In today’s episode of The Startup Chat, Steli and Hiten define the difference between “must have” and “nice to have” products. They highlight why knowing the difference is important to your business and help you to understand how to redefine your product so it is likely to become a customers “must have”.
No matter what stage of your product development, Idea development or research you are in. You must determine how your product will be accepted into the market.
A simple question that is often overlooked is the question regarding whether your product is a “must have” or “nice to have” product. Is your product essential to potential customers or just one they’ll simply appreciate.
Tune into this week’s episode of The Startup Chat, to understand how to identify the pain points that your product solves. This can be a powerful metric in framing your product, as a must have product. Steli and Hiten, also explain that you can not succeed for long in business, if you do not understand if people care about your product. When your product is a must have customers will always make compromises to use it.
Time Stamped Show Notes:
01:06 What are the differences between must have and nice to have.
02:51 Must have product examples.
04:06 How to know how the customer perceives your product.
05:02 The early days of Close.io.
05:53 How do you identify that you are going after a must have product.
07:06 Nice to have product case study.
08:48 The marketing angle to test your product placement.
09:50 The Sales angle to test your product placement.
10:48 Tips on identifying if your product is a must have or nice to have.
11:32 Being honest with yourself is an important step to success.
3 Key Points:
- If you find out that the thing, you want to build is not their number 1 challenge in life then you do not have a business that is worth building.
- The amount of money a customer is willing to pay you, can be a huge indicator of if you are a priority product.
- If through sales and marketing your customers are only reacting in low numbers it means that you don’t have a product must have.
Steli Efti: Hey, everybody. This is Steli Efti.
Hiten Shah: And this is Hiten Shah. Today on The Startup Chat, we’re going to talk about how to know that you have a nice-to-have, versus a must-have product. The reason this topic’s important is, you can’t be in business, any kind of business, and not understand whether people actually care about your product and it’s a must-have for them or just a nice-to-have. I think it’s one of the most critical things to figure out when you’re running a business. When you have a product. It doesn’t matter what kind of product it is, whether it’s a service or a software, or even some freelancing you’re doing. Is it a must-have for people, or is it just a nice-to-have?
Steli Efti: I think that it’s also one of those questions that, I don’t know. Maybe find-
Hiten Shah: How do we figure it out, Steli?
Steli Efti: What are the differences? Let’s just go through that. One easy difference between must-have and nice-to-have is, how willing is the customer to deal with a ton of compromises? Are they willing to use your product, although your product is buggy? Although it lacks crucial features? Although it hasn’t been around for a long time? How much pain are they willing to overcome to use your product versus, they are waiting for your product to be perfect and if it’s not, they’re not interested in it? To me, if you have a must-have solution, customers will take a lot of shit and still use it. They’ll jump through a lot of hoops to purchase your product or to use your product, because it addresses such a huge pain and there’s not that many great alternatives to it.
Hiten Shah: Got it. Shitty product, but the pain is so high it can be a must-have.
Steli Efti: I don’t know about shitty, but you can be pretty imperfect and still get a lot of traction.
Hiten Shah: Got it. How do you figure out … That to me, has less to do with the product and more to do with the opportunity.
Steli Efti: The pain point that you’re solving, I don’t know. The solution you’re offering is addressing something that’s going to be a must-have. Something that’s a real priority to the business. Something that really moves the needle versus, a lot of times companies I find, will entertain nice-to-have products. They will be interested in potentially purchasing something that’s kind of a nice-to-have. On a nice-to-have a company will be a lot slower on purchase. A lot pickier. They’ll be a lot more, “Well, it’s missing this little thing and we’d also like that little thing.” They just take their sweet time versus if it’s a must-have pain. If the house is on fire and you’re offering me a bucket of water I’m not going to be like, “This is not enough water,” or “The temperature of the water’s not … ” I’m not going to have a huge debate.
Hiten Shah: Just give me the water.
Steli Efti: Give me the fucking water!
Hiten Shah: Give me the water. I need it.
