Are you selling what your customers are truly buying?
31/03/10 13:21 Filed in: Customers
Are you selling yourself short? Do you know and understand what your customers are truly buying from you?
Let me give a bit of background information...one of our current customers is a very specialized service provider who has been around for 20 years solely focused on servicing a very specific industry. Although they do not produce any intellectual property (software), they have been the sales and support partners for industry specific financial systems for many years. As the sales and support company, they not only resell the software, they also provide all of the implementation support, training, technical support, etc.
As part of the Ideas2Revenue process, we spent some time with this client to better understand their offering, current customers, implementation processes, etc. However, the main thing that we try to pull out in this initiation meeting is to have our client articulate the value that they believe that they are providing to their customers. So, this client told us everything about the software solution that they were selling. They told us about how modern the solution is compared to the competition, how the software package is user friendly, etc. However, not once did they talk about the value that they as an organization provided to their clients. In many ways, they were often reducing the price of their own services and implementation support in order to help drive the software licensing deals.
Now, again as part of the Ideas2Revenue service, our next step was to identify, engage, and interview a few of their current customers. When we started to conduct the customer interviews, and we started to use our questioning process to uncover a number of key measurable value metrics, can you guess what we found out? Simply put, is that many of these customers purchased that particular software package because our client was the one selling it. Each and every one of our clients customers stated that the decision to move forward with a new financial solution was based first on the level of support and service that they would receive from our client. The functionality and capabilities of the software package itself were important, however were secondary to the support that they knew they would receive from our client. Each one of these clients used words like trust, reliable, and dependable to describe our client.
So, the point is that you need to make sure that you truly understand what your customers are truly buying when they buy from you. In this example, our client thought that their customers were buying the capabilities of the software that they were reselling, however the reality is that their customers bought the level of support and comfort that they were going to receive from our client and their support organization. In this particular situation, our client was giving away or not charging enough for the services that they provide in order to implement the software solution...in yet what they were not charging enough for was exactly what the customers were buying when making their purchasing decision. So, obviously moving forward the pricing for the services being provided will now have a different price point as this is the value that the customers want and are willing to pay for.
Are you selling yourself short? Do you truly understand what your customers are buying when they purchase from you? There is really only one way to know for sure, and that is to get out of the building, talk to your customers, and ask the right questions in order to reveal the right information. You may be surprised as to what you can learn from this exercise which in itself, if done right can help you to begin making more profitable revenues by selling what your customers are actually buying.
Let me give a bit of background information...one of our current customers is a very specialized service provider who has been around for 20 years solely focused on servicing a very specific industry. Although they do not produce any intellectual property (software), they have been the sales and support partners for industry specific financial systems for many years. As the sales and support company, they not only resell the software, they also provide all of the implementation support, training, technical support, etc.
As part of the Ideas2Revenue process, we spent some time with this client to better understand their offering, current customers, implementation processes, etc. However, the main thing that we try to pull out in this initiation meeting is to have our client articulate the value that they believe that they are providing to their customers. So, this client told us everything about the software solution that they were selling. They told us about how modern the solution is compared to the competition, how the software package is user friendly, etc. However, not once did they talk about the value that they as an organization provided to their clients. In many ways, they were often reducing the price of their own services and implementation support in order to help drive the software licensing deals.
Now, again as part of the Ideas2Revenue service, our next step was to identify, engage, and interview a few of their current customers. When we started to conduct the customer interviews, and we started to use our questioning process to uncover a number of key measurable value metrics, can you guess what we found out? Simply put, is that many of these customers purchased that particular software package because our client was the one selling it. Each and every one of our clients customers stated that the decision to move forward with a new financial solution was based first on the level of support and service that they would receive from our client. The functionality and capabilities of the software package itself were important, however were secondary to the support that they knew they would receive from our client. Each one of these clients used words like trust, reliable, and dependable to describe our client.
So, the point is that you need to make sure that you truly understand what your customers are truly buying when they buy from you. In this example, our client thought that their customers were buying the capabilities of the software that they were reselling, however the reality is that their customers bought the level of support and comfort that they were going to receive from our client and their support organization. In this particular situation, our client was giving away or not charging enough for the services that they provide in order to implement the software solution...in yet what they were not charging enough for was exactly what the customers were buying when making their purchasing decision. So, obviously moving forward the pricing for the services being provided will now have a different price point as this is the value that the customers want and are willing to pay for.
Are you selling yourself short? Do you truly understand what your customers are buying when they purchase from you? There is really only one way to know for sure, and that is to get out of the building, talk to your customers, and ask the right questions in order to reveal the right information. You may be surprised as to what you can learn from this exercise which in itself, if done right can help you to begin making more profitable revenues by selling what your customers are actually buying.
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Are you charging for the confusion?
