Tools Used In This Guide:
Validating your idea is perhaps the most critical aspect of the startup journey. Most ideas come from the founder's personal experience, but a product with a market of one isn't going to be viable. You have to figure out whether there's a need for your product idea, and the best way to determine that is to talk to potential customers.
There's an old adage that says you need to talk to at least thirty potential customers before you can predict whether there's a real market for your product. This number is borrowed from statistics - It's not based on any real data, but as a proxy for "talk to a lot of customers" it's a fine place to start.
But beware! This process is easy to get wrong. Founders can fall in to one of several traps during this stage:
- Using "People I know" as a proxy for the true customer. The danger here is that people you know tend to be people who like you and won't want to hurt your feelings, so they're not likely to give you negative feedback.
- The Pygmalion problem. Visionary and determined are words often used to describe entrepreneurs, and these are critical traits for success. But they can leave you blind to flaws in your logic and cause you to ignore critical feedback if it contradicts your vision.
- The 'faster horses' problem. There's a quote often attributed to Henry Ford. "If I'd have asked people what they wanted, they would have said 'faster horses'." With truly revolutionary ideas, potential customers won't have a frame of reference for your solution and are not likely to be effective sources of feedback. That doesn't mean you don't need to talk to them, but some aspects of their feedback won't be useful if they can't connect with your solution.
Below are some tools and techniques for identifying your customer and getting actionable input. In this Recipe we're going to use two tools: The Mom Test, a book by Rob Fitzpatrick that's widely considered a must-read for startup customer discovery and idea validation (There's a blog post with key takeaways if you aren't able to purchase the book, and a companion course from Udemy that goes a bit deeper, if you are so inclined). For startups focusing on the consumer market it helps to have a lot of data about your potential audience. SurveyMonkey's Audience Panel product allows you to target fairly specific segments of the population if you have a few hundred dollars to spend.
Identifying your customer
Identifying your customer can be a bit of a Goldilocks problem. Too broad and you risk building something so generic that it doesn't meet anyone's specific needs. Too narrow and you might quickly outgrow your initial customer group, or not generate enough revenue to make the business viable.
We'll explore The Mom Test more later in this Recipe but let's start with some advice from Chapter 7. If you aren't sure who your customers are, start broad and divide them until you have a set of unique customers. There are two axes you'll want to use to help you in this process. For your broad group, think about their problems. What keeps them up at night? What do they wish was easier, took less time, or was more rewarding?
Make a list of your top 3-5 educated guesses about this broad group's problems. Now think about whether these issues can be used to subdivide your broad group. For example, if your broad group is parents, maybe one of the problems you identify is setting up their children for success in life.
The next axis to explore is motivations. As a thought exercise, consider one of these individuals having just purchased your product, and work backward. What was the reason they did so? Do all of the sub-groups you identified have the same motivation, or can you further sub-divide any of them?
Another exercise that can help with this process is developing user personas, which is covered in a different Recipe. If you are having trouble with dividing your broad customer group, personas can help.
Wherever you end up with your list of potential customers, be prepared to adjust as you learn more, because the next step is to actually go out and talk to them.
Making the most of customer interviews with The Mom Test
This section is just a distillation of the core concepts in The Mom Test. your initial customer interviews are a critical part of the success of your startup. Done well they can be the difference between building the right vs wrong thing, and even help you avoid wasting money building something that doesn't meet a market need.
The first, most important thing you can do when conducting user interviews is not pitch your product. Ideally the subject walks away not even knowing you have an idea for a startup. The reason for this is, people generally want to be supportive and kind. So if you describe your idea, they're very likely to tell you enthusiastically that it's a good idea, even if they wouldn't personally pay for it. And your goal in this process is to find a solution that customers will pay for.
If possible you should keep the interview process casual. The best interviews are ones where the subject not only doesn't know you have a startup idea, they don't even know it was an interview. You can use the personas you created previously as a guide here. As a rule of thumb, if you can think of a place where every member of your target demographic would gather (either in person or online), that's a good place to target for interviews.
You may not want to do cold outreach, but sometimes it's necessary. This is a case where it helps to not be 'pitching'. When asking people for their time, the less formal you can make it, the better.
One way to frame the interview process is to interview like a doctor. When you visit the doctor they don't start out by showing you the medicine they have. They as, "Where does it hurt?" "What's bothering you?" These are fine first questions to start with, although it's better to try and anchor them in the general area of your startup. "You're a new parent. What's going well? What's not going so well?