Steli Efti: If I’m out in the desert and I’m dying because of dehydration, I’m not going to debate if this water is clean or not. In another setting, when it’s a nice-to-have because I have plenty of water options, now you have to pitch me really hard why I should purchase your water versus all the other waters that I’ve purchased before and that I already own. To me, that’s really an indicator for, your product is addressing a must-have need that’s so strong that customers are okay making a lot of compromises.
Hiten Shah: Hmm.
Steli Efti: You’re not convinced. Let’s move to the next one. We might revisit this.
Hiten Shah: No, no. I am totally convinced. I’m just thinking through it and thinking, okay. If you say that the customer has a fire and any water you give him, they’ll be happy with. Because that’s what you’re saying, right?
Steli Efti: Yeah.
Hiten Shah: How do you know that? I’m like, “Okay, cool. I get that.” I get that if I have a fire I need the water, but let’s say on a sales call. First sales call, as an example. How do you know the difference between a customer who believes that you have a must-have for them, versus a nice-to-have?
Steli Efti: Well, here are a few ways. Number one, the customer is adding urgency to the sales process, versus for me having to do that. The customer is like, “How quickly can I use the product?” “Well, we need another week before we could-” “Well, can we do it faster?” Those are really strong signs. The customer can’t wait to use it. Does the customer or the prospect add urgency on their own? Does the customer or prospect, do they show a willingness to purchase, although they have many requirements or requests that I can’t fulfill? The customer says, “Well, I really would want you to do x, y, z.” I’m telling the customer, “Well, there’s a lot of things we’d like to do eventually but we’re not going to have in the next few months.” The customer says, “Cool. These are nice to have. I still want to buy right now. I’m still interested in using this right now.” A good example of this was closer didn’t have much reporting when we launched and the customer still purchased a CRM that was promising them to close more deals without telling them how many more deals they closed. To us, that showed that the productivity gains that we offered them were so strong that they were willing to take a lot of short-term compromises on the reporting side. Eventually as they grew really quickly, they really needed these reporting things so we had to build them not to churn or lose too many customers. Thinking about launching a product that’s missing some very crucial stuff and seeing customers still having the desire to purchase and make quick buying decisions I think, is a very strong sign for that.
Hiten Shah: That’s incredible. I love the sales angle. I’m going to give the product angle.
Steli Efti: Nice.
Hiten Shah: To me, a lot of this has to do with how do you identify that you’re going after a must-have? I’ll make just a very pithy, stupid statement which is, if you’re not solving the customer’s number one challenge it’s not a must-have. Period. In your case, sales number one challenge at the time when you started was productivity. You happened to offer them that water for that hair on fire problem. Is that safe to say?
Steli Efti: Yeah.
Hiten Shah: I think it’s really important to identify what the number one challenge is related to whether it’s what you want to build, or what your customers think. I actually like to just be like, “Okay. I don’t know what their number one challenge is. I don’t know what I want to build. I need to go find out.” If I go find out that the thing I want to build is not their number one challenge in life around let’s say, whatever the problem set is or the industry is or the market is, guess what? I don’t have a business worth building. I don’t have a product that’s gonna be a must-have, and I’m going to have to do so much more work to build the product, sell the product, market the product that it’s not worth it.
Steli Efti: Beautiful. I love that. I’ll give you another example. Another angle. I had this discussion twice this week. Both with startup founders that I believe, it’s not quite sure yet that they have a must-have solution. Both companies have really big brand name customers. Large Fortune 500 type customers, but both of these startups are not making a lot of money with these customers. One of them was actually telling me, “You know what? We are not making enough revenue, but look at all the amazing logos that we have.” “These customers are incredible, and if we only get a chance to expand and add on and work the relationship over long periods of time, this is so much potential to make so much money.” Although, this is a relationship they’ve already had for a year or two. In my mind, I’m wondering, “Why are we not already making a ton of money?” The other founder brought it up himself. He was saying, “Well, we have all these great customers but we’re not making enough money.” Why? Probably because we don’t yet have a solution that’s worth paying a ton of money. We’re like a nice-to-have that the innovation department is buying, versus being a must-have that a department with much bigger budget, decision making power in the organization is buying. We need to figure out how to get over there, or we need to close up shop. I think the amount of money you can make, the amount of money a customer is willing to pay you percentage wise out of their budget, can also be a very strong indicator are you a nice-to-have? A nice little have? You’re making .001% of their budget or are they willing to pay you real money and allocate a real good chunk of the money they have to spend on this type of product? Because you are a priority product. Because you are something that’s a must-have for them.
