Customer Development

In April of 2009, Steve Blank and Eric Ries gave a presentation on Customer Development at a Startup2Startup Conference in Palo Alto, California. They called it The Customer Development Model, which stated that, “More startups fail from a lack of customers than from a failure of product development”.

But it’s not just startups, more companies fail from a lack of customers than from a lack of a great product, yet most of the time a company forms around a product and then tries to go out and find customers for that product. What if there was a way you could find the customers first, build a product for those customers, and then create a company? There is and it’s called Customer Development.

Customer Development is a rigorous methodology developed by Steve Blank to bring the scientific method to the typically chaotic, seemingly disorganized startup process. Blank’s first book, The Four Steps to the Epiphany, detailed the Customer Development process and his second book, The Startup Owner’s Manual, is a step-by-step guide to building a successful startup, offering practical advice for any startup founder, entrepreneur, investor or educator.

According to Steve Blank, Customer Development involves four steps:

  1. Customer Discovery – Create a hypotheses about who your customer might be and then ask those customers what they want, how they work, what they hate, and what they want more of.
  2. Customer Validation – Develop a repeatable and scalable sales process. Only “earlyvangelists” are crazy enough to buy.
  3. Customer Creation – After proof of sales, creation is where you “cross the chasm”. It is a strategy, not a tactic.
  4. Company Building – (Re)build your company’s organization and management. Re-look at your mission.

Credit: Steve Blank and Eric Ries

But what if you’ve already started your company and you already have products? You can still use these same methods to find out who your target customer is, what they want, and how they talk in order to create custom marketing directly to them.

Steve Blank says, that “Customer Development is about testing the founder’s hypothesis about what constitutes product/market fit with the minimum feature set.” What is product/market fit? I would define product/market fit as the moment when the iterations of your product match the desires and needs of a market in a way that the customer would actually be mad at you if you didn’t let them have the product. Once you’ve achieved this state, it’s time to “fuel the engine” as Eric Ries says, and build it fast. This is the moment you’ll want to attract funding and start adding as many customers as possible (Customer Creation) in order to build a company. In this way, the entire company is built around the customer, not the [by]product.

Customer Discovery

Customer Discovery involves “getting out of the building” and doing Customer and Solution Interviews. Part of the Lean Startup methodology, which combines Customer Development and Agile Development to create a business model that values learning, these interviews are the best way to find out your customers wants and needs – so that you can solve them. Like Agile methodology, Lean methodology uses iterative processes and the Scientific Method to hypothesize, test, and learn in order to create a product that customers actually want before building it. Once they have this “product/market fit” they built it as fast as possible.

What are your customer’s pain points? What are they complaining about? Where do they hang out? What words do they use? It’s only when you know the answers to these questions that you can then determine if they are both able and willing to pay for the solution. The first part of that question is called a Customer Interview.

Here’s an example of a customer interview:

You “get out of the building” and meet with a potential customer in your market and ask them what sort of problems they run into on a daily basis. The business owner tells you about having too much spam in their email.

Now that you know the customer has a problem with too much spam, you create a hypothesis about what product might solve this problem for the customer and set up a second meeting called a Solution Interview to determine what the customer thinks of the solution, if they are willing to pay, and if they are able to pay for it.

Here’s an example of a solution interview:

You meet with the customer, present the solution to them, and ask if they would be willing to pay to have their spam reduced.

Write down any feedback you get because the point is not to sell the product at this point, the point is to learn as much as you can so you can go back and refine the product to create product/market fit. Even if you can’t change the product, you can still iterate your approach or how you you’re using the product to solve that problem. It could be that your product is a better answer to another problem or that a new product is needed.

Applying Customer Development and Lean Methodologies to Content Marketing

Joseph Dager, Lean Marketing consultant and author of Lean Marketing House, says that “Lean Sales and Marketing is about applying Customer Value to the Demand side of your business.”

