The One Question Customers Should Ask

Below is the “Tip of the Week” transcript from the Podcast Episode 14: The Stages of Fundraising (Ann Winblad)

We talked about proof points and investing in companies with an absence of proof points. Ann talked about the days when seed investing was less prevalent and she often had to make earlier stage investments. They would often talk with customers and ask if they would purchase a product… and this led to a lot of ifs and mights and questions about the viability of the market for a product.

Before I left my previous employer my goal was to get firsthand experience leading innovation. Prior to that I had operated in strategic and M&A roles at 30,000 feet where I learned a tremendous amount but had no firsthand experience within the companies I was advising.  So, I was able to work out a transfer to a division in which I could lead breathrough innovation.  And while the technology that we were developing was truly disruptive, the customer-facing product was ill-defined and positioned for the target market… essentially the customer didn’t want it. Through many product iterations and customer testing around North America, Europe and South America, we were met with confused looks and furrowed brows. It was really kind of distressing b/c we had this revolutionary technology that was in an embodiment that no one seemed to want.  But slowly the product, user experience and messaging evolved, and there was interest. We would ask the standard purchase intent question, “how likely is it that you would buy the product at X price?”… with the goal of getting to greater than 25% of the target customers responding “Definitely Buy.” Yet, the response from customers began to change. As we better tailored the solution for the target market, we no longer had to ask the question. The customer began asking me intently, “how can I get one?” “When will it be available?” and even “Can you leave this prototype here? ”   There was even  a guy in Italy that I was worried was not going to let me leave with the device…  but at least I got out of there with a strong intent to purchase. So, the reason I tell this story is because of two major learnings:

1. Is a demonstration required in order to sell or can the messaging alone compel a purchase? In the case of my example, the customers who used the product became evangelists… but we recognized that in order to scale, not every customer is going to have a chance to use the product before they buy. So the messaging and positioning must be crafted in a way that drives sales conversion.

2. What seems like a subtle difference in customer response, is actually very meaningful. As an investor, you should be talking with customers and those in the target market before an investment. Have you ever been in a situation where you told someone about an app, for example, and they said it was cool or interesting but never asked you for the name of the app or got out their phone and downloaded? The unmet need in the market should be so compelling that customers ask for it. And when they do, they become an extension of your sales force that you don’t need to pay a salary or a commission. These evangelists will refer you for free.

In the past, I’ve heard this discrepancy referred to as the vitamin pill vs. the pain killer… Would you rather knock on doors trying to sell the vitamin pill, or just answer the phone as customers call you for the pain killer?

Ultimately, in a world where cash is scarce and traction is everything, find out if your startup’s customers are asking to buy it now or saying, maybe later.

 
   

   
  • Geoff Rothman

    Hey Nick, great job summarizing all of this so succinctly. This is high value content! I’d love to see you replicate these in LinkedIn’s new Publishing feature if you aren’t already.

    The good thing about my previous job at HP was learning #1 the hard way. I’m pretty strict with sales reps now who try to lean on the demo to do their sales job for them. I remind them that the software is the strongest in the market and has really compelling value messages for every vertical and they need to lean how to sell the value. Demos for everyone just don’t scale (oh and btw, I refuse to do it for them…that’s a barrier in itself lol). We do pretty thorough discovery with the prospect and cater the demo to address their critical business issues. That helps narrow scope and also allows them to justify the purchase the cost. To address the last sentence in point #1, SFDC has a killer marketing team that creates compelling videos and sales enablement tools that honestly makes our job really simple most of the time. Finding that compelling message/vision was key to its success as you mentioned.

    • So true. I’ve used SFDC. It is a very powerful tool. Look forward to checking out LinkedIn’s publishing feature.

Listener Feedback

Pete Maglio

The takeaways to end this episode are fantastic! Thanks @TheFullRatchet & @BenEinstein! pca.st/Fey4 #smartHardware #startups