Estimated Time
- Reading: ~19 minutes
- Video: ~44 minutes
- Activities: to be completed prior to next week
Insights
- Explain your startup in one simple sentence so anyone can understand what you do
- Talk to your users!
- Understand who you are building for and how they are using your product or service
- Identify your ideal customer and find as many of them as you can to start using your product
Episode Date: October 17, 2021
Identifying your ideal customer profile
Do you know who you're building for?
- A founder should distinguish their "first" users from their "ideal" users
- A first user could be your friend from college, a neighbor, your grandma, etc.
- Your ideal users are ultimately those for which your product offers a solution
- This user is willing to pay to use it and uses it frequently
- Both groups can offer insights especially in the early days
- You want to prioritize your ideal users over your first users when you can
- Hopefully, some of your first users will be ideal!
- Here is a trick to identify potential ideal customers early:
- Segment your users into cohorts based on an engagement metrics like
- Time on site
- Rides taken (Uber)
- Workouts registered (Fitbod or Peloton)
- etc.
- Focus on the top 10% of users who use your product the most
- Ask yourself:
- What do these users look like?
- What are their occupations?
- Where are they located?
- Why are they engaging with my product?
- How much time are they spending on the platform?
- Use this info to create a blueprint for a potential customer
- For example, an ideal profile might be a small business owner in a major city that needs help with web design, but doesn't need to hire a full-time software engineer
- This example would be a blueprint for an ideal customer of a marketplace of freelancers
- Once you have a blueprint you can begin to target these users
- Cold emails, advertisements, direct outreach, hang out where they are, etc.
- Remember: Winning founders understand their customers deeply
- Superhuman has an innovative approach of focusing only on potential customers that fit their ICP:
- CEO Rahul Vohra only on-boards email "power users" due to his product's relatively high price point (~$360/year for an email client)
- Rahul knows if he onboards a customer who is not the right fit, that customer will likely have a bad experience
- They likely churn quickly, and the entire cycle of acquiring that customer will be a waste of time
- Superhuman actually rejects potential customers if they are not a good fit
- Instead, Rahul chooses to only spend time onboarding and acquiring customers they know will love and utilize their product
- Now this might be an extreme example, (leveraged by the fact that Rahul has the successful track record to pull this off)
- But the key takeaway should be - know your ideal customer profile and target them early and often
Can you explain your startup in one simple sentence?
- Call this "Jason's OSS Rule" - One Simple Sentence.
- Any great company can explain what they do in one simple sentence
- As a founder, you need to be able to explain at its core - what your company does?
- No buzz words; just a clean, clear, and crisp sentence that anyone could understand
- As investors, we see convoluted, buzz-wordy company descriptions too often from startups - avoid these!
- Here are some examples with popular companies:
- Coinbase example:
- Bad job: "We're leveraging the blockchain and decentralized technologies to allow any investor to get exposure into the world of cryptocurrency."
- Good job: "We help people invest in crypto."
- Uber example:
- Bad job: "We use AI and machine learning to connect riders and drivers, disrupting the worlds of transportation and mobility as we know it."
- Good job: "We help you get rides faster and cheaper."
- Slack example:
- Bad job: "We're a future of work startup leveraging software and integrations to improve workplace communications for the long-term."
- Good job: "We sell communication software to startups."
- Can every employee explain what you do in one simple sentence?
- Does your sales team speak clearly about who you are as a company?
- Starting with a single sentence explanation allows you to dive deeper, or stay at a high level depending on the context of the conversations
- Everyone in your company should be able to answer the following question without hesitation:
- Who is company XYZ and what do you do?
- Brainstorming with people who aren't in the weeds building your product with you often helps come up with this description
- Something else to keep in mind: Does all your branding align with your simple sentence?
- Is the messaging consistent across your website, Twitter, Facebook, TikTok, etc.
- You have very little time to make an impression on a user
- Do you pass the 15-second rule?
- HubSpot offers 9 guidelines for exceptional web design
- Make sure users understand what you do as quickly as possible!
- Remember: Winning founders can explain their product simply
- Einstein famously said: "Everything should be made as simple as possible, but not simpler"
- Winning founders can do this in their explanation as well as with product development
- If you can't say what your company does simply
- Your customers won't be able to simply decide if they want to buy
Do you know where to find more customers?
- Once you have your first 5 customers, you should immediately look for the next 5, 10, 50, 10,000!
