The two most important steps for any new business venture are to understand whom you are selling your product to and why they will buy it. And to best answer these two questions, you need to dig a bit deeper and answer questions such as: What customer problem does the product solve? Who are the buyers and who are the users? And what features are “must-haves” as opposed to “nice to have”?
Most important, you need to talk to your customers in order to determine the validity of your assumptions, and see whether you have a viable business plan that will help you fulfill their needs. There is no better way to get feedback on your idea than to get out of the office and meet face-to-face with your potential customers. And while it may be uncomfortable to encounter rejection (and you certainly will if you’re meeting enough potential customers), it is also the quickest way to find out if you’re creating a product no one wants.
Here are three stories that illustrate this point. The first story, which highlights the important difference between data and real answers, comes from author Andrea Gabor in her book The Capitalist Philosophers.
Once upon a time there was a CEO of a pet food company who wanted to increase his profits from making dog food. So he consulted the wisest men in his company, who knew all about developing computer programs that would analyze the nutritional content of various grains and food supplements. Eager to please the CEO, the wise men programmed their computers to come up with the optimum combination of grains and supplements that would meet the nutrition needs of man’s best friend at the lowest price.
But a strange thing happened. During the first six months of selling the optimum mix at the lowest price, profit margins of the company declined. The next quarter, profits dived once more. “What’s going on?” the CEO demanded.
Since his wise men didn’t have an answer, the CEO consulted the greatest expert in the land, who knew all about the mysterious science of systems analysis and who conducted an extensive study (at considerable expense). When he was finished, the expert appeared before the CEO.
“Have you discovered why our profits are declining?” the CEO demanded.
“I have,” said the expert, leaning on a thick report. “The dogs don’t like it.”
The second story is courtesy of Bruce Johnson and Accelerated Growth Consulting. Bruce recounts that while attending a conference years back, one of the guest speakers was Len Schlesinger (former vice chairman and COO of Limited Brands and who now serves as the president of Babson College in Massachusetts). At the time, Len was still teaching at Harvard, and one of the stories he told was about when he and some friends decided to test their entrepreneurial theories and open up a soup and sandwich shop.
A few of my colleagues and I decided to open up a soup and sandwich place near campus to put our theories to the test. During one of our brainstorming sessions about the menu, someone suggested, “What if we offered gazpacho?”
Since our clientele was composed of Ivy League students with a developed palate, we all thought, “Great idea. No one else is doing that around here. It’ll be unique.”
So we put it on the menu and guess what? It failed miserably. For some unknown reason, students in Boston during the winter don’t want to buy cold soup.
What we learned from that experience is that executives talking to other executives about what customers want is ridiculous.
The final story comes from Harvard professor Clayton Christensen, who shares the story of a fast-food restaurant chain that wanted to improve its milkshake sales.
The company started by segmenting its market both by product (milkshakes) and by demographics (a marketer’s profile of a typical milkshake drinker). Next, the marketing department asked people who fit the demographic to list the characteristics of an ideal milkshake (thick, thin, chunky, smooth, fruity, chocolaty, etc.). The would-be customers answered as honestly as they could, and the company responded to the feedback. But alas, milkshake sales did not improve.
The company then enlisted the help of one of Christensen’s fellow researchers, who approached the situation by trying to deduce the “job” that customers were “hiring” a milkshake to do. First, he spent a full day in one of the chain’s restaurants, carefully documenting who was buying milkshakes, when they bought them, and whether they drank them on the premises. He discovered that 40 percent of the milkshakes were purchased first thing in the morning by commuters who ordered them to go.
The next morning, he returned to the restaurant and interviewed customers who left with milkshake in hand, asking them what job they had hired the milkshake to do.
“Most of them, it turned out, bought [the milkshake] to do a similar job,” he writes. “They faced a long, boring commute and needed something to keep that extra hand busy and make the commute more interesting. They weren’t yet hungry, but knew that they’d be hungry by 10 a.m.; they wanted to consume something now that would stave off hunger until noon. And they faced constraints: They were in a hurry, they were wearing work clothes, and they had (at most) one free hand.”
The milkshake was “hired” in lieu of a bagel or doughnut because it was relatively tidy and appetite quenching, and because trying to suck a thick liquid through a thin straw gave customers something to do with their boring commute. Understanding the job to be done, the company could then respond by creating a morning milkshake that was even thicker (to last through a long commute) and more interesting (with chunks of fruit) than its predecessor.
Here’s the takeaway: All three stories highlight the necessity of getting out of the office and talking to your customers. You may have a reasonable hypothesis on who your customers are and why they buy, but until you validate this by meeting with them face-to-face, all you have (at best) is an educated guess. Perhaps most important is Len Schlesinger’s observation that “executives talking to other executives about what customers want is ridiculous.”
Patrick Lefler is the founder of The Spruance Group – a management consultancy that helps growing companies grow faster. He is a former Marine Corps officer; a graduate of both Annapolis and The Wharton School, and has over twenty years of industry expertise.