How Startups Build a Strong Customer Base
Let me ask you a quick hypothetical. If you could fire off an email to 1,000 people who might be interested in your product or service, how many of them would convert and buy?
You might not have a ready answer for this question, and that’s OK. Most of the time, I can’t put a hard number on it either, especially early in the life of the product. But it’s an important question to ask and answer.
What comes out of that answer is product-market fit, and that’s one of the most difficult concepts for any startup to nail down. But once you have a concrete idea of product-market fit, you can start to build a customer base. And once you know your customer base, you can scale your sales efforts and grow that base.
Product vs. Market vs. Fit
The problem is, a lot of startups tackle the answer from the wrong end of the question. They focus on the product side of product-market fit. They dive into the details that hypothetical email, the selling points of their product, and the numbers behind the value proposition.
This is great data to have, and it’s critical that you’re able to communicate it properly — but that’s only if you’re sending that email to the right people in the first place.
The digital age has given us the gift of unlimited options for unfettered access to an almost infinite number of customer prospects at a relatively low cost.
In over 20 years releasing dozens of products and building over a dozen companies, I’ve done my share of walking through that question and forming the answer. I’ve realized that it doesn’t matter how good your pitch is when you’re pitching to the wrong prospects.
So before we talk about how valuable our product is, let’s first establish who we believe our market is.
How a handful of early adopters becomes a true customer base
Every time I launch a new product or start a new company, I reach a point where the engagement with the product and the feedback from the prospects starts to tell me who my customer is. I find a few of them, I get to know them, and we have some mutual success.
Now how do I find a lot of them?
The trick to that question is that the answer isn’t so much about the “where” as it is the “who.” In other words, in order to find the perfect customer, I need to know as much as I can about what makes a customer the perfect customer for my product.
But because my early adopter population is too small to be statistically significant, I need to make a lot of assumptions. That means I need to create that perfect customer myself. And that means creating a persona.
Without getting too far into the mechanics of creating and using personas, the perfect customer persona isn’t just about demographics or industry or size or budget. It’s about the challenge of the problem and the solution that our product addresses.
Who suffers from the problem the most, and why?
Who benefits from the solution the most, and why?
Who is the most “ready” to adopt the solution, and what is it about their scenario that makes them a better candidate than everyone else?
But creating the perfect persona is only half the battle. And, not to be a downer, it’s also the easiest part of the customer-base-building process.
Champions, detractors, and everyone else
Now that we’ve created a persona, let’s talk about creating personas.
My perfect customer, my champion, is the customer I should be able to sell to in my sleep. This is especially true once we know everything we can about them. We’ve documented all this knowledge in their persona, and we need to chase this persona.
But chasing our champions across the market universe is a hard thing to do. It’s not single-grain-of-sand-on-a-beach difficult, but maybe perfect-shell-on-a-beach difficult, and unless you have unlimited resources and unlimited time, you can’t build your business off of the revenue from perfect customers.
Detractors, on the other hand, easy to spot and define. These are the prospects whom, for one reason or another, are never going to buy from us. We entrepreneurs and company leaders have a hard time admitting that these folks exist, until they find us, and we waste loads of time and energy catering to a sale that’s never going to happen.
Creating the detractor persona is just as critical as creating the champion persona. What’s more is you can pretty much use the detail of “why” your champion is your champion from those questions above, take the reverse, and apply that to your detractor persona.
In other words, no matter how awesome your solution is, if your prospect is insulated from the suffering caused by the problem, maybe due to an external factor specific to them, they’re a detractor. This is especially true if they’ll fight your solution to maintain their externally-fed status quo.
Now, once you know who your champions and your detractors are, it’s time to think about everyone else, because this is the pool from which you’ll create your customer base.
Push the 98% forward
Here’s the math I like to do when it comes to innovation.
If my solution is truly unique, and my product is truly cutting edge, and my company is helping ushering in a new era of advancement in whatever field I’m playing in, then my perfect customer, my champion, my early adopter, is the top 1% leading the way to this massive wave of change that I’m riding to a billion-dollar valuation.
My detractors are the bottom 1%, likely to stay where they are forever, with their VCRs and flip phones and MySpace pages.
I’m kidding. I love you technophobes.
My point is that once I know who those folks are, there’s another 98% of a market between those two personas that I need to push forward towards that 1% champion side.
So the most critical question to our answer — the number of customers we convert from that hypothetical email to 1,000 prospects — is as follows:
What makes our champion different from everyone else?
Making the imperfect customer nearly perfect
This is where it gets difficult, and this is where a lot of entrepreneurs and company leaders trip themselves up.
The next set of personas we need to create shouldn’t be drawn up from a blank sheet of paper, so to speak. As you might imagine, they’re a derivative of our perfect customer, yes, but figuring out which parts of that persona need to change to produce the most nearly perfect imperfect customer — that’s all trial and error.
And that’s going to take some work.
Outreach is good in the beginning. Defining your champion persona and talking to prospects, using that persona as a template, will allow you to learn a lot about the small differences between them.
Positioning and messaging will help you to address those differences and remove some of the friction that keeps those imperfect customers from buying.
Measuring the results of the changes to positioning and messaging will lead you to expand your customer base instead of replacing it. The latter happens when you’re trying to be too many solutions to too many problems, a common mistake when attempting to scale.
Referrals, whether organic or paid, will allow you to lean on your champions as a network. Don’t be afraid to turn to your best customers for help finding more customers like them.
Pilots and free trials amplify your reach into new markets. But they only work well when you learn from who converts and who doesn’t convert. In other words, be able to measure and be willing to change your positioning and messaging for as long as you run the pilot or the trial. Don’t just let the trial sit there and collect freeloaders.
Advertising, while sometimes thought of as a guaranteed way to find and tap new nearly-perfect prospects, only works when you know the persona of the imperfect customer and you can speak directly to them via the proper channels.
The only thing more frustrating than not selling to any customers is selling to the wrong customers. If you’ve got the sales bandwidth to be able to do more outreach, maximize that time by minimizing your target.
Don’t count on your customer base to find you, because chances are they won’t. Be proactive and go out and find them.
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If you want more direct startup advice, look into Teaching Startup.