean they will actually buy it. Its a great feeling to see your product resonate with someone only to ask them at the end, “Would you pay X for this right now?” and have them tell you that they would never pay anything for it, but they see the value. Ouch. Good thing you asked them if they would actually buy it right now right? Better to know now that 6-12 months in to development. Unfortunately, even in venture capital backed companies, the key questions often don’t get asked early enough, with predictable results. Steve Blank discusses a great example of this and also provides one of the best questions to ask your potential big customers, “If the product/service were free, would you roll it out across the entire company today?” The answer will be enlightening.

Facts only exist outside the building – opinions reside within.  Truer words were never spoken. Entrepreneurs have a wonderful reality distortion field when it comes to their startup. It allows them to recruit people to build that has a great chance of failure, for little pay and a lot of risk. Its contagious optimism. The problem with the reality distortion field is that it makes it nearly impossible to take a hard look at the reality around you and adjust to that reality. Whenever information is found that points in a bad direction it can be explained away, time and time again.

One of the fascinating points that Steve Blank points out in his talk on Customer Development is that more products fail due to a lack of customers than due to a failure of technology. This insight is what gave birth to the customer development methodology and putting customer validation and eliminating market risk at the beginning of a startup, so that if the market is not there, it is found quickly and the startup has a chance to change course or pivot to a different business model or product.

There are ways to quickly and cheaply obtain customer validation. One of the quickest and cheapest ways to get some initial customer validation is to use a landing page website to test your product or service. Within a week you should be able to determine if there is a possible market for your product. You can even test the market before you have made the product by having an order button on the landing page and sending people to an email signup for preorders. Of course, an email address is not a true purchase (the best customer validation), but it is a good indication that customers will actually buy your product. Charging for the minimum viable product (from day one) is another strategy that focuses on building customer validation from the very beginning.

Surveys are a great place to start getting customer validation and understand what the customer really wants. But it is only the beginning and they are inherently limited. You need to understand everything about the customer and how they make a purchase. How many people are involved? Who influences the decision? If its a B2B transaction, how do the company politics impact purchases? Purchasing decisions are not simple and often emotion is as much a part of the decision making process as logic.

 

ECC Talk #7 – Sales Channels and Revenue Models