Why & how idea stage startups should conduct customer research

Posted by Shaun Symm on 16 January, 2020

If you are planning on developing a startup and are at the idea stage (pre-product) then customer research should be the first thing on your to do list.

The key is to ensure that the conversations you have with people in your target audience are conducted in a way that gives you the feedback you need to be successful.

At Launch Lab we find 2 recurring problems that early stage startups have when it comes to customer research:

  1. They don't do enough customer research, and some founders don't do any.
  2. They have the wrong conversation with people in their target audience.

The first point is easy to solve. Just 'get out of the building' and speak to more of the right people.

In regards to the second point, many founders who do conduct customer research say the wrong things and ask the wrong questions.

Save time & money

Before we go too deep it is important to know why early stage startups have to undertake customer research. The following example paints the perfect picture.

I recently read about a startup that spent 9 months working on a machine learning product that made use of data from clinical trials to help doctors prescribe the most effective drugs to their patients.

After 9 months the data set was very good and the suggested drug prescriptions were excellent. The core product, and technology, was strong.

The product helped patients receive the most effective drug prescriptions, helped doctors write better prescriptions and the startup thought it would be able to charge medical practices for this.

It sounds like the perfect product ... but the startup shut down almost immediately.

Why?

When demonstrating the product to doctors the feedback was very good. The doctors loved it. The problem was that the doctors would have to pay to use it.

They couldn't on-charge that cost to their patients and they didn't have additional budget to pay for it themselves. Rather than lose money they preferred the old 'free' method of prescribing drugs.

So, after 9 months and $40,000 developing the startup the founder shut it down. His take out was that all 3 parties (the startup, the patient and the doctors) needed to get value from the product. Unfortunately only 2 of the 3 did.

All that time and money could have been saved by doing customer interviews at the idea stage before a line of code had been written.

Research is not sales

Early stage founders, especially first time founders, are often in 'tell' mode. They operate on the proviso that telling is selling.

The problem is that customer research isn't sales. As an idea stage startup you don't have anything to sell yet.

When you discuss a business idea that you as the founder are excited about, the conversation is more often than not about you telling the other person the idea that you're going to work on.

If you're excited, and enthusiastic, in your delivery then telling them about your idea will almost always result in a positive response.

People don't like conflict and they won't want to hurt your feelings. Thus, telling them your idea results in responses like "What a great idea" and Wow, that's going to be huge".

Unfortunately that isn't research and the feedback means nothing. The likelihood of these people actually giving you their credit card details and paying a recurring fee to use your startups software is very slim.

This type of approach, where you tell people your idea, can be referred to as a solution obsession.

It is far more effective to have a problem obsession.

You want to find out what problems people in your target audience have and how they currently solve those problems.

Avoid convenience sampling

Convenience sampling is where you conduct research with friends, family and close colleagues.

They might not be in your target audience and are more likely to tell you what they think you want to hear.

It's best to conduct interviews with people you don't know.

How to find the right people to interview

Firstly, early stage startup customer interviews must be conducted in person.

Creating a survey in SurveyMonkey, or Typeform, and emailing it out or posting it in Facebook groups isn't going to cut it.

Here are some ideas on how to find the right people:

  • If your startup is in the B2C space go into your nearest city and walk the streets. You will find thousands of people. It is difficult to get people to stop and talk to you so you might need to offer up an incentive. When you do stop someone you'll need to ask a few leading questions to ensure they are in your target audience before starting the interview.

  • Go to relevant Meetups in your area. The great thing about Meetups is they are full of people interested in the same subject matter. You should be able to find groups that are in your target audience.

  • Post a task on an outsourcing platform like Airtasker. The task would be for the person to meet you in order to be interviewed. This method requires paying the person so be sure that they're in your target audience.

Questions to ask when conducting early stage customer research

Now that you have the right person sitting in front of you it is important that you ask the right questions. Saying the wrong thing, or telling them your idea upfront equals failure. You want to understand their world view before you tell them what your product is.

I recommend the following once you've ensured the person you are interviewing is in your target audience:

  • Tell them you are conducting research on a new product in the { enter your industry or vertical here } space, and that you aren't selling anything. Do not tell them about your product.

  • Ask if they have ever personally experienced the problem you are solving (again don't tell them about your product, just the problem your product will solve).

  • If they have, ask how they solved that problem.

  • If they solve the problem using another product ask if they pay for the product.

  • How much do they pay?

  • Do they love using the other product? And do they have any problems, or complaints, with the current solution they use.

  • If they do have the problem but currently don't use another product to solve the problem how do they solve it? And, what do they pay for this solution.

  • If they aren't paying for a product it could be that they're 'paying' for the solution using their time.

I won't list every possible permutation that can arise from the answers to these questions but remember that you need to think on your feet and plan your questions based on each possible answer you are given.

For example, let's say you are researching a new productivity app.

Some people might tell you that they pay $50 a month to use a cloud-based Saas solution from a large established startup. The path will lead you to find out what they love and what they hate about the product, the features it might be missing and the pricing. Why they chose this product over potential competitors. Do they know of any other competitors?

Another person might use a spreadsheet instead of paying for a cloud-based Saas solution. Find out why they won't pay for a solution better than a spreadsheet.

Others might tell you something you hadn't expected. Remember to drill down as deep as you can without being annoying or over stepping. This is a fact finding mission!

How can we help?

As startup developers we usually only get paid when we design and develop a startup product.

However if you are at an idea stage, and are a startup in Australia, we'd love to discuss your business idea with you.

We can assist with early stage startup strategy and direct you through the steps you should take before we write the first line of code for you.

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