Customer Development and Best Practices in Understanding Markets and Customers

Dr. Juha Mattsson CEO & Co-founder, Symbioosi juha.mattsson@symbioosi.fi 27.11.2012 Founder Institute Startup Research

The rule that governs all: buying and selling your product should be made “dangerously easy”

2

27.11.2012

(c) Symbioosi Partners Oy, Juha Mattsson

The Customer-Offering-Sales Strategy

Customers Markets Understand how, why and when your customers make a purchase decision Understand how your offering generates value to your customers

I

Make buying "dangerously" easy

II

Profitable Growth

Optimize productmarket fit

Marketing & Sales Model
III

Product Offering

Build scalability

Create an end-to-end sales and marketing machine
3 27.11.2012 (c) Symbioosi Partners Oy, Juha Mattsson

The Customer-Offering-Sales Strategy
Strategic customer focus & customer management • Customer qualification criteria • Customer needs & value drivers • Strategic customer segments • Addressed markets • Market positioning and differentiation • Customer selection & prioritization Understand how your offering generates value to your customers

Customers Markets Understand how, why and when your customers make a purchase decision

I

Make buying "dangerously" easy

II

Profitable Growth

Optimize productmarket fit

Marketing & Sales Model Value communication & capture • Value propositions • Customer acquisition model • Pricing models & tools • Go-to-market strategy • Sales competencies • Account/relationship mgmt
4 27.11.2012 III

Product Offering Value creation & commercialization • Solution components • Product features • Match to customer value drivers • Product development and customer development

Build scalability

Create an end-to-end sales and marketing machine
(c) Symbioosi Partners Oy, Juha Mattsson

Things to learn from startup methodology
  Good ideas are "dime a dozen", execution is the key Acting like an entrepreneur:  Investing your personal money on a high-risk venture  Sacrificing your scarce time in front of more secure options  Obtain just enough funding (and dilute your ownership) as necessary to execute to next phase Managing a chaos  Fast-moving business environments  Zero existing structures (organization, customers, markets, brand, etc.) Fighting natural psychological tendencies to  Believing in your own ideas and assumptions  One-pont-estimation The fail fast -principle!

5

27.11.2012

(c) Symbioosi Partners Oy, Juha Mattsson

'Customer development' is an established methodology in the start-up field

ITERATIVE VALIDATION OF PRODUCT/MARKET FIT PROBLEM  Core 'CustomerProblem-Solution' hypothesis  Positioning  Customer acquisition  Market size SOLUTION  Platform  Architecture  Features

CUSTOMER

PRODUCT

Feedback

CUSTOMER DEVELOPMENT

PRODUCT DEVELOPMENT

6

27.11.2012

(c) Symbioosi Partners Oy, Juha Mattsson

The Customer Development Framework
Pivot
Customer discovery Customer validation Customer creation Company building

Problem-solution fit

Product-market fit Scale organization

Proposed MVP

Business model

Scale execution

Proposed Funnel(s)

Sales & marketing roadmap

Scale operations

A product solves a problem for an identifiable group of users

The market is saleable and large enough that a viable business can be built

The business is scalable through a repeatable marketing and sales roadmap

Operational processes and a structured organization is built to support scale

7

27.11.2012

(c) Symbioosi Partners Oy, Juha Mattsson

A few notes about the Customer Development approach
The customer development process iterates on

 Core business assumptions
 Who is the customer  What need/problem to solve  What the solution should be  Product functionality & features  Assumptions of customer acquisition and conversion Tasks  To validate core hypotheses (customer-problem-solution)

 To develop a Minimum Viable Product
 To achieve product-market fit  To produce a development and marketing/sales roadmap for building scale

Two desired outcomes from the process
 A thriving, successful company (build organization and scale the business)  Realization that there is no real market or the market is insufficient (stop and change direction)
8 27.11.2012 (c) Symbioosi Partners Oy, Juha Mattsson

Essential Concepts in Customer Development
          Customer-Problem-Solution Early Adopters / Evangelists Segmentation Market type Non-traditional business models Positioning Product-Market Fit Minimum Viable Product (MVP) Pivot Getting out of the building

9

27.11.2012

(c) Symbioosi Partners Oy, Juha Mattsson

Early Adopters, Evangelists, Lead Users
 Passionate, early users of a new innovation (technology/process/business model) who understand its value before mainstream markets  Early adopters are important, because – They seek out new solutions & technology to solve their problems – not just for the sake of playing around with newest technology – Don’t rely on references from others to make buying decisions (though are incluenced by other early adopters) – Are often willing to help you and want you to be successful!