- You would be surprised how often founders find their first group of customers and then quit looking
- Some founders assume the customers will continue to come
- Some focus more on new features
- Some begin to focus all their attention on the first few users
- While other founders assume that members of their team will keep bringing customers in
- Do not get caught in this trap
- Do not get lost building new features or assuming the customers will keep coming on their own!
- As founder your job is to find more customers!
- Take the profile outlined above and target more look-alike groups of users
- Without paying customers you do not have a product
- Winning founders are obsessed with acquiring new customers
- If you found a way to acquire new customers that works - keep doing it!
- Jason always says that if you find oil (new customers), keep digging!
- Striking oil typically means there is more oil - don't give up to start looking for diamonds!
- So, how do founders go about finding their first users?
- What are a few customer acquisition strategies in the early days?
- Take advantage of your network
- Are you solving a problem that your network suffers from?
- Who do you know that could get you in front of your ideal customer?
- Do you direct access to any ideal customers?
- Do you have expertise that you can leverage?
- Try writing educational blogs, creating tutorials, or sharing your journey on social media
- Hangout where your users are
- Attend live events (meetups) and expand your network
- Look into online networking events [like these]
- If you're selling developer tools to software engineers on a bottom-up basis...
- Post on hacker news and subreddits to try and get early users and feedback
- Talk to the users themselves
- Build in public
- Create a sense of community around your product
- Being open and transparent on Twitter, Reddit, and other platforms is becoming more popular
- It is a great way to find users via word of mouth
- You can also build publicly on Indie Hackers or launch on Product Hunt to engage that community
- Alex Tew, co-founder of Calm used a strategy to attract users by building an interesting viral site called donothingfor2minutes.com - it's still live today!
- The virality of the non-product drives traffic back to the product
- He did this before creating Calm by building a simple website that asked if you could sit still for 2 minutes
- If you moved the mouse or touched the keyboard it would say "Try Again"
- People shared the website, and he collected ~100k emails of engaged users in just a few days
- This was before ever launching Calm
- He saw that people were interested in a short meditation session
- Now he had their emails to continue engaging
- There is also the waitlist strategy
- You need to create demand to create a waitlist in the first place
- Companies like Superhuman have perfected the waitlist
- You should create a waitlist if:
- You want to gauge the level of interest before you have a product
- You want to limit the number of customers you're onboarding at a specific time
- You want to build up hype and demand for your product
- Once you have a few hundred users on the waitlist, you can utilize growth hacks like:
- Enticing users to move up the waitlist by referring other people to sign up
- This creates a virtuous cycle
Do you have founder-product fit?
- Ask yourself "Are you using your own product?"
- Are your employees using your product?
- Do you truly understand the problem you are solving for the end-user?
- There are several benefits to "eating your own dog food" as this is called
- 1. You can quickly help your team find bugs before they impact too many customers
- 2. It strengthens your relationship with the customer because
- Everyone at your company understands the customer experience
- You'll build credibility by knowing all the workflows and pain points
- Connect with the customer as they share the ways they are using your tool
- 3. It keeps your company on the same page
- The engineering team gets to hear feedback from users (even if they are internal)
- The marketing team better understands how the product works to better strengthen campaigns
- The sales team better relates to the problems of the customers
- The executive team stays involved in the day to day functionality of the product
- One portfolio company, Fitbod is a great example of this:
- Fitbod's co-founders Allen and Jesse originally built their product for themselves
- Or, in other words, they were their own ideal customers
- This is one reason why building a company around a problem you understand first hand can be so valuable
- The founders understand the pain points and they have credibility with their customers
- Do you know your one key feature and how that feature is being used?
- Does your main feature align with your one simple sentence?
- Does everyone at your company know the main value you bring to your customers?
- In other words, does everyone that works for you truly understand why your company exists?
- What is the main way that you use your own product?
- If everyone is using your product they'll have a better idea of the problem you solve.
- What is the main way that your users are using your product?
- Sharing the top customer examples helps your company align around the voice of the users.
- You can build marketing campaigns and sales strategies around these markers when you know:
- Who your ideal customer is, what your key feature is, and you use the product yourself regularly
Do you know how people are using your product?
- We've established that you and your employees should be using your product.
- But are your customers using it in the same way?
- This goes back to the first point - do you know who you are building for?
- Remember, winning founders understand their customers deeply
- Are the features you think are most important the same ones that your customers think are most important?