Hiten Shah: Yeah. They’re critical. I’m going to give the marketing angle.
Steli Efti: Nice.
Hiten Shah: To me, the marketing angle is that nobody’s resonating with your site. A simple way to think about it is, most people come and they bounce. In Googlenomics if on your home page you have a 80, 90% bounce rate, that’s bad. Real bad. If you have a very single digit 1, 2, 3, 4, 5% conversion rate just to sign up for the first step in your process. Of sign up or lead gen or whatever, you probably have a value proposition problem or even a targeting the right visitor, or something like that. At the end of the day, it’s not a must-have. It’s not pulling them in. It’s not drawing enough people in that are coming to your website. Other part of marketing is if your ads get low clicks or if you treat them off the problem in any decent enough channel and nobody’s responding. I think marketing is one of the easiest places to figure this out. It’s also one of the easiest places to test this, where you can put out different messages and just see how people resonate. Then pick up on the one that people resonate with most. Same with sales, to be honest. If you’re messaging on the sales call, the way you describe it doesn’t really get as close as possible to what you suggested around, they just want to buy. They want it now. They want to use it now, then you need to keep tweaking your messaging and your communication, how you frame it until they say that. Honestly these days, I would say even if you haven’t built it yet, you probably want to say that.
Steli Efti: I love it.
Hiten Shah: Whatever the right thing is.
Steli Efti: That makes so much sense. Marketing and sales, they’re different tactics that you apply but the end result is the same thing. You’re putting something in front of customers, you see how they react. If they’re not reacting, or if they’re reacting and engaging in very low numbers, it just means that what you have is not something that deserves a must-have reaction. Which should typically be a very strong one, right?
Hiten Shah: Exactly.
Steli Efti: All right. With that being said, let’s wrap this episode up with some tips. We haven’t done this in a while at the end of episodes. Here’s one tip I’ll give to farmers out there that are not sure. They can’t say definitively that they’ve built a must-have solution or product because of the amount of money, the amount of urgency, and the amount of traction they see and engagement and usage they see with customers. If you are in doubt, instead of thinking about future potential, “Oh well, maybe one day we could grow into becoming a really big business, although right now we’re not seeing customers wanting to give us a lot of money. They’re complaining a lot. They’re not clicking on our ads. We see very low numbers on everything.” My number one advice to you is, if you’re not sure that you- if you don’t have definitive proof that you’ve built a must-have product or solution, then the answer’s most likely that you haven’t yet. Instead of waiting for the future or the market to solve this, and instead of giving yourself the excuse that the reason why the numbers are so low or you’re not getting as much money or all these things are not there is because you’re still young and you’ve only been in the market for two years. If you had just more marketing budget or if you have more developers to build more features, things would change. Instead of buying into that bullshit story to yourself, take a hard look and ask yourself, “Can we go out and really get confirmation that we’ve built something that is must-have? If not, maybe let’s take another round of doing customer interviews and doing customer development to figure out what are their must-have problems right now? Is there maybe, an opportunity for us to pivot or adjust or switch or build something else? Or change the way we’re building to become a must-have for them, versus potentially being somewhere in the nice-to-have category which is just deadly as a startup.
Hiten Shah: Yep. My tip would just be, make sure you’re solving the most important problem for your customers or don’t work on it.
Steli Efti: I love it. That’s it from us for this episode.
Hiten Shah: Seeya.
Steli Efti: Bye bye.