Lesson #4 - Customer Development Adapted for Web Apps, by Ash Maurya

In order to build a successful product, you have to eventually find a scalable and repeatable way to reach customers.

 

There is an implicit expectation that customer development will uncover that path to customers.

 

My experience (with web based products) has been that it’s not as much the uncovering of the path but the building of the path that is troublesome.

 

Some paths are obvious but hard, such as those built on referrals (word of mouth), SEO, etc.

 

It’s comparatively a lot easier to find 30-50 people, validate you have a problem worth solving, build a MVP, even get them to pay you – all of which is a false positive if it was predicated on a customer acquisition approach that won’t scale or more importantly be applicable to how you acquire customers in the future.

Customer Development needs to be a continuous learning process

Customer Development is about establishing a continuous feedback loop throughout the product development cycle. Enterprise selling necessitates constant contact with customers throughout the customer lifecycle.

 

This is NOT the case with web software. To fix this, you have to build appropriate customer touch points in the form of ongoing usability tests, customer feedback calls, interviews, etc.

Start building and testing a path to customers from day one

Seasoned entrepreneurs know that building a significant enough path to customers is one of the hardest aspects of building a successful product.

I always get at least one question from the audience during my talks/workshops on “finding prospects”. I used to answer this question with the canned response of “make a list of people you know, start there, ask for referrals, interviews will reveal the path to customers”.

 

Now, I slant my response more heavily towards finding prospects by way of testing the actual channels you intend to use for reaching your future customers.

Don’t get me wrong. Talking to anyone is still way better than talking to no one. If you have no idea how to reach early prospects or if the channel takes time to build, start with your 1-degree network.

But, don’t declare Problem/Solution Fit unless you’re able to recruit a fair number of your interviewees using an actual channel you will use.

It’s also equally important to point out not to fall in the trap of prematurely optimizing this channel. You may not have a problem worth solving or have to pivot to a different customer segment. Premature optimization is a form of waste. Your first objective should be driving just enough traffic to support learning. During Customer Discovery, that means enough traffic to yield 30-50 interviews.

Some examples –
1. Write a blog post that ends with a call for participation in an interview
2. Create a landing page and drive SEM traffic with a call-to-action ending in an interview (not a survey).

Start building and testing your selling process as soon as possible

While Customer Development does NOT magically scale even for Enterprise software, the learning from the interviews can more easily be applied towards building a repeatable and scalable direct sales process.

Selling a product over 15-20 minutes in an interview is very different from selling a product in 5-8 seconds on a landing page.

Again early interviews are helpful in identifying what’s important (your unique value proposition) but you need to start testing that in the right format (e.g. landing page) as soon as possible.

Some examples –
Run customer interviews in a usability test format.
1. Instead of verbalizing the unique value proposition, show them a landing page and test positioning.
2. Instead of getting a letter of intent, watch them sign-up to your service and note where they get stuck.

Retention, not Revenue is the Ultimate Validation

Getting paid is only the first form of validation. Providing ongoing value (as measured by customer retention) is the ultimate validation. While this is true for both Enterprise and web businesses, early revenue plays a bigger role towards customer validation in Enterprise software than web software. For one, the purchase order is a lot bigger. Also, because the sales process is a lot harder to close, the barriers to loosing a customer are higher compared to web based software that can be canceled at any time.

Here again, Enterprise Software has a natural customer feedback loop built-in – in the form of account managers whose job is to periodically ensure customer engagement and retention are healthy. In a web based business, you have to build and monitor that feedback loop yourself with potentially thousands of users.