- Another portfolio company, STEEZY, uses their customer support tickets to inform their product roadmap
- Are customers having to work around clunky UI/UX that is making their lives harder in your app?
- If you are dogfooding your own app you'll identify issues sooner and prioritize a fix
- Being able to proactively tell a customer something like:
- "In our latest release, you can now do click here to immediately complete the task
- You don't have to click this sequence of buttons anymore
- It should save you 5 minutes every time you log in"
- This builds trust when you hear their suggestions and understand their problems
- Look at your product data often to help understand your customers and know which questions to ask when you meet face to face
- Who logs in and when?
- What pages are they on longest?
- What actions are they taking?
- Where do they get stuck or lost and log out?
- Study patterns across users and cohorts
- Grouping your users into cohorts to track trends is extremely helps
- This allows you to better understand customer retention and churn
- You can segment users based on when they signed up
- Quantitative data like this is extremely valuable
- But so is qualitative data... which leads us to:
Do you know how to conduct customer interviews?
- Are you talking to your customers regularly?
- Are you solving their problem?
- Winning founders solve big problems for their customers
- Use every interaction with your customers as a way to gather data
- You do not need to provide a formal "interview" to gain valuable insights
- A simple email to check in and see if they have any needs, thoughts, or questions can provide a lot of great information
- When you release a new feature let your customers know about it and be excited for them to start using it...
- "I think you'll love this new feature, it is going to make your life easier by doing XYZ - would love to know what you think! What did we miss, what works for you?"
- You'll quickly get feedback without people even feeling the need to commit to an interview
- Sharing blogs posts that are relevant to your customer or providing educational opportunities is another way to establish credibility
- This credibility can lead to your customers thinking of you as the industry expert in the space
- Building relationships and checking in with customers before you "need" anything also builds good faith and confidence
- Offering additional value through your expert insights can be a huge addition
- For example, if you are a cloud security tool your day is 100% consumed by cloud security
- But for your customers cloud security might only be a fraction of their responsibility
- Sharing key learnings with them cements yourself as a thought leader who cares about them as a customer
- Providing a great customer experience by simply being available is another way to stand out from competitors
- When a customer reaches out - make it a goal to respond to them quickly
- Then when you want to conduct interviews, people are more willing to participate because you have a relationship
- Often the customer will even feel they owe you a favor if you've provided service above and beyond their expectations
- So, how do you find the right customers to interview?
- Use the segmented customer engagement data we talked about before
- Use the different cohorts and select a random sample of customers from each
- This should range from your most engaged cohort to your least engaged
- Reach out via email or phone
- If necessary, offer them a gift card, or something relatively meaningful for their time
- There are even some programs that can assist with this for a small fee
- You want to hear from a wide variety of users
- But make sure to weigh your "super users" input accordingly
- The users who are using your product more than others, or paying you the most have shown to be more invested
- What kind of questions should you ask?
- Open-ended questions that get the user talking and help you understand how they are using your product
- A few sample questions might be things like:
- How often do you use our product?
- When are you most likely to use it?
- What do you think about the product?
- What would you change about it?
- What would encourage you to use the product more frequently?
- What does our product allow you to do that you couldn't before?
- How would you feel if you couldn't use our product anymore?
- What should we stop doing?
- Would you recommend our product to a friend or colleague?
- Have you? Why or why not?
- Listen to their answers and ask follow up questions that keep them talking
- "Can you say more about that..."
- "Can you explain what you mean by that..."
- "Would you elaborate on why..."
- It is often the answers to these follow up questions that contain the real value
- People may give you a generic answer the first time (or speak at a high level) but if you ask them to elaborate often they will share more specifics
- Do not interrupt your customer's feedback!
- Always wait for them to finish before asking a follow-up question or for them to elaborate on an answer
- You can also conduct listening labs
- Where you have the customer test out the app and think out loud while they explore
- This can be done as early as with your mockups or wireframes
- You simply put the app (or designs) in front of them
- You then ask questions like
- "What would you do on this screen?"
- "What are you looking for?"
- “What do you think of that?”
- "What do you need to do next?"
- "Did that do what you expected it to do when you clicked on it... why?"
- Essentially you are having them talk you through how they would use the product
- Ask if it is okay for you to record the session and revisit the conversations with your team
- You can also take interviews in another direction and create a Net Promoter Score survey...
Do you understand Net Promoter Score?
