Skip to bottom for 7-step guide. Read on if you want to hear a story or two, suggested books and a little science.
Whenever I would start a new gig as VP, Sales, I would create a list of 12-15 questions that was started by me but improved and vetted by the existing team. I have done this many times over twenty years. (Please ping me if you would like a copy of one of my past questionnaires.)
I would then call existing customers and ask them all 12-15 questions (as well as some follow ups when appropriate) and record the results. The questions were mainly geared to help me understand why they purchased from us in the past but did contain other questions to help the business in general. I did not stop calling customers until I started to hear answers that began to show me a meaningful trend.
So far, I have always found something that might help me to hire the right type of sales rep, possibly what channels might be best to try and almost always what words to use when speaking with a prospect. I would usually get a few other nuggets as well.
The power of a great question is like tossing a stone on a placid lake. The ripples can be seemingly endless. (A More Beautiful Question – book suggestion)
When I did this at LiveVault, a data backup company now part of Iron Mountain, I found that the words we were using were not the ones that our customers were using when describing the benefits and the value we were providing them. We were touting more of the technical side geared toward how tape would degenerate over time, how you might never get the data back when you wanted it, etc. I spoke to over 20 customers in my first couple of weeks on the job and more than half used the same exact or very similar words when I asked them – “Set it and forget it.” They cared not only about peace of mind but also convenience. SMBs are super busy and their time is very valuable to them.
We made this slight but powerful change to how we spoke to prospects and the business started to scale even faster. We had continuous record breaking months soon after. This was not the only reason (John Cleese helped us out a bit as well. :~) but I believe it was impactful. It also gave confidence to the sales team when generating interest.
Another beautiful question with big dollar implications. (Please note that Scott Jarr gets credit for adding this question to my list. I have used it ever since. Thanks Scott!)
As this relates to startups – temporary organizations that are in search of a business model – I have found that too many do not take the time to ask the right questions to find out if they are on to something or not. I also have found that when there is early success, complacency can set in and curiosity can begin to wane.
Sometimes, the customers you initially acquire are not profitable or representative of the larger market. Sometimes, you are right but not yet completely so. This process, when started in earnest and continued can help you avoid the first proverbial “Valley of Death” where 90% of startups end up.
Many of us are too eager to be right and are too biased to look at the results objectively. I speak from personal experience.
This can lead to other disastrous results as most companies do not die from starvation but from indigestion. They are too eager to expand rather than go deeper thinking that this is the best way to scale revenue. Continually asking questions of yourselves, your assumptions and your customers could mean the difference between scaling and dying (usually a slow and painful death).
“It ain’t what you don’t know that gets you in trouble. It’s what you know for sure that just ain’t so.” – Mark Twain
Here are some things I have learned re: Customer Development (most of this is from Steve Blank, Cindy Alvarez and my own experience/research) that may help you create a process to find Product/Market fit.
Why do Customer Development?
Product/Market Fit (a.k.a. Customer Development) is imperative for any startup where there’s nothing more valuable than the ability to understand what your customers need versus what they want. This understanding is key to building a repeatable and scalable business model.
“Get closer than ever to your customers. So close that you tell them what they need well before they realize it themselves.” – Steve Jobs
What is Customer Development?
Customer Development is a tried and true process (when done correctly) to finding out if you have a market for your offering. It is an iterative process that requires true empathy, perseverance, and genuine curiosity to navigate from hypothesis to a true customer-worthy offering. It is not a guarantee that you will find a market and make millions of dollars but it will help you to quickly test your hypothesis(es), iterate and pivot quickly saving valuable time, money and frustration down the road. Your investors and future VP, Sales will thank you.
“No business plan survives first contact with customers” – Steve Blank
How does Customer Development work?
1. Identify your assumptions
There are things you believe to be true about how your customer thinks and acts, what he is capable of, and how he makes decisions. There are things you believe to be true about how you will produce your product, the resources and partners, etc. These need to be identified and catalogued as preparation for effective customer development
2. Write your problem hypothesis
Once you have identified your assumptions, you will craft a succinct statement that will help you to identify the target customer profile – looking at your customer from all angles from the professional to the personal.
3. Map your target customer profile
What does your customer look like: what about her abilities, needs, and environment make her more likely to buy your product etc.?
These three steps should take you less than 1 day to complete. (Do not overthink it as you are likely to be wrong in many areas the first time out.)
Once this process is complete, the first round of interviews follow:
4. Find customers to interview
- Seek out people likely to be interested in your product and talk to them about their problems, how they deal with them today, what they like and do not like about current solutions, how they would solve it if they had a magic wand, etc.
- Look for places where your likely customers already are and try to get in front of them. For instance, set up an area at a trade show.
- Partner with complementary products or services to cross-promote.
- Leverage personal networks for initial interviews.
- If you have something then show them but only afteryou have gone through the interview process outlined below to avoid anchoring.
5. Put together a script for email and phone to ask for an interview
This will be short and sweet clearly explaining your objective and setting proper expectations. Ask for 15- 20 minutes of their time. Often, they give more as people love to talk about problems that they are having.
6. Create your list of questions to ask.
IMPORTANT: The key thing to remember is to focus on what you are trying to learn vs. coming up with the perfect question(s) to ask.
7. Conduct 15-20 interviews to test initial hypothesis.
You are looking for trends to prove or disprove your original hypothesis. You are also looking to explore alternatives based upon the answers you hear. Ultimately, you are hoping to hear, “I would buy this if…….”. Make sure you ask questions the right way. Try not to lead the witness!
Continue this process until you discover a need that enough people will pay enough money for to make a profitable business out of or move on to the next idea after about 100 of these conversations. There are exceptions to every rule but this one has merit in my opinion.
Suggestion: If you are fortunate enough to find a meaningful customer need, split into two teams. One that continues to perfect and extend the life of the newly discovered solution and another smaller team that begins to look for the next one (Read The Curve Ahead for more on this).