In my last blog post How to Start a Business – Ideation Phase – Part II – Wealth Builders Forum I discussed the importance of creating a Problem Statement, identifying an Ideal Customer Avatar (ICA), the Lean Startup methodology, Falling in Love with the Problem, identifying our market and how much of it we can realistically access and if we can make money in the area that we’re interested in pursuing.
At this point in the game, we are WELL underway in crafting a business idea that makes sense from a financial standpoint.
Customer Discovery – TRULY understanding what our customer wants
However, we now need to lean into our business idea and determine whether people are actually going to pay money for the product or service that we’re going to be offering. So how exactly are we going to be doing that? The first thing that we’re going to be doing is what is called Customer Discovery.
In addition to the direct interaction that we’ve already had with our potential customers, we’re going to now be doing more intensive customer interviews where we start to test potential solutions that we have started to develop based on what we have initially heard as to what the exact depth and breadth of what the problem is.
In order to do this we start out with what is called a Hypothesis. It is essentially a statement that includes both the Problem Statement and what we believe at this point in time is the best possible solution.
Continuing to use the woman’s industrial clothing line as an example, our hypothesis might be something like this: My idea solves the lack of stylish clothing for women who work in industrial settings (problem) by offering products that perform at the same level of other existing products but that are cut, shaped and of color combinations that satisfy these customer’s preferences.
Once we have defined our hypothesis we need to ask a few refining questions:
- Is the problem we addressed actually a problem?
- Will the solution we propose actually solve the problem?
- Does the market we plan to target have this problem?
- Is the market we plan to target willing to pay for our solution?
Do our assumptions hold true
When we get to this point in the process we want to have a set of assumptions that we hold to be true based on the initial feedback that has been provided by our potential customers. Some of these assumptions might be as follows:
- That our potential customers understand our product/service
- That we don’t have to educate the market
- That our customers value our product/service at our price point
- That we don’t have to bundle our product/service with another deliverable to provide context or value
- That our delivery format provides the best solution for our customer
- That our price point is acceptable to our market/customer AND we can be profitable
In order to start validating the market, we need to reconcile some of our assumptions with those of our customers. Do we know what our customer’s assumptions are and if they are consistent with those that we have? If not, we will need to refine our assumptions in order for them to more accurately reflect where the market is as it relates to what we are offering.
Is our product or service in some way challenging the current market?
In some cases depending on how revolutionary or disruptive the product or service is, we may need to ‘challenge’ the existing market assumptions:
- Are we challenging the “way it’s always been done”?
- Are we offering an alternative product/service whereby WE need to provide the bridge for our customer? Do NOT require them to make a leap.
- Is there a prevailing cultural or historical reason for customers doing what they do? Is this going to be hard to do under the specific circumstances?
Remember, if our Customer doesn’t do what we want them to do it’s not THEIR fault. It’s OURS!!
Refining our Ideal Customer Avatar (ICA)
So now that we have already honed in on our Ideal Customer Avatar (ICA) and have a very strong understanding as to who those customers are, we can start to conduct a much higher level of Customer Discovery.
This begins with the right questions. The first thing that we have to fully understand is that contrary to popular belief, we are NOT asking for our customer’s opinion or even ‘what they want’ per se. Instead, we are trying to “qualify” OUR proposed solution to the best degree possible.
To do this, we want to ask our potential customers open-ended questions as to their perceived problem in the area of life that we are looking to resolve on their behalf. We are looking to hear our customers tell us how they are dealing with the existing problem at hand.
We want them to describe circumstances where this problem popped up in their lives and what happened. What was on their mind. How they felt. What they did as a result. We are looking for behaviors and feelings toward this problem as much as anything.
The types of questions that we might want to ask are as follows:
- Tell me how you currently do X.
- How is that process working for you?
- If you could do anything to improve your experience with X, what would it be?
- What’s the hardest part about X?
- What do you like/dislike about? What do you dislike about the solution you are using for X?
By asking these questions we let the Customer:
- Tell us their exact insight about our topic of interest.
- Tell us whether they see the problem or don’t think there’s a problem
- Identify for us that there’s a DIFFERENT problem than the one we originally identified
- That there’s a more pressing problem than the one we are looking to resolve
- Help us start to develop empirical data on whether our problem/solution is viable
Now that we have some data from our customers, what do we do?
After we have asked at least our first 10 ICA customers but hopefully a couple dozen, we now have substantial data from our potential customers as to what the real problem is and whether our initial assumptions are still holding up.
Do our Customer’s responses match up to our initial assumptions:
- Are our original hypotheses(sis) still valid?
- Do our Customers substantiate our product/service idea?
- Do they substantiate our Branding? Messaging? Positioning?
- Do they perhaps offer a different approach to the design, offer or pricing?
Once we get the answers from the above questions and we have refined our assumptions and hypothesis, we will need to take the next step in validating our business idea.
To do that, we simply need to ask ourselves the following questions: What have we learned from our customers? Do we still have the right idea for our product or service? Do we need to change anything like our pricing, positioning, or messaging?
Time to create a Minimum Viable Product (MVP)
After hearing from our customers, we make another assessment as to whether our core assumptions are still intact. If they are, we take the next vital step in validating our product or service by building what is called a Minimum Viable Product or MVP based on the feedback and input we have received up to this point from our customers.
The MVP is the essence of what we would propose for a solution but in the most minimalistic form that is possible. Another way to think of an MVP is that it is a version of our solution that allows us to gain the most amount of validated learning about customers with the least amount of effort, time and money. The MVP truly just needs to be ‘enough’ and not any more than that.
Now that we have our MVP in our customer’s ‘hands’ we have to observe HOW they are engaging with it. Are they using it the way we envisioned they would use it or are they using it in a way that is a better solution? What is their behavior(s) as they engage with our product/service? What are they feeling? What are they providing for feedback? Do they think that this solves their problem? Do they offer any insights on what might be made better?
Whether we have a product or service, we want to test every aspect of our idea including the ‘complete cycle’ of it including customer acquisition, conversion and fulfillment if at all possible. We also want to do this with no inventory, no employees as little financial outlay as possible. But how would this even be possible?
Interestingly enough, due to the Internet and the powerful applications that are now available there are dozens of platforms that can help us validate our business. In fact, we now have the potential of creating landing and squeeze pages fueled by digital sales funnels where we can test out our business’ feasibility very quickly.
Creating a funnel to attract potential customers
An example of this for our women’s clothing line might look like the following. We would first create a FaceBook fan page and start to build up our community.
We’d then start to run some FaceBook ads and market our product or service to those individuals on FaceBook that most closely resemble our ideal customer.
Upon engagement, we’d funnel these potential customers to two separate variations of landing pages that we create that have different product or service offerings, an alpha and a beta version.
We then observe how potential customers react to each of the offers tracking the responses using empirical data so as to be able to make an evaluation using performance data. We’re looking to see how customers react to these small “experiments”. Will a customer pre-order? Will they buy? Will they sign up for more information? Will they give us their email
Conclusion
Reaching the point of creating a Minimum Viable Company (MVC)
Once we have this feedback we can again refine our final product or service and all the other systems (marketing, messaging, branding, delivery, customer fulfillment, etc.) that are needed to have what is referred to as a Minimum Viable Company (MVC). From here, we are ready to begin figuring out and testing how we are going to make money from this venture, which we will discuss in-depth in the next blog post.
Ultimately, in the end of the Validation phase, we’re looking to refine our product or service, our offer and our complete customer engagement process to more accurately reflect what our customers want and expect. If we can do that, we can serve them and make money in the process.