- Net Promoter Score (NPS) is a way to measure customer experience
- Winning founders are obsessed with meaningful metrics
- Measuring, tracking, and making decisions based on data is important
- Instead of the open-ended discussion questions, you ask users to answer on a scale of 1-10
- This makes it easier to compare answers and group results by cohorts
- You simply ask, "on a scale of 1-10 how likely are you to recommend our product?"
- You can follow up by asking "why did you give the score that you did?"
- Here is how it's explained at NetPromoter.com
- Promoters (score 9-10)
- They are loyal enthusiasts who will keep buying and refer others, fueling growth
- Passives (score 7-8)
- They are satisfied but unenthusiastic customers who are vulnerable to competitive offerings
- Detractors (score 0-6)
- They are unhappy customers who can damage your brand and impede growth through negative word-of-mouth
- You find your NPS score by taking your percentage of promoters minus your percentage of detractors
- This means your NPS score can range from -100 to 100
- 100 if you have 100% promoters and 0 detractors
- -100 if you have 0 promoters and 100% detractors
- You can use NPS results to anticipate churn or drive customer outreach
- NPS for major brands (via customer.guru):
- Starbucks: 77
- Apple: 47
- Facebook: -21
- Delighting customers is the ultimate goal and NPS allows you to understand how delighted your customers are with a single number
- NPS is a great benchmark that gives you an understanding of how your customers feel about you, but you must know your customers beyond their score
- You need to know their answers to questions like:
- What problem are you solving for them?
- Do they feel you are solving it adequately?
- What sets your product apart?
- Which features do they love?
- Which do they want to be removed?
- Do you make their job or life easier, faster, or better?
- Why do they use your product?
- What do they wish was better?
- Do the customers recommend your product to others?
- Why or why not?
- A savvy way to increase NPS through a growth hack is with referral programs
- Another portfolio company, Robinhood had one of the best referral programs ever
- You might know it as the "Free stock" program
- Every time you'd refer a user to sign up, both you and the new user would get a free stock on the platform
- This created a huge surge of sign-ups in the early days
- No other brokerage had ever done anything like that before
- Delighting customers is a vital part of the Startup Flywheel
- Collecting customer feedback is a great way to gauge how you are doing early in the process
- Talk to your customers early and often
Should you start with a free or paid product?
- This is a very common question that is dependent first on your business model
- Are you going to be a free app that generates all your revenue via ads?
- Then a free product from the beginning clearly makes sense
- Think, Google, Facebook, etc
- Are you SaaS, consumer, or a marketing place that needs people to pay you to survive?
- Your product is not going to be free forever (like with an ad-based model)
- Another factor, other than the business model, is how much runway you have from the start
- If you have only a few months to start making money, you can't afford to wait
- In most cases, it is best to turn on revenue as soon as possible
- Some founders will then ask... is growing a customer base or growing revenue more important?
- Ideally, you're growing both!
- Free users, without skin in the game often provide high frequency, low-value feedback
- Free users speak with their words and their engagement but aren't invested
- Customers who are paying, have skin in the game and are more invested in your product
- These customers speak with their words, wallets, and engagement
- Any kind of traction is good in the early days - double down on what is working
- What signals should you look for that tell you it's the right time to turn on revenue?
- You've figured out the pain point your company solves
- You are seeing early signs of product-market fit
- During customer interviews, they indicate that they would pay to continue using your product
- You have a waitlist that includes a price users will pay for your product
- You've run successful free or paid pilots with happy users that convert to paid customers
- How do you shift from a free to a paid product?
- There are multiple ways to roll this out and it depends on your product and your goals
- A few common examples,
- You could offer a freemium version of your product
- This allows the free users to have access to part of your product
- Users have a monthly limit on messages they can accomplish in your app
- Your company branding is included on their downloads from your product
- Only a few members of the team can have access to your solution
- If they want full access they'll start paying
- Now they have unlimited messages
- They can white-label your product with their own branding
- They invite more team members
- You can also offer early users a discount to continue using your product
- You could grandfather legacy users in at their original price point
- You can also flip the switch, turn on the paid tier, and know that you might have high churn for the next couple of months
- Whatever you decide clearly communicate the plan with your customers!
- At least you will have identified those who stuck around as your ideal customers
- When it comes to pricing Jason gives the example
- If you have 10 customers paying $5/month and you raise the price to $10/month you only need to keep half your customers to break even
- This also allows you to focus more of your time on the more serious user without a loss in revenue.
