In today’s episode of The Startup Chat, Steli and Hiten talk about how founders can avoid customer development mistakes.
Customer development is a four-step framework for discovering and validating the right market for your idea. It is used by founders to build the right product features that solve customers’ needs and much more. Customer development is crucial to the success of a product, therefore it has to be done the right way.
In this week’s episode, Steli and Hiten dive into what Customer development is, why it’s important, some common mistakes founders make when they do it and much more.
Time Stamped Show Notes:
00:00 About today’s topic.
00:35 Why this topic was chosen.
01:27 The biggest common mistake founders make.
02:56 Another common mistake founders make.
04:47 Why there are different types of product validation.
06:04 Why giving you money is a much stronger form of validation.
07:22 Another big mistakes founders make.
10:05 Why not being able to reach enough people is not an excuse.
10:44 Why you should never stop doing customer development.
10:59 Why product-market fit is not a static status.
3 Key Points:
- Customer development has nothing to do with your product.
- Founders will use different lingo to make their business look bigger than it is.
- Customer development never ends.
Steli Efti: Hey everybody, this is Steli Efti …
Hiten Shah: … And this is Hiten Shah.
Steli Efti: And today on the startup chat we want to talk about customer development mistakes to avoid for founders. So here’s the deal, like Hiten, you and myself, we talk to founders all the time, a lot of them are kind of early stage founders and they’re in the “customer development” phase, and they come to us to tell us that they’ve done customer development and they think they have product market fit in now they’re worrying about all the other stages that are, that are about to happen for them. And when we talk to them and ask exactly what they did in customer development, who they talk, what they found out, we realized sooner or later that they’ve made big mistakes in the way they think about customer development or the way they executed on it. So I thought it would be useful for us to share some of those kinds of biggest reoccurring themes and mistakes to avoid. So when kind of young founders or new founders are going out to do customer development, they avoid these mistakes and they don’t waste time, right? So, right of the bat Hiten. If you had to think about the biggest common mistake that most founders make when it comes to customer development, what comes to mind?
Hiten Shah: It always, it always starts for me with their speaking to the potential customers and people the wrong way. So they’re introducing bias in what they’re saying. And so then when, when I talk to them what ends up happening is I just can feel the bias. I can just feel it so that they ask questions like, would you use my product instead of asking what’s the biggest challenge you have? And I think that’s a very distinct difference that many founders, despite all the material about customer development and how to talk to the customers before they are your customers and all that kind of stuff, people just gloss over and they miss and they think talking to customers or prospects or early, you know, talking to people early about your business has to do with your product. And in my opinion and the way that I learned customer development, it has nothing to do with your product it has everything to do with that person, their problems and their stories and everything you can learn about them with no information about what you’re doing or your product. And I think that’s like the biggest mistake people make, which is they focus in on themselves, their product and questions they want answered instead of learning about what people care about.
Steli Efti: I love it. Yeah, I couldn’t agree more. That’s definitely, that is definitely the number one mistake. I think another one, although I would like to double click on this, I have 100 stories of telling people this exact faith like you. You just, you just went out there to prove yourself right and if you go into the world with that attitude, you know, it’s fairly easy to do actually. It’s fairly easy to see yourself being right, if that’s your number one goal. Right? But the other thing that I’ll say is that I’ll talk about the money piece sometimes. People, here is a pet peeve that I have. People will go out there, they’ll do “customer development”, they’ll come back and they’ll say, “Steli, we’ve done this. A bunch of companies or we have a bunch of early customers and so now we’re thinking about like how to scale this now to do x, y, and z.” And when I stop people, I always go, oh, so you already have paying customers? And they go, yeah, we already have some early customers. So what are they paying you? And here’s the most beautiful thing I hear almost all the time, if it’s very early stage. They go, well, they don’t technically pay us yet, and I was like, well motherfucker, there’s only one way of paying you, you know, this is like, what are we talking about here? There is a, they send you money and there is a, they have not sent you money. If they’re the, you have not received money from them camp, then those people are not customers. Right? It’s a very simple thing and so one of those beautiful things is that people will start using different lingo to make them feel like they’ve progressed a lot further than they truly have. Right? Which goes back to this bias thing, but they’ll say, “Well, we have 100 early customers,” and then you go, are they paying you? No. Well then you don’t have 100 customers yet. You really don’t. What they essentially have is they have 100 free Alpha users or Beta users of their product right? They’ve 100 people that said, “Sure, if you sent me a free link to sign up, I’ll play around with this.” But that’s not the same thing as having 100 customers. Right? It’s very, very different. So one of the things, especially in B2B that is like a big encouragement that I give to people, is to think about like all validation isn’t the same validation, there’s a hierarchy of it, right? So somebody telling you, I think your idea is nice. That’s useless to me that says that’s less worth than somebody telling me your idea sucks. That is more useful to me. So somebody just saying, “Oh, I like your idea. Oh I think that’s a really good idea.” That’s useless. Now somebody’s saying specifically, “You know what, this is so useful. This sounds so useful. So good. I think I would want to use it, or I would want to purchase it. I, we would need this in our company. I would