• Innovative Strategies That Create More Profits

Category: Business Model Private

Customer-Centered: How Can I Help You?

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In today’s world, most people realize that you have to put the customer, not the product first. But, does that mean that you accept everything the customer tells you? NO,

 According to David Stucer, in a Sales & Marketing article, you believe the customer when he is talking about his issues. You do want to pay attention when they tell you their needs when they tell you what’s broken in their lives. And when they say why where they are hurting?

The reason a customer comes to you or wants to do business with you is that he wants you to solve his problem. Therefore you have to show him how you can solve his problem or issue. As David would say: “we hear you, we can help you; here is how.”

Solving the problem is easier said than done, however. You can grasp the problem conceptually, but most people have difficulty conceptualizing the solution. Make it easy for them to see how you can solve the problem,

Most often, people jump to talking about their company and their product or services. That’s undoubtedly not customer-centric. The customer doesn’t want to hear about your business; he wants to hear about how you are going to solve his problem. 

The wrong way to go about it is to put the spotlight on your company. The longer you talk about your company, the less time you have to listen and speak to them about their problem, And there is a good chance that after a short time they will stop listening and turn you off,

You  will get a better reception if you focus on how your business can help him improve his business, As David would say, “People are far less concerned with doing business with an awesome company then they are about whether the company can solve their problem”, You will also begin to build a relationship with that client,

That’s customer marketing, getting the attention of people who have a need you can meet.

Success Depends On Knowing Which Market Type You Enter

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Market Type makes a critical difference when you enter a market, Yet, many entrepreneurs do not consider market type when planning how to enter their market. There are four types of markets and each one needs to be approached differently. Steve Blank in his book, “The Four Steps To The Epiphany” describes the four types as:

  1. Startups that want to enter an existing market
  2. Startups that are creating a new market
  3. Startups that want to resegment an existing market as a low-cost entrant
  4. Startups that want to resegment the market as a niche player

Which market type you plan to enter changes everything. How you evaluate customer needs, customer adoption rates, how customers understand their own needs, and how you position the product to the customer. The market type also changes the market size and how you launch the product into the market.

For example, If you enter an existing market, the market knows you and will accept your new product based on its segmentation and merits. If you enter a new market, no one knows what the product is or who you are so you have to educate the market about what your product can do for them.

Here is some additional information on the four market types.

New Product in an Existing Market

An existing market is easy to understand if you have a better value proposition both buyers are known and competitors are known. So its all about the product and the product’s features and benefits.

New Product in a New Market

This is a situation where you have to create a new, large customer base (large enough to be profitable) that couldn’t be done or wasn’t done before you came along.  What’s your story: a new better product, lower cost, a new class of users, a new product that solves availability problems, or a new skill or technology.

Normally, at first, your product will be ignored. Who needs it? Most people will be skeptical, But at this time you also have no competitors. That’s good because you need time to determine who the users will be and what the specific targeted market will be.

In a new market, your problem isn’t how to compete, its how to convince a customer segment that your product is needed and up to the task.

Creating a new market means you have to determine:

  1. If there is a large enough  customer base for your product
  2. If the customer can be convinced they need and want this new product
  3. What the adoption curve (especially for revenues and margins) looks like
  4. What the financial requirement will be (burn rate during the adoption phase) and if you can raise the funds needed.

New Product in a Resegmented Market. A majority of new startups are aimed at this hybrid market. There are two types of resegmented markets:  Low-cost strategy or a Niche strategy. Segmentation here means you selected a position in the customer’s mind that is unique, understandable and concerns something the customer values.

New Product in a Low-Cost Segmented Market

In this segment, customers will be at the low end of price and value. This is the “disruption” that Clayton Christenson made famous in his book on disruptive technology, These customers will buy a new product if the product is “good enough” and priced at a substantially lower price then what is available now. 

The good news is that established companies will not compete with these new,  low-cost providers because their cost structure makes them unprofitable at these prices. So, they ignore the new entrant. But, over time, the new entrant moves upscale and sooner or later become a significant competitor to the established companies. Then, major competition erupts.

