Blog - Entrepreneurs with Denis Oakley

This is the last part of a five-part series on understanding your customer.

In this post we are going to answer two questions:

What do you get in return?
How can your relationship grow?

What do you get in return?

What do you get from your customers? CASH! That’s the obvious answer. Is it everything that they give you?

It all depends on your business model. Take for example something like whatsapp. What does it get from it’s customers? It doesn’t get any cash from the users. It doesn’t sell advertising either. What it does get is information and engagement. I’m not sure how it uses these. Facebook owns it and so revenue is less important.

With a startup a lot of your early customers give you information and feedback. I worked with one company who gave their product away for free to a major multinational. This gave them the credibility of having a large corporate customer on their books.

Google gives away its search product to consumers for free. This allows it to harvest data about them, their habits and preferences. It then sells this data to advertisers.

Another way of looking at is that every customer has an impact on your reputation. A buyer on Amazon gives you a review or testimonail. The social proof slows increases you value as a company. When someone sends you a nice email or piece of feedback that can be part of your sales material.

It can go onto a bug list. You then give it back to the customer as an improved product or enhanced service.

That said you do need to get cash in one way shape or form as sooner or later your runway ends and the plane crashes

For many startups the temptation is to give the product away for free to get initial traction. If you have to give it away to get customers you have a problem. The value proposition has problems and doesn’t solve the customer’s pain. To fix that go back to an earlier stage in the innovation curve.

How can your relationship grow?

I remember doing door to door sales years ago. I managed to sell stuff because I was a good salesman. It wasn’t because what I was selling was any good. I actually made sure that I never went back. That was a business where the relationship did not grow. It was ot intended to grow.

The ten minutes that I spent on the customers doorstep had to be paid for by that single sale. It also had to pay for all the places where I didn’t sell.

That is inefficent. Much later I worked for a food delivery company. Their model was to feed people every single day. It cost two to three times the cost of the first order to get a customer. When they fed them 10 times a month and kept them for 4 months the aquisition cost wasn’t significant.

They only managed to grow the relationship though because of a daily interaction. True it was all automated. That automated relationhip was question and repsonse every day. What food would you like? I’d like this. Was it tasty? Yes. Can I buy it again tomorrow?

Your customers may not buy that often. The frequency is not the issue. It’s how you create and build that ongoing question and answer sequence. What questions are you asking your customers that deserve an answer

This is the fourth part of a five-part series on understanding your customer.

In this post we are going to answer two questions:

How many of your target customers will you really reach?
How frequently will you interact with your customers?

How many of your target customers will you really reach?

It is great to know that there are a billion customers out there waiting to buy your product. The trouble is that you have $500 in your pocket. Your largest competitor spends over $1 billion on marketing each year. No one has heard of you.

You will not get those billion customers any time soon. It will take years of hard work. That big number is a great symbol of the eventual payoff. Right now the focus has to be on practicalities.

How many people can you reach with that $500? If you estimate that it costs $10 to get a customer you have got 50 customers. Perhaps.

Does this feel like a big bucket of cold water coming all over you? That’s a good thing because it helps you build a reliable financial model.

To start with it takes lots of money to get customers. You have to spend money or time. Entrepreneurs who don’t ask this question are often disappointed with their impact. Entrepreneurs who do ask it chose to focus on a much narrower segment to start with. That often delivers far more success.

Its a simple tradeoff. Do I spread my money over millions of people each of whch I have a small chance of winning? Or do I spend my money where I have a much better chance of winning a few people.

How frequently will you interact with your customers?

All other things being equal the more that you engage with your client the

stronger the relationship
more you sell
greater the expense
greater the loyalty

This depends a lot on your product or service. The stage and length of the sales cycle is also important.

Many goods have a natural sales cycle. This is due to their life expectancy or consumption rate. The bake sees me daily when I buy bread. The butcher sees me weekly. The car salesman sees me every few years.

You can play with the frequency. Often customers will have an existing purchasing habit. They will buy according to that habit. You won’t be able to alter it.