You'll likely get some fairly generic responses, but keep digging until you get something concrete and specific. As a follow up you want to get them to tell you about a specific time this happened, and what they did to solve it. You can ask about the last time this happened, or just a time they remember. Either works. What you're looking for here is what happened to them and what they did about it. One of the reasons talking about your idea is bad in an interview is people will present themselves in their best light when faced with an abstract. What you're after is figuring out what they actually do.
The next thing you want to do is get a sense of how important the problem is to them. Is this something that they would pay to have addressed? Asking them about how they solved the problem is a good way to address this.
To put this in concrete terms, let's use an example of insurance sales. There are a number of additional examples in the book, so you should review those for ideas. Ideally you as a founder have some personal connection to the industry you are focusing on, so for the sake of example let's pretend that you have worked in insurance sales and you're frustrated by the level of rejections you get from people who would really benefit from a life insurance policy, and you have a theory that a current customer referral tool would help insurance agents expand their sales.
So you want to find out if other agents have the same problem (maybe it's just that you are not good at insurance sales!) and if so, how are they addressing the problem now and how important it is to them.
Since you work in insurance sales presumably you can find some peers to talk with informally, but if not, you'll need to do some cold outreach. Thankfully insurance sales is largely done on the phone so it should be easy to find contact information for agents. If possible try to make contacts across the entire geography you intend to serve, so you don't accidentally bias your results based on potential regional trends.
Example conversation with an agent for your insurance sales referral idea
"Hi, I was wondering if I could ask you about something I've seen in my work. Maybe it's just me and I'm wondering if you are seeing this too." (Neutral introduction, doesn't give away your goal, puts them in a position to be helpful)
"I know in this job cold outreach ends up with a lot of rejections, but it seems higher than I would expect, and I get rejections from customers that I know would benefit from a policy. Are you seeing this too?" (Puts them in a sympathetic mindset. Unlikely that they would say no, so this keeps the dialog going and on friendly terms)
"Any strategies you use to overcome objections?" (Avoid explaining your theory - you hope that your idea comes up but also you're prepared to adjust if your potential customers have different ideas)
"Any good stories of being able to overcome objections?" (Anchors them in specific past experience. It would be better to ask them about their last experience vs. a memorable one but sometimes it can be difficult to casually bring up recent experience)
Since your idea is related to referrals you should also be talking to people about how they shop for insurance. A good question here is "If a friend asked you for advice on picking a life insurance agent, what would your first idea be?" Asking questions in this way again puts them in a position to be helpful and avoids responses about their perception of their personal need for life insurance or lack thereof.
Surveys with SurveyMonkey Audience Panel
Surveys are another tool you can use when you are trying to understand a market or to answer specific questions about a potential customer population. Unlike interviews, surveys are better suited for quantitative data than qualitative. If you just need to reach members ofa broad category like adults or working parents, a Google Form posted to social media might be sufficient. But with a relatively small investment you can use a tool like SurveyMonkey's Audience Panel to reach narrowly-targeted groups in larger numbers than you might be able to reach with your personal contact list.
One of the best features about Audience Panel is their audience selection tool. Since they have a global list of respondents, you can target very specific groups based on your needs. They have several 'quick-start' survey options:
For more specific targeting, the tool allows you to select respondents based on any combination of the following major criteria:
- Country & Region
- Gender (you can specify gender or allow the survey to balance according to percentages from census data)
- Age Range (You can select any range from 18 and up)
- Household income
Additional options are available, mainly focusing on people in a work setting:
You can also enter your own custom survey questions to filter respondents if you wish.
Pricing starts at $1 per respondent for up to 5 questions with a 200 respondent minimum, but each filtering criteria adds to the per-respondent cost, and there are additional costs to add additional blocks of 5 questions to your survey.
Keep in mind that while the pool of potential respondents is large, each filtering criteria removes a portion of potential respondents. If your filters would result in not enough respondents qualifying, the tool will inform you and you will need to remove filters until you have a large enough sample size. Additionally, more filters can increase the time it takes to get your full number of responses.
Once you have identified your audience, you can create your survey. You will need to create an account with SurveyMonkey first, but the process of creating a survey is straightforward. You can select from any type of closed form, likert, or other structured response question. If you need help with generating good questions, SurveyMonkey has an article with tips that can help.
The contents of this Recipe are © Innovation Works, Inc. and are licensed under CC-BY-SA 4.0 . Contact us with questions or feedback, or to learn more about our structured program in Entrepreneurism based on Startup Recipes.