want to buy this. Where can I buy this? How can I buy this?” Now, that’s a much stronger signal. That’s actually really truthfully useful. Right? Okay, this is strong validation, there’s a strong demand. Somebody practically without me even asking has offered to buy this or that they want this, cool. Then one level above that is when they actually do it, right? Even if it’s for a smaller amount, let’s say you haven’t built the product yet or it’s very early, if it’s some token amount, it doesn’t matter, but then giving you their credit card information or putting their hand in their pocket and giving you a dollar is much stronger than them just saying, “I would spend a million dollars with this, or I really, really like this,” like real money giving you real or if it’s an end consumer product, spending a lot of time. Like giving, you something that’s really worthwhile, which is their attention, their time or their money, that’s obviously a much stronger signal than them just saying they would do it or them saying they like what you do. And I think that most people, most founders, when they do customer development, what they try to do is they go, they talk to a bunch of people and all they’re looking for is people say, “I think I really like this idea.” Oh yeah, I think you’re right. This is a really cool idea. That’s what they think validation means and nothing could be further from the truth. That’s to me worthless. Like people, there’s a high cost in being honest, right, and very, very small reward to strangers and when you’re like a passionate founder, that talks excitedly about his or her baby and you look with your big eyes to this prospect or this customer and you’re like, do you think this is a good idea? It’s very hard for somebody to be honest and tell you this sucks. It’s much easier for them to just go, yeah, sure. Right. I think this idea might have potential, but that’s not really worth anything. That’s not really validation and that’s today unfortunately still what many founders will go out there and then come back and believe that they’ve gotten enough positive feedback that now their idea’s validated. Anything else that you can pick off that’s like a big mistake that people make during the customer development phase?
Hiten Shah: Yeah. I think we captured like the key ones. I feel like, you know, I’m going to say something silly, but they don’t really do it. They just don’t do it. They just think they’re doing it because they’re talking to people about their idea. And you know, they come with a product and they think it’s great, but they don’t really have that many people who love it, and you know, they’re not talking to each and every person who signs up and they’re, they think that … But they think that they’re doing customer development or that they’re customer centric. So I feel like the biggest thing missing in terms of why these people, you know, are so I guess ill prepared in a way to do this and to do customer development, is that it’s become something that like, is almost like a checklist a or like a check mark on a checklist where it’s like, oh yeah, I did it. I talked to a bunch of people. But that’s not how it works. It’d be, it has to be in your DNA to be able to go actually, constantly be going back to the customer, or potential customers, or just a demographic that you want to go after, or a set of personas, what however way you look at it and literally learn from them. Even right now, every week, right now, there’s at least a handful if not more of customer development interviews I’m doing. I bought, two months ago I did about 51 in a 10 day period. And you know my businesses is very, some of them are really old now, and even for the newer ones I’m doing it, but we also have product managers that are also doing it right now. And that’s how we build product. That’s how we build our businesses, by learning as much as we can all the time from customers. So in the last, I would say two months, between three, three of us, we’ve probably talked to 200 different people in one way or another in order to learn from our customers. And talk means like, we’ve either had lengthy chats with them online, we had many email threads back and forth or we’ve run a bunch of surveys, but those don’t count in the 200 or we’ve literally spent 20, 30 minutes with them talking to them, and that’s customer development. Not, you know, acting like you did that. And you know, I’ve heard a lot of excuses like I can’t reach my customer or I don’t know how to go after them or find them, and I think that’s a big excuse too. You can Google that and figure out how to find customers. You can do Twitter searches for people that talk about the problem they’re having and try to tweet at them and you will get a response, you can go do Craigslist ads depending on your demographic and market and offer them 10 bucks a or a donation of 10 bucks to their favorite charity or whatever if they talk to you and people will talk to you. So I think the excuses are gaud in terms of not being able to reach people, but one of the bigger ones I hear is I can’t reach enough people or I can’t get to find people to talk to, which is bullshit.
Steli Efti: Yeah, that’s crazy. I’ve never heard that one, that is insane. But alright, I love the point that you brought up and I’ll double click on that. You know, I think the idea that customer development ends at some point, product market fit is like a state that once you acquire it, you can hold onto it forever without doing anything more, is probably another really big fallacy issue. People think once they got a few customers, whew, now we’re done with customer development, now we’re done with product market fit issues, now all we have to do is raise more money and scale this up. But customer development never ends and product market fit is not a state that once you captured, you can just hold onto it forever. You have to recapture it every single day, every single month, every single year, because the world is changing, your customers are changing, your product, you are changing, your company is changing, things are changing. So your product market fit is not a static status that once acquired, you have for life, right? You need to earn it every single day and I think a lot of founders, they just want to rush through this “customer development” phase as quickly as possible to then get to the exciting and fun scaling phase. Right? And I get it, but I think it’s, if you have that kind of an approach, you’re going to run into problems sooner or later. All right. I think that’s it from us for this episode. Hiten?
Hiten Shah: See you.
Steli Efti: See you. Bye bye.