If you’re solving clients problems you won’t have to do much marketing at all – the customers will seek you out. If they aren’t seeking you out, you might not be solving their problems. But how do you identify what your customers pain points are? The simplest answer is to ask your target client or existing client base what things are bothering them most and when you start to see a trend, you can start to ask if they’d be willing to pay for it to get fixed.

Content/Market Fit

We believe that content marketing is the best way to attract customers when marketing online.

We’ve adapted the customer development process for content marketing and developed a way to create content that achieves a product/market fit that we call content/market fit. We spend more time on content development so that our client’s customers find them. Why? Because the content we develop content that solves a problem for our client’s customers. Whenever they search for the problem they’re having, our client’s solutions are displayed as the answer. In this way, you’re working more in sync with Google’s goals of wanting to deliver the most relevant content to users seeking out answers to their problems.

We help business bloggers write content that answers their customer’s problems.

By spending more time finding out what problems your customers are having, you’ll spend less time in the customer creation process and more time making money in the company building process. How can Erich Stauffer help you build your company? Contact us for one hour of free consultation. Just mention this code: CMF.

How to Start Making Money on the Side

Recently a former co-worker and friend asked me about how I started making money on the side:

I’ve toyed around with a lot of ideas around how to start making money on the side and how to then move from that being side income to my main source of income, but I haven’t pursued anything too closely. I’ve actually picked up a huge work load in applications support at my day job. I’m now the primary support person for items processing, online banking, telephone banking, the company Intranet, the new auto-dialer, all instances of Sugar CRM ( we currently have 3), the online survey tool, the online enrollment tool, and last but not least I’m the main IT contact for the website. So things got really hectic for me, but I’ve realized that if I let myself get lost in that chaos it will only become harder to start making income on the side. For now I’m learning PHP and MySQL and hosting a website using Apache so that I can hopefully branch off and do some freelance work.

So you’re making more working for yourself than you did at your day job?

Yes, I’m able to make a living off of doing web design and IT consulting full-time as an independent contractor. The issues I have are not unique to my business though and that’s managing cash-flow. What that means is that although I make enough over time, it doesn’t always come in at the same rate I need it to go out for bills. In other words, it averages out alright, but isn’t always timed right. For example, this month I’m scheduled to make a $400 profit over my bills (something that never hardly happened when I was at my day job), but right now I don’t have anything. It’s like that pretty much every month and that’s because I didn’t have a savings account when I quit and I still don’t. (EDIT: I do now.)

I don’t think the itch to leave will ever really go away (unless you die inside), but there are ways to test the waters before you jump in. First of all, start thinking of your day job as your biggest client and try to stop ‘expecting’ a paycheck and start trying to ‘earn’ a paycheck. This will put you in the mindset you’ll need when dealing with clients outside of a employee relationship. When I left I had one boss, but now I have over 20 (the number of current clients). My time is not my own. It wasn’t then and it isn’t now. I have to work for them just like I had to work for my past employer. The difference is that if I work more, I get more (and I can charge more). I also get to sleep in and do whatever I want. 🙂

My recommendation to you would be to take advantage of where you’re at and LISTEN to what people are saying. What I mean by this is if you can start to hear what people’s problems are, stuff they complain about, and/or what their pain points are, that’s the beginning of discovering a product, service, or business that you could start in order to solve that need. You’re in a better position in some ways than I am for finding out that information. I would love to find out what problems commercial loan officers have or what problems their clients have. If you can find a problem that you can solve + a customer that is both willing and able to pay for that solution, you have a business idea. This is called customer development.

The key is to iterate your business idea until you have what’s called a product/market fit. Eric Ries talks about this in his book, Lean Startups, but you can also read Steve Blank’s work on it. They’ve worked together so they have similar ideas. But basically, the premise is to 1) discover a problem 2) hypothesize a solution 3) interview potential customers about the solution 4) refine the solution. Once you get to a product that the customer would be MAD at you if you took away from them, you have a product/market fit and then you get funding and build like crazy. There are other subtle variations (like starting with a product instead of a customer), but being customer-centric in everything you do will pay dividends.

