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How to Create a Successful Product for a Startup?

Guest post by: cynthia kocialski

Article Overview: Creating a successful product for a startup begins with the customer. It's the process of looking for the ideal balance among what a customer wants and is willing to pay for, what a start-up can create in a reasonable amount of time and at an acceptable price, and which product has a large enough market share to make a sustainable business. But wait, customers don't always tell the truth. And yet more, the first customers may not be the ones that make the company profitable.

How to Create a Successful Product for a Startup?

Beginning a start-up is looking for the ideal balance among what a customer wants and is willing to pay for, what a start-up can create in a reasonable amount of time and at an acceptable price, and which product has a large enough market share to make a sustainable business. Experience has shown the marketing risk is greater than whether the technology can be produced; not many start-ups have failed because they couldn't develop the product. If the start-up is a software company, there is little doubt the software package can be produced, but whether customers will buy and use the software is far more uncertain. The key to market acceptance is understanding the customer. Customers are people who do not view your product in business terms. They are the humanistic side of product development, and they are unpredictable, irrational, and emotional. While this seems to be obvious when referring to consumers, it is true for businesses as well. Despite the empirical evaluation of the purchase, the decision maker, the champion of the product, and the end users are all humans.

CAUTION: Early Adopters Are Not the Same As Mainstream Customers

All customers are not created equal. It seems obvious, but the danger lies in assuming the first customers are the same as the majority of customers and letting the euphoria of winning these early customers translate into a belief that your product will be successful. Early adopters are risk-takers. They are the visionaries. They want the latest electronics gadgets and enjoy showing off their new toys. They are enthusiasts. They will accept a feature-limited, not-so-easy-to-use version for the sake of having the functionality. They are willing to pay a higher introductory price to have the latest and newest gizmo. They are usually the ones with an immediate problem that they needed solved yesterday and are desperately seeking a solution. Early adopters will spread the word about your product. These early adopters are less than 10% of the potential customers. However, mainstream customers are practical. They want tested, proven, full-featured, easy-to-use technology at a reasonable price. They are also the down-to-earth pragmatists. They are the ones you need in order to build your business because they will be the bulk of your revenue. Late adopters are reluctant and risk averse. They have to be dragged, kicking and screaming, into the new era. Left with no choice but to change, they will grudgingly try the new-fangled device. Many start-ups have failed because they didn't realize the difference between the early adopter s and the mainstream customers. The mainstreamers make the difference between an operating loss and profitability.

What causes the failure when companies don't recognize the difference between early adopters and mainstreamers? The first failure occurs when the company engages in an expensive advertising and promotion campaign after these early adopters appear to have validated the demand for the product. When the sales leads don't materialize, what's the reaction? Sales is considered to be the problem because they aren't closing enough deals on those few precious leads, and new sales people must be employed to correct the incompetence with the current sales force. Next, marketing is the failure because they aren't generating enough demand. The solution is to create better ads and engage the customer on different channels. The burn rate at the company sky rockets, and there are still scant sales to show. The second failure is making the mistake that customers who are attracted by free products are indicative of paying customers. One of the dot-com lessons is that there is unlimited demand for free products. The customers who will use your product for free do not have the same characteristics as those who will pay. If a marketing and sales strategy is based on what's important to a free customer, you won't attract the paying customers. The method by which free customers learn about companies and their free product offers may not be how paying customers find them. Today, unless your product is targeted at creating a new market space, giving away a product for free in order to build market share is viewed as absence of a marketing and sales plan-a "we'll figure it out later" strategy.

CAUTION: Customers Don't Always Tell the Truth

I was at a sporting competition for children the other day. Every time one of the kids did something, as a parent, I dutifully cheered and encouraged them with words of "good job," regardless of whether it was a disastrous maneuver or not. Customers behave the same way. Customers don't always tell us the truth. They spare our feelings. The saying "Action speaks louder than words" holds true.

I was in a customer meeting with a software company that was just turning seven years old. The founder and CEO had come to ask his biggest customer for feedback on the company's flagship product. The audience gave glowing reviews of the software, and when he mentioned possible new features or programs, the audience also gave positive feedback. As the audience exited the meeting, small groups muttered about how difficult it was to use some of the current features and how they'd never use many of the proposed ones. What happened? His biggest customer was an old, established giant of a company, where skills in office politics determine one's career growth more than performance does. Employees learned that, in order to thrive, they had to temper their comments and be publicly upbeat and positive, and this behavior was applied to the customer meeting. The CEO of the software company wanted blunt feedback-the good, the bad, and the ugly-, but what he got was quite different.