Technology adoption cycle
Lead Users Innovators
10

Early Adopters

Early Majority

Late Majority

Laggards

27.11.2012

(c) Symbioosi Partners Oy, Juha Mattsson

Product-Market Fit
 Product-Marketg Fit is reached when a product shows strong demand by passionate users representing a sizeable market  Qualifiers – The customer is willing to pay for the product – The cost of acquiring a customer is less than what they are willing to pay – There is evidence that indicates the underlying market is large enough ”Achieving Product-Market fit requires at least 40% of users saying they would be very disappointed wouthout the product.” (Sean Ellis)

11

27.11.2012

(c) Symbioosi Partners Oy, Juha Mattsson

Minimum Viable Product (MVP)
 Key idea: A product with the fewest number of features needed to achieve a specific need-satisfying objecive, and users are willing to pay in terms of some scarce resource  The aim is to produce a product version with minimum effort and features that allows maximum learning about the behavior of core customers – Conversely: minimize damage & lost efforts if this version of the product doesn’t ultimately work out, i.e. fit the market & customer need  Important – It is central to know which is the smallest feature set customers are willing to pay for in the first actual release – There are typically different MVP versions along the development cycle – The MVP is usually centered around a specific problem and solution, a ”core use case” – Scarce resource = time, money, attention, etc. that represents a sacrifice from the customer’s part
12 27.11.2012 (c) Symbioosi Partners Oy, Juha Mattsson

MVP Develops in Stages
Concept MPV #1 PPC campaign Landing page
Feature/benefit description, ”More Info” –call for action

Product-market Eval MVP #2 Product drawings Detailed specs

Product-market Fit MVP #3 Prototype Functional output

Customer Interaction

Product Drawings, exact specs

Field pilot

Objective

Get market insight, identify early adopters

Locate strategic partners, obtain seed funding, get paid betacustomers

Revenue, customer validation, capital investment

13

27.11.2012

(c) Symbioosi Partners Oy, Juha Mattsson

The whiteboard excercise
1. Draw a map of your ecosystem – Entities involved (users, customers, channel partners, technical partners, strategic partners, advertisers, customers’ customers, etc.) – Value flows (either direct or indirect) – Money flows – Product distribution (assumptions of how your product moves through your channels to reach end users) 2. Define a value proposition for each partner – What benefit will each entity in the ecosystem gain by participating? – What will they need to sacrifice/pay? – Transfer each value proposition to a C-P-S hypothesis, if possible

14

27.11.2012

(c) Symbioosi Partners Oy, Juha Mattsson

The whiteboard excercise
3. Sketch a final MVP – Also intermediate MVP’s if necessary/relevant – Think of what you need to provide to each entity with whom you have a direct relationship, in order to achieve the value identified above? – Currency: what the user/buyer ”pays” for using the MVP – MPV metric: what are you measuring to determine viability – Value determinants: what features and functionality do the users/buyers require at minimum to pay their currency? 4. Evaluate risks and critical success factors – Short term vs. long term risks, their implications, and how to account for – How the ecosystem needs to change/remain in order for your business to work? – Critical dependencies and players?

5. Draw a value path – That describes how the MVP’s and business model develops step-by-step, constantly increasing the value generated to the ecosystem
15 27.11.2012 (c) Symbioosi Partners Oy, Juha Mattsson

The Market Validation process of a Technology Product or New-to-Market Product/Brand

Stage 3: Establish Credibility
Make key influencers excited

Stage 2: Envision the solution Use quality influencers to test soclution/product concept

Stage 1: Explore the pain
Structured research, generate hypotheses, locate greatest pain Stage 0: Make sure you know the basics: basic market data, players, trends, potential target markets, potential value propositions SOURCE: Rob Adams, 2002, A good hard kick in the ass
16 27.11.2012 (c) Symbioosi Partners Oy, Juha Mattsson

