Wednesday, March 4, 2009

Lo, my 2295 subscribers, who are you?

I've previously written about the advantages of having a pathetically small number of customers, and how to get started with customer segmentation. Since my subscriber count has doubled again (thanks!), it seemed time to return to the subject of investigating who my customers are. Today, I'd like to spend some time on two techniques: the problem presentation and learning what channels of information reach customers.

Let's start with what I learned last time. Thanks to those of you who were willing to fill out the survey, I learned my net promoter score (about 25) as well as some clear other segmentation insights: about 80% of you are founders of or work at a startup, you read many of the same other blogs, and many of you would like to engage with Lessons Learned in formats and venues beyond this blog.

Before I go any further, here's the link to the new survey. If you are willing, please take a moment to fill it out before proceeding with the rest of the post; it'll mean less biased results, and you'll have a better idea what I'm talking about later.

Click Here to take survey

As always, I like to start with the NPS question. If this was a startup, I'd be asking it of a sample of customers even more often, because getting a regular tracking result is helpful for informing your decision loop. As I've written before, it is often a leading indicator of major problems. Another key benefit is what it enables in terms of analyzing responses to the survey. For example, those of you who classify yourselves as promoters are more likely than average to have found out about Lessons Learned from another blog. People who joined from sites like Reddit are more likely to be detractors. That's not an earth-shattering insight, but segmenting answers gets more interesting as the quality of the questions we're asking improves. In the first survey, most of the questions were open-ended because I had no idea what kinds of answers to expect, or even if anyone would answer at all.

That's a common pattern to gaining customer insight. Start with open-ended, subjective inquiry, like talking to customers on the phone. As you begin to see patterns, turn to more quantitative options like structured surveys or split-tests to confirm those patterns without as much observation bias.

In the new survey, you'll find more structured questions. They are centered around two themes. The first is asking after problems that you're experiencing. The challenge with these sorts of questions is to keep them open-ended, and to read the answers carefully. Every product ultimately is satisfying a need in the customers who buy it or use it. Products that don't solve satisfy any need for any customers tend to die out quickly. The more painful curse for startups is the product that satisfies a need or solves a problem - but that problem is not very important.

For startups, it is critical that the problem you are trying to solve is top of mind for at least some customers. To see if you're on the right track, consider this hierarchy of customer pain, courtesy of the Four Steps to the Epiphany:
  1. Customer has a problem.
  2. Customer knows they have a problem.
  3. Customer knows they have a problem and is actively trying to solve it.
  4. Customer has a budget allocated to the problem or is otherwise trying to spend money solving it. Ideally, they are trying to spend money but can't find a vendor to solve it for them.
  5. Customer is actively spending money, time or effort on solving the problem and failing. This is likely to be an early adopter, because they have the vision to see that the problem is important and they are already putting together a solution out of piece parts. But if that piece-parts solution is great, then it's unlikely they are going to need to buy any additional products.
Because this language may lead you to believe this concept is for enterprise sales only, I thought I'd walk you through an example from the world of consumer electronics. One of my favorite gadgets at home is the Harmony Universal Remote. This device let's you control all your home entertainment devices without requiring you to "train" it from your existing remotes. It connects to the internet to automatically download the necessary codes. But the real breakthrough is a usability insight: that people don't really want to control devices. They want to do activities. So the remote has buttons for simple high-level activities like "watch TV" or "watch a movie." When pressed, the remote configures all the right settings automatically to fulfill the customer's intention. It works like magic.

Imagine what it must have been like for Harmony in their early days. Most customers they talked to have a problem: their coffee table is littered with tons of obscure remotes. Do they know they have a problem? Not in that many cases. Sure, people like to complain about their consumer electronics, but most people have way bigger problems in their lives. But there are some people who have this problem in a more severe form, and since we have the benefit of hindsight, we can quote them. Here's a representative view from an actual Amazon customer review:
We all know how to operate our own entertainment center, but what happens when you have to explain it to your babysitter, mother-in-law, or your wife? Before this remote, I had a Sony RM-AV3000. It was a decent remote, except that it took hours to set up the macros, and the instructions that I had to leave for the babysitter were longer than the instructions for my kid!
This remote took 15 minutes to set up 6 different components (including lighting) on Windows Vista. Long lasting battery, great feel, a little pricey but anything to make it easier on me. After all, a happy wife is a happy husband. A happy a happy? Well, I wouldn't go that far!
That's an example of someone who had a problem, knew they had a problem, and had previously tried to solve it with a complex and inadequate solution. If Harmony had sat down with this person in their early days and asked them about their "remote control situation" I am confident they would have heard an earful. And if they had sketched out the concept for the activity-based remote they were building, I'm pretty sure he would have signed up on the spot. That's an early adopter.

If you are grappling with understanding what problem your product solves, try building a "problem presentation." This is way of talking to potential customers in which you do not mention your product at all. If it's appropriate, build a few slides. Or create an online survey. Or just talk to people in person. However you do it, focus on explaining the problem you think you will eventually solve and how important it is. If your customer is nodding along, keep getting more and more detailed about how the problem affects their life or their company. When they look confused, stop and ask them to explain, clarify, and correct you. When you get to the point where you can get three consecutive customers to nod through your whole presentation, congratulations. You've got an accurate read on the problem. Then, and only then, should you proceed to start trying to sell people your solution.

The second set of questions in the survey are focused on learning where you currently go to find solutions. In particular, I've focused on the two channels of communication that were most commonly suggested in the first survey: conferences and books. In a startup, these channels of communication are critical to understand for advertising, launch and PR purposes. But beyond the obvious, it's also important to know where customers go to get answers to pressing questions. If they are willing to pay big bucks, for example, to attend a conference on a certain topic, that bodes well for your ability to sell them a product related to that topic. And, for conferences, it also tells you where to go to talk to them. This is especially important for startups that have a small number of target customers, like those that sell only to large companies in specific industries.

I'll mention one last thing about knowing what channels of communication your customers engage with. It also gives you insight into their language. This is important, especially if you are a very early stage company. If you're used to pitching your company in a startup hub, like here in Silicon Valley, you may suffer from a debilitating disease: the inability to describe your product to normal people. That's no big deal if all you want to do is sell to people who live in startup hubs. But for most of us, that's devastating.

For example, when pitching IMVU, I used to say things like: IMVU is an 3D avatar IM platform with a micropayment economy powered by user-generated content. No customers understood what that meant. If we had bothered to ask them where they get their information, none of them would have said TechCrunch or Mashable. If we had spent even a tiny amount of time engaging them on this question in our early days, we could have saved a lot of time. Of course, we would have had to spend some time reading teen magazines. But isn't that a small price to pay to change the odds of your startup making it?

So thank you so much for subscribing. And an extra thank you to those of you who can spare a few minutes more to let me know what you're thinking. Have suggestions for other questions to ask in future surveys? Go ahead and leave your thoughts in the comments.


  1. That survey apparently subscribed me to feedburner updates at the end.

    Anyway, the important part was, I'd like to see a post about growing a company from small (10) to big (100) and how to organize the teams and roles.

  2. @Anonymous - thanks for the feedback.

    Don't worry, you can't be subscribed without your consent. That Feedburner page lets you subscribe if you want to give your email address.

    Thanks again,


  3. Great post. I'm not sure how recent your subscription increase was, but I think a little of that may have to do with your previous post hitting the front page of Hacker News.

  4. Dear E, so good to come across this. I had wondered about your whereabouts :-). Your writings are so very thought provoking, and now reading them will take a slice of my ever diminishing bandwidth. Best wishes to you, p
    (Just subscribed, so u hv my email)