Steve is part of the Seattle practice and brings experience in IP licensing and software services, manufacturing and devices sales to the Altus team. Email Steve with questions or comments.
Ready Fire Aim
Ready, Fire, Aim is a frequent joke among startups. There is some truth to it, of course. A young company cannot know all the ways in which the market and its customer will respond. In this post, I’ll share some thoughts on how to shift that phenomenon to preparation, focus, and execution.
While there are many pitfalls along the startup path, one of the earliest problems new companies face is identifying, acquiring and nurturing the customer base that is optimal for growth. Finding those customers who have a clear need for the product or service, are willing and able to purchase, and ideally become enthusiastic advocates once they become users; fueling the early expansion of the startup. An additional challenge is that many tech products are solving a problem that customers may not even know they have (think about a better contact management or project management or document storage solution).
Finding this best customer is not as straightforward as it sounds. There are several factors at play between a fledgling company and enduring success with a loyal customer base.
Problem: Even with social networking, no one has heard of you.
Often early stage entrepreneurs with great ideas produce products that are new and innovative. Even though friends, business contacts and other engineers rave about the product, the company still fails to get revenue traction. Revenue does not expand as expected, and new customer acquisition turns out to be much harder than anticipated. Those critical early adopters don’t materialize.
Preparation: What are the 3 most important benefits you provide your customers? Just as important: How you are finding these new customers? How you find them is often as critical as finding them. What are you doing to help those customers find you?
Michelle Riggen-Ransom, co-founder and CCO of Providence-based start-up BatchBlue Software (makers of social CRM BatchBook) recommends a two-pronged approach. “Certainly create accounts in Facebook and Twitter and make sure you are engaging and responding there as you build your online network,” she says. “But don’t neglect the power of making connections in real life. Some of our best customers have come attending local meet-ups, conferences, or when we’ve sponsored an event.”
Problem: A “product for everyone” has high value for almost no one.
When the new product or service has many potential customers, in many different industries or groups, there is a tendency to make the product generic to meet the wide range of marketplace tastes. By making the product “generic”, often it does not have enough value to any one group of customers to be compelling. Instead of being adopted by multiple groups of customers, penetration into each segment is limited because the product has not been “honed”.
“There is a benefit to casting a wide net when you first go to market,” counters Riggen-Ransom, “But you should have the flexibility to adapt once you see where you are picking up traction.”
Execution: How do product enhancements get prioritized? Who is providing input to that process? Of all the potential customer types, do you know who will be compelled to buy the most, who will buy first, and who will buy again? Conversely, are you willing to throw your plan out the window and create a new one if it looks like your initial assessment was incorrect or changes once you’ve launched your product?
Problem: Crawl, walk, and then run.
While long term success for the business may require acquisition of large customers, it is better to prove technology and sales process with smaller companies first. Targeting the so-called elephants in the room (large customer prospects) as the first and only customers can lead to disappointment.
Focus: Regardless of company size, are you asking yourself why you lost a deal or why you won it? The answers can reveal gaps in your customer communication process.
Problem: Drinking too much of your own Kool-Aid.
Just like finding bugs in a piece of code is hard for the person that wrote the code, many companies have their own image of what their products mean to their customers and what value they provide.
Surprisingly this is often without talking to the customer to really understand how the product affects their lives or business. Without truly “getting inside the customer experience”, there is no way a fledgling company can really understand what it is they offer. So they need to develop an understanding what customers think about the product or service and its value to be successful.
Preparation: How do you regularly communicate with customers? Is there a communication process or flowchart guiding what you say and when? Given the social nature of customer service today, do you have a social media plan?
Problem: Jumping into a crowded pool.
Is there an “obvious” customer out there? Many companies go to market believing there is an obvious customer that will be easy to reach. This may or may not be the segment that will be the best in terms of profitability, top line growth and enduring customer loyalty. The “obvious” customer segment may be crowded with competitors, with price competition and margin erosion. There may be so many product alternatives that customers feel no need to be loyal. From the customer perspective the choices boil down to price and availability, there being little or no meaningful or significant feature differences between the multiple offerings.
Focus: How are you segmenting? The biggest segment is not necessarily the best. Early gains and growth are critical. Pick the segment that can give you early gains, not the one that looks like the largest.
Conclusion: As your customer base expands, and you start to take on more customers providing more features and delivering more value, you will find that these preparation and focus questions can keep your execution on track. Ready, Fire, Aim will not be in your vocabulary but replaced with preparation, focus, and execution. Or, as Michelle from BatchBlue says: “Research, Reassess and Repeat as necessary.”