The target customer

December 20, 2010 Leave a comment

It’s a lot easier to build great technology than it is to properly identify your target customer and ideal market. Sure you may have found a market that has great potential. Once deployed, your solution will have a significant impact on the industry – or will it?

Who has the pain?

Before getting a chance of successfully selling a product, you need to have a very good idea of the target customer. This is the person that has the pain (or the need) that your product will solve (or satisfy). If there is not a well defined pain or need, there is limited chance that your solution has value; besides selling to a few people. Of course, the greater the pain, the bigger (and value) is the market opportunity.

Who has the money?

Without revenue, there is no business. One common problem of a lot of startups is a lack of strategy around getting money out of the hands of your customer (a.k.a. monetization). You need to draft a path from where the money will come from. The simplest form is the customer giving you a fat check. The more challenging one is indirectly making money from sponsors, adverts – that is if you have the right kind of volume.

When is your solution needed?

Even after finding a market and how you will monetize, you still need to know about time to market. As an example, tablet PC that came out 8 years ago are obviously not as popular as today’s iPad … It is so important to have a clear understanding on when the critical mass of your customers will be ready to buy your product. It is always better to delay than to simply burn money on a market that is yet not ready to purchase.

Are you too close to the problem?

While you may have been thinking about these things for a while, it is sometimes beneficial to have a little distance or fresh eyes in order to find the right answers. This is where someone like me comes in. You might be surprised on the outcome if you were to consider asking the advice of someone that has many years in developing product plans and go to market strategies. And while such consulting services are not cheap, there are certainly a lot less money than to ship a product to the wrong target customers or at a bad time to market; or even worse to have forgotten how to monetize. Sales and marketing activities are many folds more expensive than product planning and building the right kind of product marketing strategy.

I would be more than happy to provide you some guidance, just drop me a line at michelbesner (at) me (dot) com …

 

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Due Diligence : Customers

May 5, 2010 Leave a comment

Another piece of the due diligence is the customer base. As part of the checklist, you want to get of course the list of all customers but also you want to get a good understanding of who is the authorized representative for each of them (direct, channel, web). As well, you want to see customer growth for the past five years, including revenue per customer (sales, maintenance and services). If you are offering a service-based solution (mobile or web), you also want to get info about usage and churn. You also want to get reports on all credits given to customers as well as a detailed list of accounts receivable.

Another challenge for companies being reviewed is to provide a list of all non-solicitations (for and against the Company). You also want to gather all correspondence sent to and received from any customers regarding problems relating to the services or products offered by the Company. As you can imagine, this can be quite a task if the Company has not been properly keeping all their archives and records.

Finally, you want to get any information about advisory councils or other form of customer interactions that the Company is handling. It is also a good idea to ask for permission to talk to a few customers. Of course, the Company will offer to provide names of selected customers. This is quite fine but most likely these are clients that are very favourable to them. You might want to add a few more names that you previously selected from the customer list. In this line, you should also ask for any form of customer win/loss analysis that they might have conducted in the past couple of years.

This was the last segment covering the key components of a due diligence check list. Hopefully you found this to be quite useful. Next on my list is to talk about integration planning, namely employee reviews, budget consolidation and change of management.

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Business Plan: Knowing who is your real customer

April 20, 2010 Leave a comment

So your Company has identified a real market problem and you have the technology to solve it. You have drafted a business plan and are looking for funding in order to execute your plan. The revenue forecast sounds pretty exciting as you are looking to commercialize a solution for the general mass (B2C). But have you answered this question: who is your REAL customer?

End user vs. customer
There is a big difference between the end user (the person that will ultimately consume your product) and your real customer (the person that will give you money – that will help you monetize your technology). The answer is far from easy in this day and age with electronic distribution, apps stores and social media platforms that allow you to integrate and sell plug-ins.

Partners can be your competitors
If you are trying to acquire the wrong customer base, you might end up competing with someone you thought would be your partner. For example, if you are looking to release a great solution that will help Facebook increase its revenues, you need to make sure that they do not plan to do the same as well. If you follow closely the customer ownership trail, it will help you create an answer.

Monetizing vs. customer ownership
Great technology will allow your Company to get to bigger revenue if you pick to right way to monetize it. Don’t focus on customer ownership – this is even more important when you are making low prices one-time consumer products sold for a few dollars. OEM or Affiliate partners can be most of the time the better customers, giving you indirectly access to their large customer base and share revenue.

Listing all potential customer types
You should take the time to list all potential customer types you might have: consumer, hardware manufacturer, distributor, etc. Thinking out of the box can actually help you identify a better customer that you might have thought about initially. For each type, you need to recognize the benefits and revenue potential but also (and that is very important) the cost to acquire the end-user base.