New Niche Product in an Existing Market 

To introduce a new product in this market, you need to ask the question: “would people buy a new product designed specifically to meet a specific niche or mindset (want); even if it costs more or has less performance?

If you enter this market, you have to convince the market that this new product is so different or even radical that it changes the characteristics of the market. Unlike a low-cost entry, here you are only going after segments with higher prices and affluent buyers.   

Resegment Markets Summary

In both resegmented markets, you have to re-frame the product and how people think about the product within their existing market.

Trying to resegment an existing market, especially with a low-cost product can be difficult because you need a long-term plan. Longer-term, moving upmarket will bring intense competition from companies protecting their profits.

Before you jump in, ask yourself, “What kind of a startup are we?”

 

How To Develop Your Business Model For Better Results

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In contrast to the usual product development model, Steve Blank, in his book, The Four Steps To The Epiphany,”

describes his new approach to developing an efficient and effective path

on how to develop your bu for better results and gives your startup a real chance of success. 

 

Most startups lack a process to create, develop, and validate their business.

They start by developing the product first because they know it’s such a good idea.

They don’t realize that there are millions of needs and wants in the market, and their view of needs may not match the market’s needs or wants.

If you want to succeed, you can’t be founder-centered; you must be customer-centered.

 

His model has four steps:

 

One: Customer Discovery. Focuses on finding product-market fit by determining if

the product solves the customer’s needs and wants.

Two: Customer Validation: Develop a sales model that is repeatable.

Three: Customer Creation: Creates and motivates end-user demand,

Four: Company Building: The move from the learning phase to the business execution phase.

 

This model flips the “development model” on its head. Rather than developing the product

and then finding the market, you do the opposite because it takes several iterations to get it right..

Plus, it’s a frugal way to determine if you have a viable, sellable product.

It also keeps you from hiring sales, marketing, and other company development people too early.

 

Here is a little more on each strep

Customer Discovery

Based on your hypothesis, you need to go into the market and find out if the problem,

your product and your solution match what the customer wants. 

This combination will take several attempts and several iterations to your hypothesis.

You can’t do this with focus groups; you need the interaction with the customer,

Also, this has to be done by the founder and the founding team.

 

You can’t send out a salesperson to do this.

You have to read the customer and determine if what the customer

is telling you is correct and if you should modify the product as a result. 

 

Don’t start the conversation with your product vision. First, find out what the customer needs, 

why he wants it, and what he doesn’t like.

You are there to learn from the customer, not sell him something now.

 

Customer Validation

In this step, you are trying to build a repeatable sales roadmap for the team that will follow.

This step proves you have found a market and customers willing to buy your product.

It also  validates, through field testing, that your sales process is repeatable,   

This step also confirms your business model, your market, and customers,

identifies your buyers and establishes pricing policies and channel strategy.

Once all of this checks out, you can move to the next step, crossing the chasm into the mainstream market.

 

Customer Creation

The goal here is to create end-user demand and drive that demand to the sales channel.

But don’t try to scale so quickly that you deplete all your financial resources.

Crossing the chasm is a difficult step and can take some time. 

 

Also, how you plan to do customer creation will vary with the type of startup and market type you are entering.

For example, a new market with a new product or an established market,

or are you entering an established market with a low-cost product or coming with a new product in a hybrid market.

Each of these has significant revenue and time considerations. See the discussion on market types.

 

‘Customer Building

Customer building is the step where you transition from a “learning company” into a formal “operating company.”

With appropriate departments, each department becomes mission-oriented within the overall corporate strategy.

 I would love to hear what you think of this approach.

If you used it and how it worked. Email me here. Thanks.

 

 

Why Customers Not Products Drive Successful Companies

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Before getting into the details of Value Proposition, we need to take a more general look and value proposition and customers first.