Market Validation: the Pyramid of Influence
Stage 3: Leverage Influencers
Well-known thought leaders

Sources
- Analyst firms - Vertical Publications - Consulting firms - Flagged from market research - Thought leaders - Personal contacts Affinity groups Trade publications User groups Trade shows

Stage 2: Quality Influencers Knowledgeable on the space and articulate

Stage 1:
Quantified Market Research Structured questionnaires

Secondary Market Research

SOURCE: Rob Adams, 2002, A good hard kick in the ass
17 27.11.2012 (c) Symbioosi Partners Oy, Juha Mattsson

Basic Principles of Agile Market Validation

• Start from identifying research contacts • Obtain progressively more useful research • As the process unfolds
– less structure, less quantity – more face time, more depth

• Contact several tens, even hundreds of people • Fast iteration

18

27.11.2012

(c) Symbioosi Partners Oy, Juha Mattsson

Stage 0: Secondary Research to Crunch the Basics
Aim: Do the homework Method & sources • • • • • • Industry press, trade press, news sources, etc. Statistics sources Internet: google, blogs, company homwpages, etc. Market research reports Government sources (incl. public funding such as TEKES) Industry associations

Understand the business ecosytem
– – – Value network, key players & stakeholders Existing business models Power relationships

• • • •

What’s going on, what’s hot
– Trends, emerging demand/consumption pattenrs

Recognize emerging players Gather relevant existing market data & analysis reports
– Data to back up trends & patterns

Search for potential target markets and buyers
– Where’s the pain?

Note: this high-level secondary research does not qualify as market validation!
19 27.11.2012 (c) Symbioosi Partners Oy, Juha Mattsson

Stage 1: Explore the pain
Aim: Sharpen the target market Method & sources

Conduct structured primary research to recognize areas where pain is the greates

• •

1.
2. 3.

Generate hypothseses regarding the prospected market Collect data to prove/disprove hypotheses Isolate most heated pain points (= combinations of target segment + need)

Iterative workshops to generate hypotheses Pre-interviews to guide questionnaire design Collect primary data by
– – – – Web-questionnaire Structured phone interviews Pont-of-sale interviews observation


Both quantitative and qualitative data & analysis Heat maps

Vitamin vs. aspirin??
20 27.11.2012 (c) Symbioosi Partners Oy, Juha Mattsson

Everyone Should Participate the Data Collection

 Engineers develop a customer-oriented perspective and generate in-depth insight of customer needs/pains
– What’s valueable to the customer and what not

 Everyone learns the sales process
– It becomes crystal clear what sells

 All activity becomes customer centric

21

27.11.2012

(c) Symbioosi Partners Oy, Juha Mattsson

Stage 2: Envision the Solution
Aim: Validate solution/concept Method & sources


Use quality influencers to test solution/product concept Focus on quality influencers
– Lead users identified from phase 1 – Thouhgt leaders: Speakers, writers, analysts, professors, researchers – Experienced people from relevant fields: technology, marketing, logistics, etc. etc.


Face-to-face meetings, in-depth interviews Go through two things
– Overview presentation of the business concept – A prototype/demo of the product/solution

“Bullshit radar”
22 27.11.2012 (c) Symbioosi Partners Oy, Juha Mattsson

Outcomes from phase 2 interviews:
 Key product/solution features  Core customers = laser-sharp customer focus  A fine-tuned presentation + prototype

23

27.11.2012

(c) Symbioosi Partners Oy, Juha Mattsson

Stage 3: Establish Credibility
Aim: Gain recognition Method & sources

Contact all necessary influencers to build recognition & excitement Analysts Journalists Publishers of market information

• •

Face-to-face meetings, in-depth interviews Outcomes:
– Visibility in analyst reports, publications & press – Revenue possibilities – Easier financing

• • •

24

27.11.2012

(c) Symbioosi Partners Oy, Juha Mattsson

Additional readings in Customer Development http://www.custdev.com
http://marketbynumbers.com http://steveblank.com

Steven Blank 2005

Cooper & Vlaskovits 2010

Eric Ries 2011

25

27.11.2012

(c) Symbioosi Partners Oy, Juha Mattsson

Thank you!

Sign up to vote on this title
UsefulNot useful