Having clarity about your real customer will not only give you a better path to success but also minimize any burn rate you will have in trying to monetize with the wrong audience…

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Never underestimate the customer buying experience

December 1, 2009 Leave a comment

How much do you understand what your customer is going thru in order to buy your product? How many hoops does he have to pass before he can talk to a sales rep? How many steps does he need to do before he can actually try your solution? As an entrepreneur, you need to walk in the shoes of your customers in order to understand how easy (or painful) you make the customer buying experience.

Assuming you know nothing
Too many times, we make wrong assumptions about what the customer is seeing. So when they complain, we do not understand, they most likely did not do it right. Did they? One simple test is to assume you know nothing – play dumb and try buying your product like it was the first time. Call a reseller (how easy is it to find one?), ask some basic question… try another one… are you getting the same message, the same answers?

Consistency is important
You are not getting the same message depending of which sales guy or reseller you are talking to; or even worse what they are saying is not exactly what the web site is saying? You have a big problem. Don’t take the cheesy response that each sales person has their own specific talent and they are adapting the message that will make them successful. While everyone has a different style and you can’t hire robots – you still need a consistent message. What your product does, why is it better than the competition and why the customer should buy it. The customer needs to get the same message period.

Understanding the path of buying
What are the steps that your customers usually take in order to make a buying decision? Does your company mimic that process? If your customer requires download a trial license, then make one available. If they need to have access to consulting, make someone available. While temptation is high to innovate, stay focused in not disturbing the buying cycle. You can still be creative but any radical change might just confuse the hell of your customer.

Make it obvious
The sales process needs to be intuitive for the customer. For each step that requires the customer to think and analyze in order to get it, you are loosing prospects. If you produced a video clip showing a great new feature, what is the next step that your web site offers to them? If you expect the customer to navigate to the “Contact” page then you are asking them to make an additional step. Adjust your real estate to place right beside the clip a form allowing them to ask for a trial or to contact you.

The elusive web site
How many times do you go thru the discovery process on your web site? What is your main page saying? Are you guiding the customer to a natural path where he will discover what you do, why this is important for them and why you are the best choice to address their needs? Do you like it when you go in a clothing store that the second you step in they already ask you if want to buy something and keep bugging you every two minutes? Probably not. So don’t do the same on your web site. Give the time to the customer to come in, walk around and when they start to show interest, then you can ask if you can assist and if they need help in making a buying decision.

No matter what you do, always take the time to experiment it yourself, ask friends and colleagues to try it for themselves, seek continuous feedback. The beauty is that if you listen, you will end up creating a beautiful customer buying experience – and win more business.

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The importance of leveraging your customer base when looking for funding

November 19, 2009 Leave a comment

Don’t you love reading a business plan filled with hypothesis where most of it is purely based on gut feelings or mathematical equations extracting a given percentage of a given market? I have been recently talking about credibility and today’s topic is no exception. Too many startups are not leveraging their first set of customers.

Finding patterns early
As soon as you have more than 20 customers, you need to start extracting trends (or lack thereof). How many are buying for the same reasons? Are they all from the same market segment? How about their size? Any indicators that you can find in your customer data can become valuable information as you build a business plan for a round of funding.

Growing from something means a lot
As soon as you can project trend lines for growing a specific customer base, it add credibility to your plan. Of course you need to be realistic about the accelerators that the investment will give you – growing at 300% or more in the first couple of years is possible but not over 5 years (scalability is not magic, even with lots of money). Any portion of your business plan that is not based on customer trends will be discounted a lot more. Predicting to sell 2M$ of something without having won any previous customers is always a challenge.

One is an anecdote, two is potentially a trend

While customer metrics and trends are important, don’t fall for finding trends where they do not exist. If one customer bought a specific solution for you, it does not mean more will buy. Having a second one will help but you need at least 3 customers of the same type and buying for the same reasons before you can start to get serious with any trending. If you can’t find any trends by simply looking at your customer data, then spend some time with your customers – asking them questions that will help you find any patterns.

More is not necessarily better

Ok so you must wonder why I am saying this after mentioning that you need more than a few accounts in order to begin to trend. You would think that having many would help. Well it does as long as your customer database is coherent. For example, if you are pushing a free version of your solution, make sure that your samples align with whom you are trying to sell. If you are selling a high-end solution, getting students and non-profit organizations to download your free software won’t help you commercial business. Even more importantly if you are calculating conversion rates to justify your revenue plan.

At the end, data analysis is not obvious and if you don’t have a lot of experience or are unsure about what you are seeing, seek some support from someone that has done this many times in the past. But don’t go without proper metrics to support your business plan.

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