If you think it is every 6 months when it is actually every year – then your revenue takes a 50% hit! Ouch. If you can predict it and target them as they approach renewal then the equation shifts in your favour.

With some goods customers need lots of interaction upfront. They then need less going forward. With other goods there may be little interaction to start with but far more down the line. Both could be true for the same good.

For insurance. You may buy through a salesman because you have complex needs. With no claims every year is very simple. It is renew and forget. Or you may buy insurance online wth no interaction. Making a claim can involve dozens of emails and a high level of interaction.

Understanding the different patterns that you can have is important. This is because by tailoring your operations to that need you can please him far more. Often far better than more traditional companies in your sector.

This is the third part of a five-part series on understanding your customer.

In this post we are going to answer two questions:

What are you offering your customer?
How many customers are there?

What are you Offering Your Customer?

The best thing to offer your customer is what they want. The thing that most entrepreneurs offer their customers is what THEY think the customer needs. That works. Sometimes. More often the result is a failure to give the customer what they really want, love, desire or crave.

The marketer, Seth Godin, talks about Purple Cows. It’s a simple idea. Imagine being on a train or a bus and driving through the countryside. Then among all the black and white cows, you see a purple cow. WOW!

I the great sea of competition you and your customers are all black and white cows. That’s because you offer the customer what you think they want. You offer what management wants. You offer what you have always offered. There are a thousand reasons to offer a black and white cow. It takes courage to go out and paint it purple.

It is hard because you don’t really know if the cow should be purple, red or pink. You have to talk to customers.

Some lie. Some mislead themselves. Some don’t know what they want. You have to sift through all these bad responses, look behind the words to find the truth and see what customers want. Then match it.

Have fun!

How Many Customers are There?

One VC I met said that he would never invest in a market which was worth less than a billion dollars. Smaller than that he thought and it was too difficult to make a decent return when he sold the company even allowing for growth in the market.

That’s only applicable to high growth startups. For entrepreneurs who want to fund a lifestyle, it can be far smaller. The truth is though that it has to be large enough.

One of my more spectacular failures was when I tried to sell triathlon race guides. I looked at the market to see how many I could sell. I looked at the number of triathletes and figured that at least a billion dollars were spent on triathlons each year.

I went ahead and discovered that only 5 people were interested in buying my guides. $100. I’d totally miscalculated the number of potential customers that I could have. My customers weren’t triathletes. My customers were triathletes who hadn’t done a race that was important to them and who didn’t have any friends who had done it before.

I hadn’t answered the question.

There are lots of ways of getting to an answer. Bottom-up market sizing, Top-down, TAM SAM SOM. All of those work.

Cut the crap out though. Look at the small market you can and then start counting real customers on your fingers.

If you can’t go to a place where you should be able to find customers and count them – then going further afield won’t help. It will just delude you.

” My solution targets mothers around Malaysia”

But…

Will all type of mothers be interested in your product? Is your service useful for mothers living out of the city?

You need to identify your Stakeholders.
Stakeholders are in some way linked to your solution. If you identify and meet their need, they will actively support you.

Stakeholder Map Sample

This leads us to the question,

How do I understand my customers’ problems and how do I match my solution to it?

There are a few tools to understand customer’s pain and gains.

We want to help you build confidence and equip you with the tools to grow faster (we could even provide you mentorship).

Log in to the FULL COURSE to find out more

Personal Tip:
The truth is your first idea will not work at first. Remember, you are on an entrepreneur journey where failure is important – it’s more important to learn than to be right.

“…But it was such a great idea!….”

How many startups have you seen with a great business idea but still fail to make it happen?

Many first-time entrepreneurs start off passionately focusing on building their solution. They tend to forget the initial problem they are aiming to solve. Your customers’ needs should always be your priority.

Entrepreneurs need to focus on tacking the right problems. Ask yourself – “Am I focusing on the problem or the solution?”