I was recently reminded of the importance of properly pricing your product or service. A couple of weeks ago, I went out to my vehicle and took off as usual. As I was driving down the street I noticed that my windshield was cracked...(after a few choice words) I thought that I had better get it taken care of right away so that it would not spread. When I arrived at one of the local glass repair shops, I went inside and gave the make and model of my vehicle to the person working behind the counter. Within a couple of minutes I was happily given a quote for $800 installed. Again, I mumbled a few unrepeatable words to myself as I went back out to my vehicle and drove home.
When I got home, I thought that I would check with a second shop which we had used a number of years ago, and had received good service. I called and after describing the vehicle, I was quoted $300 installed. Wow, I was going to save $500 by going with this second shop....but hold on....this can't be right! I was instantly confused and thought that this had to be a mistake. How can there possibly be $500 difference for the exact same windshield? I began to doubt myself and the person on the other end of the phone at the second shop. So after a few minutes, I picked up the phone and called them again...and sure enough I was again quoted $300. I then had my wife phone and she too was quoted $300.
So, whats the issue? If you take a few minutes to look at this, there are a number of key things in this real world pricing example worth highlighting:
1. The second place is leaving money on the table. When I was in the shop, they told me that they actually order from the exact same distributor as the first shop. However, they were shocked to hear the price their competitor was quoting. Yes, they won the business from me...but even if they were $700 they would have won the business from me as they would have still been cheaper. At $700 it goes without saying that they would have made more profit. Know your competitors pricing!
2. The second shop almost lost the business because their price was too low. Had I not wanted to get to the bottom of this pricing difference, I could have just as easily made the decision that it must have been a mistake and made the decision to go somewhere else. Yes...having your pricing too low can hurt you. If there is such a big difference between your price and the rest of the market, people will begin to wonder "what's the catch?" and may actually decide to deal with someone else. In certain cases with extremely low prices, customers will begin to wonder if you are desperate for business, and will ultimately feel safer going with a solution that is priced more in line with the rest of the market. Again, it pays to know your competitors pricing, and if you are significantly cheaper...make sure you address this price difference early in the sales process. If you leave it to the clients to try and figure out why your price is less, they may attribute it to the wrong reason and end up going to a different supplier.
3. Low prices can cost you more. In this situation, the lady on the other end of the phone at the second shop had to take 3 calls from us before we decided to go with them. So, if you think about it, not only did the second shop make less top line profit than their competitor (had they gotten the business), they actually had a higher cost of sales than the first shop. In fact the second shops cost of sales was actually 3X that of the first shop as they had to take 3 phone calls from us instead of 1. Sure, the second company got the order....but even with such an aggressive price, their cost of sales is actually ended up being higher. So, again make sure your pricing is not too far out of line from your competitors...and if it is make sure you are explaining this up front so your sales team does not have to spend even more time convincing customers that the pricing is accurate.
Sure, this is an example for a consumer focused business. However, the example and the key points are just as applicable and valid for B2B companies and sales organizations. Take a look at your pricing...if you have an aggressive pricing strategy, take the time to make sure that you are not loosing sales due to your low pricing.
Getting clear on your target!
Last week I had the opportunity to once again present the "Accelerating To First Customers" session at the Lead To Win program. As always, this fantastic program had some of the greatest new companies in Ottawa participating.
One of the key things that I cover in this session is how to get crystal clear on the true target market for your product or service. This is one of the core fundamentals of any business no matter their size, maturity, etc. It does not matter if you are a start-up who is going through the Customer Development and Lean Startup processes or if you are an existing company that has some great sales results already on the scoreboard. If you do not get this step right, then the list of potential problems ranging from spending precious marketing dollars on marketing to the wrong audience all the way through to even developing a solution that is not truly needed by the market can present itself. The ripple effect of this core mistake can be felt right across the whole company and the problems will present itself in many different forms.
I have done previous posts on this topic so I will not repeat any of these. However, there are two sources of additional information that I have come across and I wanted to share regarding this topic. First, if you are a follower of the Lean Startup and Customer Development methodologies then you may have heard of Giff Constable who is the CEO of a new upcoming start-up company called Aprizi. If you are not familiar with him then be sure to check out his blog. He just did a recent post entitled Targeting Matters! which I think is worth the read.
Second, during the recent presentation that I did with the Lead To Win program, I had them conduct an exercise. The exercise was simply to write to themselves a thank-you letter from one of their hypothetical customers. I first learned about this item from the Lean Startup Wiki and a post Kent Beck did on his blog Three Rivers Institute. This was a great tool to not only help to get people approaching their solution from the customers perspective (the only one that matters), but also to begin identifying the true target market for their solution. In this letter they were asked to write it from the perspective of their "ideal" customer, and were to focus on the benefits (not features) of the solution that they provided to the customer. I found that this was a great tool.