Do you know why customers will buy your products or services? Most entrepreneurs think it’s because of their product or service and its features, functions, and benefits. That is what entrepreneurs ask potential customers about, and that is what established, competitive
companies fight over. This attitude is a short-term, transactional mindset.

Successful companies know what their potential customers want. They are customer-focused rather than product or company focused. They know that customers want to buy products and services from companies whose products and services were created for them. When that happens, they become long-term, loyal customers.

For example, Apple said they wanted to design computers that would empower individuals and be easy to use. That purpose drove the company to make computers that a segment of customers wanted and was willing to pay a premium to get it. Customers believed what Apple
believed. This outward, customer-focused approach led to long-term, loyal customers.

Here is an example of the opposite inward product looking approach. Honeywell started a computer division in the 1960s and claimed they were “The Other Computer Company,” taking the assumptive position that they were second only to IBM. But customers didn’t see it that way.
They didn’t believe it. Honeywell’s computer features, functions, and benefits were not broad enough to displace IBM. They only had short-term, transactional customers and were forced to sell the computer division after several years of losses.

Startups need to start with what the customers want, not what the founders want. You still need to ask critical questions about your value proposition and determine the importance of each feature, function, and benefit. And you have to ask about every aspect of your product offering, including quality, functionality, packaging, service features, ease of use, reliability, and more.

It would be best if you also had a lot more than demographic information. You need to get into the market and talk with prospects so you can get into the minds of buyers, users, influencers, decision-makers, and even people who could kill the sale. And you need to classify these potential customers by
the reasons they buy.

 

How Do You Get Product-Market Fit 

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Product-market fit is when your product/service benefits match your customer’s profile. Marc Andreessen, entrepreneur, and venture capitalist stated that it is when you get organic growth. We are going to discuss both of these, but we have to understand the customer first. The first question to ask does my product/service create the ability for the customer to do things they can’t do now). Or does it relieve the customer of current pains? This question applies to their work and home life.

Make sure you see the “job to be done” from their point of view, not yours. Also, distinguish between the types of jobs customers are trying to get done.

stated that We are going to start by putting some context around customer pains and gains’ First, the way we need to look at jobs, the pains and then gains.

Types of Jobs

Functional Jobs. When a customer performs a specific task or tries to solve a particular problem, Social Jobs.Situations where the customer wants to look good or gain status. Personal/emotional Jobs. When the job makes, the customer wants to feel good or secure.

Supporting Jobs is when the customer is playing a supporting role. For example, comparing product offers or when they are co-creators such as offering feedback or terminating value such as disposing of a product or service.

It is vital to take note of the context in which the job takes place because the framework can impose certain limitations or open up liberties. Also, not all jobs have the same importance.

Now Let’s Look at Customer Pains. Pains are anything that annoys the customer when he/she is trying to get the job done. Pains can also be potential risks the customer faces in trying to get the job done. There are three types of pains.

Functional Pains. The solution doesn’t work well, has adverse side effects, emotionally frustrating, or the job is tedious. Obstacles. Things that prevent getting the job started or completed Risks. Undesirable outcomes.

When examining these jobs and their pains, be as specific as you can. Are there any metrics you can use to clarify these pains (time, dollars, satisfaction, etc.)

Now Let’s Look At Customer Gains. Gains are outcomes and benefits that customers expect and are desired. These include performance, emotional, and cost savings. There are four types of gains:

Required Gains. It provides the basic or minimum positive gains expected.

Expected Gains. These are some additional gains we expect from the basic gains.

Desired Gains. These are gains we expect that go beyond what we expected.

Unexpected Gains. These are exceptional gains never imagined.

Again, when evaluating gains be as specific as possible. Can you use metrics to measure these gains rather than terms that could be misinterpreted? When you know precisely how to measure gains, you will be able to design a better value proposition.

