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Adam
September 4, 2021
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The process of discovering customers

Knowing your customer is the very fundamental step in finding a product-market fit. Different customers will have different needs. It is the job of the founders to probe and tune the product to an identified need.

We can make all kinds of assumptions about our market, but we will never truly know if the customer needs our product until they pay for it. Before launch, we have hypotheses about who is going to be using our product, but it is just a hypothesis before it is validated.

Many products started with a market in mind and ended up in a completely different market. Quicken was a product that was targeted at individuals so they could easily do their personal finances. Personal finances are a lot like small business finances. To their surprise, some people were using Quicken to do their small business finances. If they didn’t study their users, they could never discover this. Later Intuit launched a new product called QuickBooks that targeted those individuals.

So, we do not truly know who is going to be using our product before putting it in front of them and seeing who is actually is using it. We should keep in mind that it can take a while before anyone uses the product and pays for it. Once we find product-market fit in one vertical, it makes sense to expand to other adjacent verticals without having to change the product too much. This is how Amazon expanded from just selling books to everything else that we see today.

Segmenting our target customers

One of the first steps of knowing your customers is done via segmenting into various branches. You can segment your market by demographic, psychographic, behavioral, and more. You may find out that your customers are mainly distributed between the ages of 20 to 30 males or other ages and sex. This will help you target your advertising and tuning your product better to that audience.

types of market segmentation according to Perceptive (customermonitor.com)

Usually, need-based criteria give the most crystallized and clear segmentation. If you know what your customer needs, you can think of other needs that are adjacent to their current needs and try to address them. On a small scale, many Amazon stores do this by providing other products that are needed by their target customers. For example, if they are selling Yoga mats, they can also sell pants and other Yoga related products.

The point in segmentation of your market in my opinion is not for marketing because Google and Facebook ads are doing a great job doing that. The point of segmentation is for us founders to know the market and tune our product to the market needs. The more we know about our customers the better we can serve them.

The more we know about our customers the better we can serve them.

In my opinion, we should prioritize segmenting the market based on needs, especially in the early stages. Once we do online advertising, we can learn a lot more about the market, but when we’re small, the best way to know about our customers is via their needs. I think that’s why in the Lean Startup approach we care so much about customer needs and validating them.

Who is writing the check?

There are users and there are buyers and those too don’t match sometimes especially if you are in B2B and SaaS space. In this case, you’ll need to know all decision-making parties. Most of the time users are the engineers or the salespeople and not the CTO or CMO of the company, but ultimately, the C-level managers have to cut the checks. These types of deals need a lot more diligence and are more complicated. For this reason, it makes sense to start from smaller companies and work your way up unless you have good insights into the sales process. Having a co-founder who has B2B experience can make a day and night difference.

There is a bottom-up SaaS concept pioneered by David Sacks, one of the co-founders of PayPal that seem to be an applicable model. In this model, the product becomes so sticky among the users in a company that the upper management finds no option but to purchase the product. The downside of this model is that it takes longer to get the first check.

Personas: Useful or not?

We hear often about personas, but are they really useful enough for us to invest the time? Personas are helpful to build a better user experience. Knowing who we are building the product for, has a lot to say about designing the product. We can only create personas when we interview our users and customers. These interviews must be one-on-one as online surveys are inaccurate and do not capture real information sometimes.

We can build personas even before we have customers by interviewing people. IdeaCooker allows you to ask questions online and ask people to join you for an interview. These interviews are called Customer Discovery Interviews by Lean Startup Method practitioners. As you talk to more customers, you can iterate and make your personas more accurate.

Something to watch for when using personas is that if they are not based on real information, they can mislead you and build a product that is not tuned to your real customer’s needs. So, it’s absolutely crucial to building our personals based on real customer interviews and talking to the customer. Personas are not static. They are supposed to change over time as the company learns more about its customers and this learning continues throughout the life of the company.

In your iterations, you’ll need to pay attention to the types of customers that use the product more often and or bring more revenue in.

2 Comments on this article

  1. Adam

    No Spam please.

    Reply
  2. Amin Khanechi

    I love the content! Very informative. I also found similar information in Dan Olsen’s book – “”Lean Startup Playbook”. Love the website and the content. Keep it up!

    Reply

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