Every business is built on a set of assumptions.
Your job as an entrepreneur is to find out which of those assumptions are true. You do this by talking to potential customers, observing their behavior, and buying the product.
By talking, you understand the motivations that cause their behavior.
By observing, you see honest behavior.
By buying, you walk in the customer’s shoes.
This may seem like a lot of work, but altogether these three approaches give you a deeper understanding of the customer and validation on whether your business idea is worth pursuing.
For example, in Talking to Humans, Koshi and Roberta are two entrepreneurs who want to start a pillow business. These were the assumptions they have:
- We believe that people care about sleep quality when buying a pillow.
- We believe that we can sell online directly to customers.
- We believe that our customers will be young urban professionals.
- We believe that our very first customers will be new graduates who need to outfit their apartments.
- We believe that we can sell our pillows at a high enough price to cover our costs
- We believe that we can raise enough capital to cover investments in manufacturing.
In order to test these assumptions, Roberta and Koshi decided to go to stores and coffee shops and talk to customers with the following script:
Intro: hello, I’m a PhD researcher at Hillside University researching sleep quality.
Would you mind if I ask you a few questions about the last time you bought a pillow?
When was the last time you bought a pillow?
Why did you go looking for a pillow?
How did you start shopping for a pillow?
Why did you choose the one you bought?
After you bought the pillow, how did you feel?
Are you going buy a pillow anytime soon?
After talking to some customers, here’s what they found about their assumptions compared to reality.
Assumption: We believe that people care about sleep quality when making a pillow purchasing decision.
Reality: 68% of the retail shoppers said that sleep quality was a major factor.
Assumption: We believe that we can sell online directly to customers.
Reality: 77% of urban professionals start researching pillow purchases with a search engine such as Google or Bing.
Assumption: We believe that our customers will be young urban professionals.
Reality: We still need more data on this. However, young college graduates had the money and did buy pillows.
Assumption: We believe that our very first customers will be new graduates who need to outfit their apartments.
Reality: This assumption was wrong. Only 25% of college graduates bought a new pillow. The people who were most likely to buy were people in their mid to early 30s. There was a correlation between buying a pillow and having a major life decision. When people got a higher salary, moved into a new house, or got married, they were more likely to buy a pillow.
Assumption: We believe that we can sell our pillows at a high enough price to cover our costs.
Reality: 45% of our retail shoppers bought at least a mid-priced pillow.
Roberta and Koshi showed these statistics to Samantha, who’s a senior entrepreneur. Samantha told them to not let a single statistic be the final result.
They were still in the process of understanding the customer. Samantha told them now to create an online store and try getting traffic through Google & Facebook ads. They could also adjust the messaging and pricing of the pillows.
The customer discovery process never ends and they should always talk face to face to real people and observe their behavior. They are looking for what Steve Blank calls “a scalable and repeatable business model”.
These questions will be the core of discovering your customer:
- Who do you want to learn from?
- What do you want to learn?
- How will you get to them?
- How do you make sense of what you learn?
We’ll be addressing each of these questions in the upcoming paragraphs.
Who Do You Want to Learn From?
You may think you have a product for “everyone”. However, that’s not true. You need to have a specific customer in mind.
For example, if you’re a veterinarian, you would want to talk to pet owners.
If you’re a member of Junior Civitan Inc, you would talk to high school students and college freshman and sophomores.
If you’re an Uber driver, you would want to talk to people who need rides. More specifically, these could be people at the airport wanting to get rides back home or college students who want to go out and party.
There is no exact method on how specific or broad you should be when it comes to deciding who your customers are.
However, the more focused you are, the easier it is to get data on their problems and create a product to solve their needs.
How Do You Find Your Interview Subjects?
There really is no single correct way to find people. It takes some creativity but when you talk to people, you have to show you care about them instead of their wallet. The easiest way to turn people off is to come off as a sleazy sales person. Most people are willing to help you out if you’re working on a topic that interests them.
Here’s an example: So there’s this entrepreneur who wants to talk to young mothers. She tries school pick up zones, but the moms were too busy. So she then tries playgrounds but she only got a few minutes of the moms’ time. She finally organized events at local spas and bought the moms pedicures and wine. This helped since the moms were happy to talk while they got their nails done.
Here are some other ways to find people to talk to but remember this process will take a bit of creativity:
- Creating a website and getting people to come to your website through Google & Facebook ads or by contacting bloggers
- Call friends or contact friends from LinkedIn if they know facing the problem your product/service solves. Afterwards ask for an email or a phone number.
- Get a referral to someone after you talked to them. At the end of the interview ask “Who are 2-3 other people you think I can talk to?”
- Meet people at conferences and asking for their business card. Then send them a quick email asking for a 15 minute conversation.
If you get a phone number, you can call and use this script:
“Hey (name), My name is (insert name) and [drop name] told me you were one of the smartest people in the industry and you had really valuable advice to offer. I’m not trying to sell you anything, but was hoping to get 20 minutes of your time.”
If you end up on voicemail, you can use this script:
“Hey (name), my name is Jane Doe. I was referred to you by James Smith, who said you were one of the smartest people in the industry. I am currently researching how companies as handling their expense management workflows. I was wondering if you have 30 minutes this week for me to ask you a few questions. I’m not selling anything and I would be happy to share what I learn with you. You can reach me at 555-555-5555. Thanks!
If you want to sent an email script, you could use:
I received your name from James Smith. He said that you know a lot in export report management and said that we should chat sometime.
I’m studying how companies are handling their expense report management workflows. We started this journey because of personal frustration, and we’re trying to figure out how to make expense reporting much less painful.
Would you have 30 minutes to spare next week for coffee (on me) to answer a few questions? I would be more than happy to share my research conclusions with you.
OR Would you have 30 minutes to give us some advice, and share some of your thoughts in this domain? I assure you that I’m not selling anything.
I would also be happy to come by your office or arrange a quick video conference, whatever you prefer.
Thanks and I look forward to hearing from you!
It’s best to do the interviews in person and talk to the person one at a time. Doing them in person allows you to see body language and vocal tones. If this doesn’t work, try phone conversations. In the last resort, use google surveys and emails.
It’s also important for you to go into the interview and be willing to hear ideas that don’t go with your own bias. A good idea is to go into the session trying to kill your idea instead of trying to support it.
How Do You Make Sense of What you Learned?
To find good patterns, you first need to track your data. It’s important to make the data available to the team – such as through Google Docs – to allow everyone to come up with conclusions.
Overall, it’s important to see patterns in the data and calculate statistics but to also be skeptical of it.
A good overall rule of the thumb is to interview up to 100 people before you come to any conclusions. You also can’t rely only on talking to people. Your knowledge of how effective the product is comes after you create a prototype of the product and test it. However, remember to create a minimum viable product since product creation gets expensive.
Here’s a chart from page 64 of Talking to Humans that shows you how your knowledge will grow.
At this point, you now realize that entrepreneurship is not easy. Starting a business is really hard. You can fail in many ways:
- Getting the customer and market wrong
- Getting the revenue model wrong
- Getting the cost structure wrong
- Getting customer acquisition wrong
- Getting the product wrong
- Getting the team wrong
- Get your timing wrong