Given one hour to save the world, I would spend 55 minutes defining the problem and 5 minutes finding the solution.”
~ Albert Einstein

You should understand your customers to tailor a solution to the need they seek for.
If you stay focused on your solution, you might miss gaps and other potential solutions. You might end up creating something your customers do not need. Your time and effort could go to waste.

Instead of pushing your solution, you should find the root of the problem.

Finding the deeper problem:

1. Explore the current situation

Describe the steps taken by an individual facing the problem. Touch on what the individual feels thinks and do while facing the problem. Discuss the impact and consequences if the problem is not solved for the individual.

2. Creating a Problem Statement

A Problem Statement should be specific and simple to understand. It should state the problem, who is affected and what is the outcome or consequence. Draft a problem statement.

How to Create a Problem Statement

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In today’s video I talk about corporate life and creativity and also what the whole point of Revolution Startups is.

Photo by Mpumelelo Macu on Unsplash

Your Creativity – tied and bound

Almost everyone wants to make or create something in some way. We do this in thousands of ways

gardening
cooking
decorating and DIY
metal crafting
painting

and on and on and on and wonderfully on

Most people would love to be creative in their work lives. Corporate culture makes this hard. So for a lot of proto entrepreneurs there is a real tension. They are good at and enjoy their jobs. They have the right skills and mindset after all. They need to do something more – to go beyond or change what is allowed. This frustration is often behind the reason why entrepreneurs jump.

Photo by Kekai AhSam on Unsplash

Fear of Jumping

That brings us nicely to one of my favourite metaphors about startups. Sometimes it feels to the new entrepreneur that he is standing at the door of a plane waiting to jump. Like a skydiver the entrepreneur has big fears – his house, his marriage, her children’s schooling, their quality of life.

These fears can’t really be answered before you jump. So entrepreneurs often jump anyway. It doesn’t always go well. That’s because there are lots of little checks and tests that you can do to make sure that you are wearing the right parachute and it’s going to work. None of them are rocket science. Most people miss lots. You can miss them all and make it.

In aggregate the more things that you check and make sure are right before you jump the more likley you are to have a good landing.

We Stack The Odds in Your Favour

What we do at Revolution Startups is help you tick off all those little things and stack the odds in your favour. Funnily enough as you tick them off you confidence increases and pushes the odds even more in your favour

Find this helpful? Subscribe to the course.

Every startup that doesn’t focus on its customers really early fails.

In all the startups I’ve tried the ones where I got out the building and started talking to customers worked. They worked even better when it was the first thing that I did.

Know Your Customer

We came to Revolution Startups in a very simple way. A few years ago needing some more cash I started doing gigs on Fiverr for entrepreneurs. I also helped out at lots of local entrepreneurial events in my city. I taught at accelerators and incubators.

The result is that I have spoken to thousands of entrepreneurs. I have seen them when they have their first ideas. I have seen early stages of business plans. I have seen train wrecks in slow motion. I’ve worked for some amazing people who have ticked all the boxes and make it look effortless.

So before Leander and I started we had deep domain knowledge of who we were targeting. We knew what the problems they faced were.

Forget the Technology

A great many of the entrepreneurs I’ve worked with have focused on the technology. They have built an app or a website based on their idea. Then they have hit reality and it hasn’t been pretty. It’s hard to get people onto the platform. The platform isn’t what people want. it doesn’t solve a problem.

It’s hard to get people come back. The platform didn’t do what they wanted it to do. Its hard to make sales because the service doesn’t offer value.

Start with the customer. Ask what their problems are. Then look for solutions. Your first idea is a good starting point. On a journey we leave the starting point behind.

At Revolution Startups we help you make that journey as drama free as possible. It’s still an amazing ride, not quite so scary

I want to know the people that I am working with by better determining who I am trying to reach

In this 5 part blog series we are going to walk through a process that helps you nail who your customer is or should be. This is important because many of us don’t see the customer when we start our entrepreneurial journey. We may have a clear vision of the value that we are providing or the problem that we are solving. Often these are in glorious Technicolor. Customers are grey and sketched at the side of the screen.