One business idea that I don’t mind sharing with you is a “LED light bulb replacement service” where you go to a company like First Merchants and say, “I’d like to save you 40% off your lighting bill and would be happy to show you how it works by converting one of your branches to LED lighting at cost – if you like it, we’ll do the rest of your branches too, if not, we’ll go on our way and thank you for your time.” Essentially, you’re going in, finding out how many bulbs they have, estimating the cost upfront and the cost savings, and then swapping them out in one day. You can even do a buy-back on existing fluorescent light bulbs that you can either trash or sell to someone else. A similar idea is to paint their roofs white.

A typical day for me is waking up around 8, checking my email for emergency work, working on some projects for customers (usually web edits), reading up on subjects in my field, visit a customer at their location or at a restaurant for a meeting, attend a networking meeting or meetup at night, and then in bed by midnight. I recently joined a networking group called BNI and am active on Meetup.com. I run my own group called Indianapolis Marketing and attend several others as well as Tech Point meetings, which are put on by the State of Indiana. I use blogging to content market online, but that’s less successful than in-person networking for me. I’d be interested in hearing what you’re working on at work or in your ‘spare time’.

I know you sell your skills at SEO out to companies but I wasn’t sure if you were still scooping up domain names and putting content with ads up or not. Right now I have a few ideas that I’m going to try to do some research on what kind of market might be out there for these services and if it’s something I could/should pursue. For starters I’d like to design an app. In my head I could see where small companies would really enjoy and benefit from having someone build an app for them. I’d also still really enjoy designing a “portal” similar to what our company Intranet offers, but better on every level. Another thing similar to this is I’d like to design a workflow creator tool. The one inside our company Intranet is completely flawed and my employer began hunting for an outside tool to buy to fill this need. I also am looking at starting a few different blogs around things I’m passionate about such as weight loss, video games, “manly skills”, and adventure. I’m sure to really gain profit from these areas I’d have to really pin point a specific something inside of those categories but currently I’m just looking for experience. Once I see the possibility I think I could really define it more.

Do you still do the blog for money stuff?

I’m really glad they’ve plugged you in and are using you so much at your day job. The opposite of that is brutal and part of the reason I left. They weren’t using me at all and I had nothing to do. Let me tell you from experience applying at other jobs and learning what I’ve been learning over the last 6 months that any and all programming knowledge is the key to the future in the workplace. Make sure you’re learning as much as you can about PHP, SQL, and how to manipulate and query databases. The trends are all going towards software programming, big data analysis, and cloud computing. You’re in a good spot now, but you may be able to take what you’re learning and be more valuable elsewhere. That’s usually the only way to actually get a real ‘raise’.

I still have blogs that make me money, but it’s not my primary income and while it seems like ‘passive’ income, it’s really not. If I don’t keep writing and backlinking, the blogs stop making any real money after about a month of non-activity. That’s why it’s so important for businesses to have a blog and a strong social media presence because if they don’t, they don’t show up in Google where they need to. Think about it, there are so many websites out there now that Google can’t possibly keep them all at the top – so they favor the ones with fresh content. This applies to small businesses, blogs, or anything else online. Let me give you a real-world example:

I had a blog that was making $25 in October, but I wrote like crazy all of November and December. By the end of December, I made $600 from that blog, but after not writing anything for January and February, it’s back to $25. Now some of that was Christmas traffic, but it’s happening across all of my blogs. Unless I write on them and keep them relevant, they aren’t relevant. Don’t get me wrong, there’s still plenty of money to be made in blogs, but you have to do the same thing I told you with starting out a business. You have to find real problems people are having with the product, write to those problems with how your affiliate products are the answer – and the people will come. It’s still work though.