 

 

Ranking Jobs, Pains and Gains

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Before beginning, consider the following three modifiers:

First, by ranking groups (segments), you still have to remember that individual preferences will vary substantially. Second, determine and rank which jobs are important and worth spending time investigating. Third, find out which pains are the most extreme (the must-have vs. the nice to have). Once you get in the field and begin talking to your prospects, you will modify your ranking,s and keep modifying them until you get a clear picture of your prospect’s priorities.

Begin by selecting a specific segment and ranking their pains and gains. Don’t mix segments or groups, including job types (see the previous article). Also, in your analysis, remember that these potential customers may have other ways of getting their job done in addition to your solution.

Also, your analysis should result in many pains and gains, which you will have to prioritize and be as specific in describing these pains and gains as possible. Even use metrics if possible. If the customer needs to get the job done faster, how much quicker, why that pain exists, and what would be the gains if it completed more quickly. Cover both sides of the coin. It would help if you also asked why this pain or gain is significant versus a different benefit or pain. That may help you understand the intensity ( a 1 or a 10) of this specific pain or gain. This article was quite short, but it will take your time and attention to get this information, and the information is critical.

 

Examine All Your Products and Services

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The first thing you will want to make is a list of all the items you offer. Altogether, they help your customers complete either functional, social, or emotional jobs. Also, remember that products alone don’t create value — they only do it in relation to a specific customer segment and their jobs, pain, and gains.

 Ask yourself, how to do (all) your products and services alleviate customer pains. Also, do you have any supporting services or ways to help customers compare offers, help them decide which products or services to buy?

Your value proposition will include various types of products and services:

  • Physical or tangible products (manufactured products)

  • Intangible (copyrights, after-purchase services, etc.)

  • Digital (downloadable products and services)

  • Financial (financing of the purchase)

But not all products and services have the same relevance to the buyer. Look at each one, is it a must-have or a nice to have? The following are some suggestions from Alexander Osterwalder’s Business Canvas.

Pain Relievers

How do your products and services alleviate specific customer pains? Focus only on a few and on those that matter most. Which one solves problems quickly or entirely?

Ask these questions. Can your product or service:

  • Does product or service produce savings (time, money, effort)?

  • Make your customers feel better (get rid of annoyances, headaches, etc.)?

  • Fix underperforming solutions (new features, better performance, better quality)?

  • Eliminate negative social consequences your customer might face (lost of trust, stature, etc.)?

  • Eliminate risks customer fear (financial, social, technical)?

  • Help your customers sleep at night (eliminate worries)?

  • Limit or eliminate common mistakes and help them use your solution in the right way?

  • Eliminate barriers that keep customers from adopting your value proposition (lower-cost financing, shorter learning time, etc.)?

Again, make sure you are talking about those that are relevant and relieve pain.

Gain Creators

Here you want to describe how your products and services create customer gains. How you will produce outcomes and benefits, your customer expects or would be surprised to see.

As with pain relievers, gain creators don’t need to address every gain identified in the customer profile. Focus on the ones that are relevant and where you can make a difference. Ask if your product and services can:

  • Create saving that will matter to your customers (time, money and effort)

  • Produce outcomes that exceed expectations (e.g., quality)

  • Outperform current value propositions

  • Make customers work life easier

  • Create positive social consequences

  • Do something customer did not expect

  • Help make adaption easier

  • Help customers get better performance

Again, make sure each one is relevant. Great value propositions focus on jobs, pains, and gains that matter to customers and exceed their expectations.

 

Business Model Canvas

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Business Model

This module is about the business model starting from the initial assumptions (hypotheses), through testing and validations. This is not something you can do is a few minutes and contains many, many steps. Much of this information will come from the work done by Steve Blank, the professor at Standford. We will also use Alexander Osterwalder’s business canvas because it gives us a very simple way to visualize the pieces of the business model we control and the pieces of the business model we do not control like competitors and the government.

Some steps will be quick and easy to accomplish and others will be difficult, laborious and time-consuming, but every step is important. If you skip over steps or don’t give them the effort and time they require, they could turn out to be a major problem down the road. We are going to start with value proposition.[/vc_column_text][/vc_column][/vc_row]