We will walk you through 9 simple steps over a series of blogs. Each post will ask a couple of questions about who you are targeting. The result is that you will have a picture of your customer that would make Leonardo da Vinci smile.

Why is this important?

If you can visualise your customer then it is a LOT easier to find ways to sell to him. Compare a ‘businessman’ or ‘a younger Steve Jobs’. When you think about ‘a business man’ you can think of many ways to design a product that will be attractive to him. When you think of a young Steve Jobs it is f***ing obvious what will fly and what won’t.

You also start to understand the customer far deeper. Instead of doing something TO him you start doing something FOR him. You connect with his wants and desires. You move from selling snake oil to creating value.

Let’s get going.

What do you call your customer?

I worked with a tech company who called their customers audiences. Audience 3 was HR Managers. Audience 29 was Leadership Development Consultants.

For some reason, no one at the company had any emotional connection with the customers. The marketing was poor and sales and customer feedback were even worse.

We made a simple change. Audience 3 became Helen. Audience 29 became Ian. We chose the names based on people we knew who fit the target profile. Giving the customer a name, not a number, dignified them. We respected them more. It was the start of the turnaround in the marketing and the sales for that startup.

How you name your customers is up to you. It should be clear. Having clear names makes it easy to communicate with the team about how to treat customers.

Here is an example. In a restaurant I once worked with a person dining alone was called ‘Alice’. The family with small children ‘Peters’ and the older couple was the ‘Jones’. These labels brought clarity to the staff. Each label signified a set of rules and behaviours that was optimal.

Other ways of doing it are to use alliterative names

Chuck the CEO
Bob the Builder
Charles & Camilla the Couple

Here you provide a name and rhyme it with their job title or function

In the next post, we will cover

Customers Needs
Simple Visualisation

Before investing in an idea, it is important to know if it is worth your effort.

Can my idea generate enough income? How many customers are needed to reach my income goals? Is the market share I need realistic?

Estimating the revenue potential creates an understanding of the quality of your idea.

How Many Customers Do You Need To Succeed?

Your are testing your idea.

Judge on idea by looking at the total market and estimate the market share to capture. Another way it to benchmark with competition.

You can create good insight by calculating the number of customers you should serve. What does this to with your workload? Do you need to spend half of your time in serving your customers? If this is the case, the time to build your company is limited.

How many persons should know your business to have the paying customers you need? What outreach and promotion activities are needed to reach this?

The Bottom Up Calculation is a powerful way to create these insights. Start with the revenue goal and work your way up to the market size that’s needed.

This will force you to make assumptions. These are returned to in a later stage. Documenting them is enough at this step of your Startup Journey. The goal is to get a quick understanding of the revenue potential of your idea. The calculation should be done within the hour. This way you will save money and effort by validating your idea as early as possible.

An example

It shows a coaching service. It estimates the number of paid consults needed. Is also calculates the employees that should be reached.

This calculation creates insight on the workload. Aside from the paid consults the activity that generates the actual income, what effort is needed to attract them?

The basis for success is understanding your numbers. What is it you need to earn. How many customers are needed and how realistic is this? Know what your need. Make a conscious decision and work towards that goal to succeed.

How Will We Help?

Starting your own business can be an overwhelming process.
Building a startup is not simple; we managed to identify a pattern by helping many starters like you.

We call this curve the “Starters Journey”, a structured and systematic process for starters.

We providing bite-sized information online explaining each step with:

Videos
Examples
Tips & Tricks
Activity Sheets

Throughout this course, you will be constantly gaining new insights. This insight might require you to change your approach, pricing and even your solution!

You will learn to prioritize your actions and learn faster. You are given guidance and will feel less overwhelmed. If you are eager to learn more, go to this link.

What do you get in return?

How can your relationship grow?

How many of your target customers will you really reach?

How frequently will you interact with your customers?

What are you Offering Your Customer?