The best thing you can do is to just do something. You’re not going to get good at it until you try and fail. It’s okay to fail, it’s how you learn. I have way more blogs that failed when I first started, but I started two new blogs in December that now equal my top site. I learned from all of my mistakes and can now do it better, faster. As far as apps go, I don’t want to discourage you from trying, but there are some big learning curves and substantial marketing issues to overcome in the marketplace once you’ve made one. My advice there is to pick a platform, make a simple program, then make iterations of the program, making it do more and more or do a different programs over time, learning as you go. You can actually use your apps as a platform to market your new app releases, meaning your best app should probably be your tenth app (and it makes sense that it would be that way anyway).

I make more net now than I did “net” at my day job, but while my schedule is different, it’s sometimes twice the work. That’s because when you run your own business you have to work to get the business, and then you have to work to do the business so it’s almost double the work. At my past employer, the work came to me so half of the work was already done. I didn’t have to run an internal marketing campaign around the company asking for work and specifying why I should be the one to do it. Although, come to think of it, I probably should have. It would have riled a lot of feathers, but it strikes me as a better way to live within an organization. Anyway, I’m sure you’ll figure out what you want to do, but remember to enjoy the moments you have. Enjoy your family, and such.

How to Get More Customers

We did a small test to see what were some of the biggest problems business owners had and what we found was the biggest problem was “How to Get More Customers

We know that in order to get more customers you must first figure out what your customers pain points are – find out what are the things they are complaining about that you can fix – and then determine if they are both able and willing to pay for them. The first part of that question is called a customer interview.

Here’s an example: a business owner complains of having too much spam in their email. You respond by creating or finding a product that helps the client reduce their spam and then asking the customer if they would be willing to pay to have their spam reduced. This is called a solution interview.

Customer and Solution Interviews are part of the Lean Startup methodology, which combines Customer Development and Agile Development to create a more sound Business Model that values learning. Agile and Lean both use iterative processes and the Scientific Method to hypothesize, test, and learn in order to create a product that customers actually want before building it. Once they have this “product/market fit” they built it as fast as possible. Erich Stauffer talks more about this cycle here.

If you’re solving clients problems you won’t have to do much marketing at all – the customers will seek you out. If they aren’t seeking you out, you might not be solving their problems.

How do you identify what your customers pain points are?

The simplest answer is to ask your target client or existing client base what things are bothering them most and when you start to see a trend, you can start to ask if they’d be willing to pay for it to get fixed.

A less effective, but quicker route is to find out where your customers are complaining or seeking out solutions online. A good way to do this is by using Google Discussion Search to search for problems people are sharing on forums and other discussion groups.

We did a test search with the term “my business” and this is what we found:

  • My business keeps disappearing from Google Places
  • I need a slogan for my business
  • I need a logo for my Business and possibly a website
  • I need help getting payments to my business
  • What is the best CRM software for my business?
  • Anyone using Dropbox for business file storage?
  • I need a really good name for my business
  • I need help with my business card
  • A client owes my business money… what to do?
  • Can I request to remove my business from Yelp / Qype?
  • I need help getting my business off the ground
  • How to promote a new site?
  • How many of you have tried Offline Marketing ?
  • What’s your most effective marketing method?
  • What is the most important points of business?
  • How to get more customers?

Once we started noticing a trend, we started recording things we could blog about, solutions for problems like which CRM is best, how to use Dropbox for your business, and how to promote a new website. Our first post is this post, which addresses the last question

How to Get More Customers?

  1. Identify a need by asking or searching.
  2. Find a solution for that need.
  3. Ask potential clients if they would pay for that solution.
  4. If so, write about it. If not, find a different problem or solution.
  5. Once you’ve written about it, promote it using SEO.

Essentially you start out with Lean methodologies, then do content marketing, then finish with SEO. So the key to getting more customers is not SEO, it’s knowing you have a product that solves a problem AND people are willing and able to pay for and then writing up content about it on your “home base” and only then doing search engine optimization.