This is a summary of my talk at the Startup Weekend Next pre-accelerator program on the topic: Why customer discovery is critical to a venture
(For the purpose of this article I am using the word customer very broadly – for this article by customers I mean all entities that will either use, or pay for or influence the purchase of your product or service).
Wrong assumptions kill more companies than bad products.
(This was my answer to a question on Quora)
In a focus group, for evaluating the potential of an idea, your goal should be to test all the assumptions that you have for your venture. Apart from the concept itself, there will be several assumptions on the ‘business’ around that idea that you will need to validate (e.g. pricing, availability, brand personality, etc.)
Here are a few things that come to mind, that you could consider testing (of course the more you share your idea, the more specific our answers can be).
- How deeply does the consumer/customer feel about the problem that your idea is solving : The more pressing the problem, the more relevant your idea is likely to be for consumers.
- The concept – the power of the idea itself: Do the consumers/customers see the value proposition in what you offer?
- Do people like the way your idea delivers the solution: I.e. does the product work for the consumers/customers as you had expected it to?
- Look for insights: Listen to what people are telling you about the problem that your idea is solving. See if your product does a good job or a great job at delivering the solution. See if the response is a ‘nice’ or a ‘wow’ as these subtle differences will determine factors like conversion rates, adoption rates, usage patterns, etc.
- The business model: A business model is about ‘who will pay how much and to whom’. Each element of this should be tested in the concept test. i.e. are the consumers/customers seeing the value proposition as you meant it to be, how much are they willing to pay – is there price sensitivity, and if so, how much. (In the case of fremium products, this may not be relevant.)
Concept tests help you validate your assumptions with qualitative inputs from the conversations with relevant groups. (You have to be super careful to ensure that your group selection is accurate. Else you may get an inaccurate reading. E.g. if a particular profile of respondents do not respond well to the concept, should you try the concept with another segment – is a call that you may need to take depending on what you are doing.)
But when you want to quantify the concept and potential, you will have to rely on a broader quantitative research that covers a larger sample that is representative of the audience you eventually intend to address.
Listening to focus groups is like watching a recipe being demonstrated on a TV show. Watching customers is tasting the food so you know what went into it. (When you watch a cooking show on TV, you usually try to do exactly how they tell you to. However, if you were to taste the food, then you will make the adjustments according to what you know your guests / family will prefer).
In my view, while focus groups and other forms of qualitative and quantitative research are perhaps relevant for larger organizations who are looking at directional inputs, for startups and early-stage companies, it is important for the founders to be immersed in the user/customer’s life to understand the things that even they may not be able to articulate.
Startups usually redefine a market or sector. They usually think (or should think) of things that will do things differently than currently being done. Hence, users/consumers may or may not have a good handle on the subject as they would not have the vision of the future that the entrepreneur has painted for himself/herself.
Research is good to validate hypothesis and assumptions. e.g. to check what you think is a need gap or pain point that is really true for users/customers. Not to find if they need or want the stuff you intend to put out.
When testing the viability of a product/service concept, you should aim to get answers to the following:
- Does this concept address a customer need or want
- Are customers excited about the value proposition offered by the product/service
- Is there a business case in this concept
For the first point, you should check with customer is the problem that you are addressing is relevant. Concepts which address real and important problems have a better chance of succeeding.
Once the customer has accepted that they indeed are looking for a solution to the problem you address, then explain your concept and check if they feel that this addresses the problem well and that the price-point at which it does is fine too. You may need to test this with a few customer segments to understand which group has the highest potential for you. Be careful to check that the value proposition and your concept is easy for customers to understand. In many cases, showing them a one-page concept note is closer to how they would see / know about the product in real life. It is unlikely that they would get a chance to hear about the product from someone like you.
After the product is ready, it will be important to get customers to use it to ensure that the product, according to them, delivers on the promise. In concepts that may require repeat purchase, it will be important to test if they purchase it again. There are some interesting ways of doing research on concepts and products, including qualitative techniques and quantitative research.
From a venture creating point of view, it is important to understand if there is a real business case underlying this concept. This will mean working out a fairly detailed business plan, costing the concept right, pricing it right and then seeing if it makes commercial sense to get this product out in the market.