Actions speak louder than words. One way to circumvent the above behavior is to watch your customers' behaviors and ignore their words. Send someone into your customers' offices and have them show you how they are using your product or ask to observe as they are using it. The truth of your product will be shown to you. That's not to say that they will accurately show you what they do because, sometimes when people are observed, the mere act of observance may cause them to behave other than they normally would. But with technology, if the customer can't find the right series of clicks, it's a sure sign your product isn't being used as you intend. Excel is a commonly used spreadsheet program that allows users to analyze and manipulate data. It's amazing the number people I've seen use Excel to format documents like a word processor because they don't know how to use Word.

Talking to your customers regularly will give them the comfort zone to speak more freely. You will often glean more information about your product from the side comments and one-liners than from the response to a direct question. Talking to your customers out of the blue puts your customers on their guard. Imagine someone you haven't seen in 10 years calling you up and asking to borrow money. Are you going to loan it to them? Not likely, but if they are someone you see regularly, you might. It's a good idea to keep your customers talking and talking.

CAUTION: When Customers Tell You What They Want, It's Limited, Not Visionary

If you ask customers what they would like changed in a product, what do you think they will say? First, they will ask you to provide functions they find missing or to fix what does not work well in today's solution. They will ask for an incremental improvement in what is currently available to them now. Second, they will look to the products offered by the competition and ask for features that the competitors offer in their solutions. And if customers look beyond your competitors' products, then they will look to unrelated products that they use and ask to transfer features found in these products into your products. The question a start-up has to answer is whether one can truly differentiate its product in the minds of the customers by offering slight improvements or variations over the existing product.

So if you want to offer a revolutionary product, one that is a break from the conventional or truly unique, you won't get that information from the customer. We have all heard someone say to us, "I don't know what I want, but if I see it, I'll know it's what I'm looking for." The customer may describe the problems, but the vision of how to solve that problem has to come from the start-up. A customer can be shown a mock-up or demo and, from the tangible, offer suggestions and observations. The saying "If a picture is worth a thousand words then a demo is with a million" is very true. If a demo isn't possible, then it becomes a matter of creating a familiar way in which customers can visualize the product: A metaphor or an analogy will help make a revolutionary product more tangible.

METHOD: Does your initial marketing avoid these problems?

Who are the people, partners, investors, and potential customers that you will need to support your project? Each of these plays a role in the success of your company, and each has a perspective on your customer. Talking to potential customers is a direct way of speaking with buyers, but they don't always tell the truth, and it's easy to misinterpret the meaning of their words. Business customers are easier to access directly than mass market consumers, who are simply not as approachable. Start-ups can conduct surveys and interviews with consumers, but there are only so many that can be contacted. Potential partners are companies or organizations with existing customer or membership bases that are representative of your potential customers: Not only may you be able to access the consumer through them, but they may be able to offer insight into these customers. Partners also may be channel partners or distributors. In addition, industry experts, analysts, or influencers may have insight into your intended customers or may hold opinions that are highly respected by your buyers. These individuals may be able to lend some knowledge about your customers. Investors have seen a lot, and while they may not be able to provide direct knowledge of the customer, they have seen the results of how other companies have operated and are knowledgeable about what has worked and what hasn't. The goal is to be an outside-looking-in company in order to create a product that is based on customer needs and to determine how your start-up can attract these customers later, when the product is ready to ship.

Finding customers isn't easy. Accessing customers is difficult. Once you can interact with them, understanding customers is straightforward. While statistics and numbers provided by market analysts may point a start-up in the right direction, there is no replacement for speaking with the customers. A deep knowledge of the customer is crucial to the success of any product and company.

Finding customers isn't easy. Accessing customers is difficult. Once you can interact with them, understanding customers is straightforward. While statistics and numbers provided by market analysts may point a start-up in the right direction, there is no replacement for speaking with the customers. A deep knowledge of the customer is crucial to the success of any product and company.

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Article Tags: customer behavior, customer development, startup customers, startup product



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