So, are you 100% crystal clear on your target market? If you are not sure, then now is the time to get clear. One way to find out is to write yourself a hypothetical thank you letter from one of your customers.
One of the key things that I cover in this session is how to get crystal clear on the true target market for your product or service. This is one of the core fundamentals of any business no matter their size, maturity, etc. It does not matter if you are a start-up who is going through the Customer Development and Lean Startup processes or if you are an existing company that has some great sales results already on the scoreboard. If you do not get this step right, then the list of potential problems ranging from spending precious marketing dollars on marketing to the wrong audience all the way through to even developing a solution that is not truly needed by the market can present itself. The ripple effect of this core mistake can be felt right across the whole company and the problems will present itself in many different forms.
I have done previous posts on this topic so I will not repeat any of these. However, there are two sources of additional information that I have come across and I wanted to share regarding this topic. First, if you are a follower of the Lean Startup and Customer Development methodologies then you may have heard of Giff Constable who is the CEO of a new upcoming start-up company called Aprizi. If you are not familiar with him then be sure to check out his blog. He just did a recent post entitled Targeting Matters! which I think is worth the read.
Second, during the recent presentation that I did with the Lead To Win program, I had them conduct an exercise. The exercise was simply to write to themselves a thank-you letter from one of their hypothetical customers. I first learned about this item from the Lean Startup Wiki and a post Kent Beck did on his blog Three Rivers Institute. This was a great tool to not only help to get people approaching their solution from the customers perspective (the only one that matters), but also to begin identifying the true target market for their solution. In this letter they were asked to write it from the perspective of their "ideal" customer, and were to focus on the benefits (not features) of the solution that they provided to the customer. I found that this was a great tool.
So, are you 100% crystal clear on your target market? If you are not sure, then now is the time to get clear. One way to find out is to write yourself a hypothetical thank you letter from one of your customers.
Come on...why would they want to help us?
The answer to this question in many ways is simple. However, it is only once we have had the opportunity to explain it to the client does it truly appear to be simple. The following is how we approach answering this question, and hopefully it may be able to help you as part of your Customer Development process....
1. You are not selling anything! As we highlight in our book and what Steve Blank has laid out in his methodology, the point of this exercise is to truly understand the customer, their requirements, and their definition of value. The goal is not to “sell” something. This is a very important distinction that people have a hard time overcoming. If you approach a situation where you have a sincere desire to learn and understand, people will know and sense this. If however, you approach it as a sales exercise, no matter what words come out of your mouth...clients will see right through this and will not truly open up to give you the information that you are trying to uncover.
2. Do your homework. This is extremely important for the next item on this list, but as far as we are concerned it is a “business basic”. The bottom line here is that many of these people will be less likely to spend time with you trying to help you understand their needs and requirements when you have not taken the time to do some basic homework. Go to the company website to better understand what they do and how they make money. If they have annual reports available, take the time to read the most recent one so that you can understand the companies strategic goals and directions. Use tools like LinkedIn, Spoke, Hoovers, Facebook, or even Google to find out more about the company and the individual. Find out what are some of their issues...and their motivation...
3. Try to find their motivation. This is where you need to do your “homework”. Once you have identified the right person to contact, and before you pick up the phone, make sure you have put some thought towards why this person may be motivated to share some of their valuable time with you. Using the tools mentioned above, you can often get some insight into what motivates them. Often, motivators fall into one of the following categories:
• Recognition - People who are motivated by "Recognition" are interested in respect, admiration, notoriety and celebrity. They want to be recognized by people around them as someone important, credible, and someone to be associated with.
• Influence - People whose primary motivator is "Influence" find power, control, competition, independence, and order to be most important. These people are similar to recognition seekers in many ways; however it is more about what they feel the recognition will give them. They may view this power, or influence, as something they need to accomplish their goals.
• Internal - Some people are motivated by "Internal" factors like morals, duty, intellect, creativity, philanthropy, and honor. These people are less affected by what others say than they are about what they say about themselves. This inner voice is what will make them take action, if they believe in the cause.
• Profit - “Profit” motivated people strive for success with money, possessions, acquisitions, wealth, income and growth. Most often people who are in this category will be very upfront and direct about it, which makes it easier to understand and work with them.
4. Just Ask. Not sure how else to describe this other than the fact that people do want to help others. Yes, you are going to come across some people who could care less about you and your desire to learn. However, the world is still a good place, and there are still people out there that are willing to help you if you just ask. If your solution is appropriate and can have a tangible impact on them, their company, and their industry then do not be afraid to pick up the phone and just ask.
The power of the Customer Development methodology is that you can be building your potential customer base while you are developing products and services that clients truly need, and are willing to pay for. With a sincere desire to understand and learn, combined with doing a bit of homework ahead of time will allow you to get the most out of the CD process.