- If you churn less than five customers even better!
- Anytime you have free users you should work on ways to convert them to a paid plan
- Let them know what they are missing regularly, and how it would be better if they paid a monthly fee
- To continue the example from before; send a reminder with every message that they are nearing their monthly limit and give them the option to upgrade now
Do you understand the technology adoption curve?
- Anytime you are creating new technology you need to understand it will take a while to win over all five of the individuals described in the technology adoption curve
- The technology adoption curve was introduced by E.M. Rogers in 1962
- And made popular in the book Crossing the Chasm by Geoffrey Moore in the early 90s
- There are 5 stages to think about when it comes to technology adoption
- Innovators, early adopters, early majority, late majority, and laggards
- Innovators
- These are people that take risks with new technology
- They typically support a transformation within the company around new tools
- Early Adopters
- These people look to understand the technology fully before they support it vocally
- They like to be at the forefront but care about their reputation
- This is typically your group of beta testers - try it without going all-in from the start
- Early Majority
- This group makes decisions based on data
- They support technology but want to see the proof first
- Late Majority
- These are the people that require even more proof than the early majority
- They don't like risk and are often not that interested in change
- Laggards
- They are skeptical of new technology
- They give up when a new tool doesn't work and revert to their old way of doing it
- Identify the innovators and early adaptors and market accordingly to those users if your product is a new concept
- If you are working on an enterprise SaaS solution the innovators and early adaptors will be your allies
- But you need to get the support of the early and late majority also
When should you fire a customer?
- Do you know when to cut bait with disengaged users?
- Referencing back to your NPS - these are your 0 to 6 users
- These users that are taking away time from your promoters
- These users are providing bad data in terms of feedback - you should not be building your product for them
- A new feature will not save a disgruntled user - remember who you are building for!
- How do you communicate that you are firing a customer?
- Is it better to fire them or let them continue using your product - knowing they might churn anyway?
- One way to do this is to let users know you will no longer support the plan they are on
- Let them know the date that you are no longer supporting the service
- This gives them enough time to transition from your platform or start paying for a different tier of your product
- You might find that once these customers are paying (or paying more) to use the full product that they are actually a good fit
- It is not uncommon that the people paying the least amount of money are the most needy and have the most complaints
- Time is one of the most valuable resources a founder has - be aware of how you are spending your hours each day (and with whom you are spending those hours)
- Remember the Superhuman example we covered earlier:
- Superhuman actually "fires" potential customers during the on-boarding process
- Meaning, if a user doesn't fit the specific qualities of an ideal user, they won't even bring them on as a customer in the first place
- Superhuman can preemptively "fire" their customer because they understand their ideal customer profile so deeply
- You should be spending the majority of your time finding early users and talking to them as soon as possible
- As a first (or second, third, etc) time founder you might not have the luxury to reject users like Rahul,
- However, the fact your ideal customer profile should always be at the front of your mind is applicable
- Your priorities when identifying your ideal customer should be:
- Who are you building for? and Who is using your product?
- How are they using your product?
- Where can you find more of these people?
- And then do everything in your power to get more of them using your product
Additional Resources
- Ultimate Guide: How to Create Your Ideal Customer Profile and Target Them
- Buyer Persona and Ideal Customer Profile: Our New Guide for the Sales Model
- What Is An Ideal Customer Profile (ICP) And How Do You Create One?
- A beginner's guide to cohort analysis
- Cohort Analysis Explained with an Excel example
- Starting Greatness Podcast [~31 minutes]
- Geoffrey Moore's (Author of Crossing the Chasm) discusses how founders can apply core principles and avoid critical mistakes
- Summary of the above podcast [~8 minutes]
Activities
Week 4
One simple sentence
- Workshop and come up with a one sentence description of your company
- Align this messaging on your landing page and within your team
- Could a customer who visits your website for 10 seconds explain to someone else what you do?
Founder - product fit
- As you develop your MVP use your own product
Create your ideal customer profile
- Begin to test it out by reaching out to individuals who fit the description
Week 5
Interview questions
- Identify questions relevant to your product or service that you will ask customers
Create a cohort analysis template
- Create a template to easily track cohorts as you onboard customers
- Having the template ready to use will make it more likely that you'll plug in the numbers as your number of customers increases
NPS Score
- Revisit this in a couple weeks as you talk to more users and generate an initial NPS score