On Monday, we had session #2 of our latest FastTrac® TechVenture™ sequence at OTBC. The topic was how to validate your market - or, in other words, finding out “if you build it will they buy it”. OTBC coach Mark Paul reviewed the critical questions that need to be answered in the market validation process, including:
- What do your target customers buy?
- Why do they buy?
- How do they buy?
What do they buy? You may think you know what capabilities are important to your target customers — but those that end up buying may be focused on a completely different set of capabilities than you expect. Do your best to find out early (in the validation stage) what the customers want to buy!
Why do they buy? What is the customer payoff? What problem or pain do you think will motivate your customers to buy? Is that pain severe enough that they actually will buy? How will you verify all of the above (before building the product) so you know you’re building the right thing?
How do customers buy? Find out how customers in your target market find out about and buy products similar to yours. If they almost always buy based on referrals, then maybe you can avoid spending money on trade shows (and other expensive merchandising approaches) and focus on creating and leveraging referrals! If they usually buy based on advice they get from peers at technical conferences, that tells you a lot about where your marketing dollars should be spent. In general “never assume” what marketing investments are the right investments for your market. Go ask your customers how they buy!
Mark shared numerous stories of clients who assumed they knew the answers to the above questions, when in fact they didn’t. Too many entrepreneurs assuming they know the customer, and build a product based on that belief. If you take some time to validate those beliefs up front, your odds of success are much higher!
There is one more question that needs to be answered: - Who are your best customers?
Whether you’ve been in business 6 months or 6 years, you likely have a good gut feel (read: assumption) as to who your best customers are. Once you perform an internal assessment (discussed in my book*), you’ll have a much better understanding of who your preferred customers are.
In fact, take some time to write down your Preferred Customer Profile. Why? Because if you don’t know, or can’t communicate succinctly with anyone else (suspects, prospect & influencers) about who you can really help, how will they know they could be a customer? Or refer others to you?
By not spending time or money chasing those who aren’t your best potential customers, you’ll free up a lot of time going after those who will.
Mark
PS: Best customers = those who pay you the most, the soonest, buy repeatedly, and tell others.
* “How to Attract Significantly More Customers”: http://www.attractmorecustomers.net