This is how we approach getting meetings with real-life potential clients for our customers. What are some of the things that you do in order to generate live discussions with potential clients as part of your Customer Development process?
Our own guidelines for using email and surveys in the Customer Development process
16/01/10 16:26 Filed in: Customer Development | Lean Startup
Recently, I have noticed more blog posts and discussions within the Lean Startup Circle and other areas regarding the use of email and surveys as part of the Customer Development process. Email and surveys are fantastic tools, and can add a great deal of value, however in our business we have learned that they are not the ONLY tools to be used in order to gather the vital customer information for our clients.
Email has become a day to day tool used by just about everyone today. Email is one of those revolutionary tools that has helped all of us to communicate in near real-time (with mobile devices) and to open up the lines of communication with companies and individuals from all parts of the world. As email will never replace the power and benefits of a one on one interaction, our team has put in place some guidelines for ourselves on the use of email within our implementation of the customer development process.....
1. We never use email as the only way to make initial contact with someone, however it can be used to set the stage for a phone call within the next 48 hours.
2. Email can be used to follow up on a phone conversation or meeting to thank the client for their time, confirm meetings, confirm action items, next steps, etc.
3. Email is a tool that can be used in order to help a client provide an introduction or referral for us. Note...Kevin Dewalt recently did a good blog post on this topic.
4. Email can be used for quick communication with an existing client only after we have met them in person or have had an in-depth conversation with them by phone (Skype, Go-to-Meeting, etc.)
5. Email can be used to provide customers who have been involved in the customer development process with updates, etc. However, if additional requirement gathering is required, or if we need to better understand a specific component about their business / process then we do it through a live conversation.
6. Email is never used to gain any type of customer commitment. It can be used to confirm this commitment, but it is never used to ask for the commitment.
Surveys are also a fantastic and useful tool. The following are some of the ways in which we now govern our use of surveys....
1. Surveys can be used to validate some high level concepts, but are done to compliment or augment the one on one interviews we conduct with the key 10 to 15 key customers.
2. Depending upon the market, and the solution being developed surveys may be used as a way to identify and “qualify” potential candidates for follow on one on one conversations. We make this completely clear to anyone completing the survey.
3. All surveys are set up for a specific target audience, and typically a very specific topic. General market information is gathered by other means (analyst reports, web, etc.)
As the majority of our clients are B2B companies, we recognize that some of these rules may need to be adjusted for B2C customers, or different industries. However, we have put some of these guidelines in place for ourselves to ensure that we are able to get the full benefits that come from “getting out of the building” and having live conversations with the true target market for our clients products and/or services.
What are some of the guidelines (documented or otherwise) that you have as it relates to the use of email and surveys within the Customer Development and Lean Startup processes?
Email has become a day to day tool used by just about everyone today. Email is one of those revolutionary tools that has helped all of us to communicate in near real-time (with mobile devices) and to open up the lines of communication with companies and individuals from all parts of the world. As email will never replace the power and benefits of a one on one interaction, our team has put in place some guidelines for ourselves on the use of email within our implementation of the customer development process.....
1. We never use email as the only way to make initial contact with someone, however it can be used to set the stage for a phone call within the next 48 hours.
2. Email can be used to follow up on a phone conversation or meeting to thank the client for their time, confirm meetings, confirm action items, next steps, etc.
3. Email is a tool that can be used in order to help a client provide an introduction or referral for us. Note...Kevin Dewalt recently did a good blog post on this topic.
4. Email can be used for quick communication with an existing client only after we have met them in person or have had an in-depth conversation with them by phone (Skype, Go-to-Meeting, etc.)
5. Email can be used to provide customers who have been involved in the customer development process with updates, etc. However, if additional requirement gathering is required, or if we need to better understand a specific component about their business / process then we do it through a live conversation.
6. Email is never used to gain any type of customer commitment. It can be used to confirm this commitment, but it is never used to ask for the commitment.
Surveys are also a fantastic and useful tool. The following are some of the ways in which we now govern our use of surveys....
1. Surveys can be used to validate some high level concepts, but are done to compliment or augment the one on one interviews we conduct with the key 10 to 15 key customers.
2. Depending upon the market, and the solution being developed surveys may be used as a way to identify and “qualify” potential candidates for follow on one on one conversations. We make this completely clear to anyone completing the survey.
3. All surveys are set up for a specific target audience, and typically a very specific topic. General market information is gathered by other means (analyst reports, web, etc.)
As the majority of our clients are B2B companies, we recognize that some of these rules may need to be adjusted for B2C customers, or different industries. However, we have put some of these guidelines in place for ourselves to ensure that we are able to get the full benefits that come from “getting out of the building” and having live conversations with the true target market for our clients products and/or services.
What are some of the guidelines (documented or otherwise) that you have as it relates to the use of email and surveys within the Customer Development and Lean Startup processes?