How to Conduct Customer Interviews to Accelerate Growth and Develop an Awesome Service
I’m still on track to finish my Y Combinator startup school. This time YC Partner Eric Migicovsky teaches the course “How to Talk to Users”. It is in essence about generating business benefit by maintaining a direct link to your customers, knowing them inside-out and, thus, with this understanding making your offering even greater. This article summarises the course with the key points.
Eric kicks off:
“…at the core, the best companies are the ones where the founders themselves maintain a direct connection to their users.”
As I wrote in my previous article, on How to Come Up With Great Ideas for Startups, we build businesses that help solve others' problems. Y Combinator agrees with this; it’s pretty evident. If you are not listening to your customers’ problems, it is pretty hard for you to help them solve them? Right? It makes kind of sense.
If you take the other extreme thinking that you’ll get the sales reps to talk to them or externalize the whole process in a digital (=read mechanical) funnel, which you optimize never touching your customers, you might be far off optimizing your success ratio.
The Mom Test and Three Common Errors When Taking to Customers
Eric points us to the book “Mom Test”, written by a YC fellow founder Rob Fitzpatrick, which synthesizes the method explained here pretty well. Basically, there are three typical errors that we make when conducting user or customer interviews. Eric Explains:
“The first problem, the first mistake that we pretty much all make is we talk about our idea.”
This is natural; we all love our ideas. I did it myself when I was starting. For example, you think that by explaining as much as you can about your idea, you will get a lot of good feedback. You let your idea be the driver, not your customer’s needs. I'm afraid that's not right.
It would be best if you reversed this. Let the customer or your user be the one driving. You need to study them and learn what makes them tick. You don’t need to pitch them your idea; you do that to investors and employees. Your customers will vote with their money.
“The second mistake that we pretty much all make is we talk about hypotheticals.”
Please don’t make the mistake of having a fantasy dialogue with some potential features that you might be building. Just stick to the reality of your customer's problem and what she/he is trying to solve; understand what motivates them and why they need to solve that problem. Use open-ended questions, and you will not regret it.
“The third trap that we pretty much all fall into is that we talk, we talk a lot.”
Again, remember to let your user hold the mic. Just listen. Leave your ego at home; be open and attentive. Ask clarifying questions. Make the other person feel comfortable and that you can be trusted. Eric gives then thorough, concluding advice:
“In a user interview, try to restrain your interest in talking and really listen. Take notes and listen to what the user is saying because, in that span of time, the 10, 20, 30 minutes that you spend with the user, you’re trying to extract as much information as possible, so that when you return to the office and when you’ve returned to your co-founders, you’re bringing hard data, real facts about users’ lives to the table.”
Five Great Questions for Customer/User Interactions
Eric brings to our attention five great questions to be asked in customer interaction.
“What is the hardest part about doing the thing that you’re trying to solve?”
“Tell me about the last time that you encountered this problem.”
“Why was this hard?”
“What, if anything, have you done to try to solve this problem?”
“What don’t you love about the solutions that you’ve already tried?”
Recognize that all these are open-ended questions. They aim to extract as much as possible great information about, e.g. the problem, frequency, how to sell your solution, how to build your solution, is the problem big enough to warrant paying somebody to solve it, what competition is there, and what is the feature set that you need to build for your offering.
The Three Critical Phases for an Early-Stage Startup
My uncle, who is now departed, told me years ago that all business start from small things. I would argue that these starting points are crucial; you need to have a system on starting businesses. That is why I am glad to have learned this simple categorisation of early-stage startups.
Eric explains these phases: The Idea Stage, The Prototype stage, and The Iteration Towards Product-Market Fit Stage. He continues:
“…some of the best companies are products or services that are built for the founders themselves.”
Think; is it a service or a product that you would buy? If you start from this angle, you will have a lot of intel just interviewing yourself.
Let’s take a true-life story.
My first, humble business came, actually, building a business for my self! In 2006, I was in the market looking to buy some silver wire by the meter (I was an aspiring silversmith back then among other things). I saw people discussing and arranging group purchases, in Internet forums, to get lower prices since there weren’t any retailers selling silver wire by the meter at reasonable prices.
So, what I did? On one autumn Friday, I coded a simple HMTL-PHP webshop selling the stuff and some silver jewellery parts while enjoying the evening. My marketing was to post a link to the forum and say I’m grouping the purchases with a discount price. With that, in a year, I grow to have +100k€ in revenues.
Too bad I was limiting my self at that time to only Finland. If I’d gone all Europe, I’d probably solved all my financial problems on the spot! Haha.
In the Idea Stage, you start with yourself, proceed to family, friends and coworkers and then maybe interview some random people you meet in your everyday life. In fact, last week, I interview the guy who came to my house to do an energy efficiency certificate. I got a ton of useful information, and I don’t think the dude even thought that I am interviewing him for my business idea.
The Prototype stage
“as you move past the idea stage into testing your prototype with users, the next major kind of benefit that you can get from talking to users is figuring out who will be your best first customer. This is critical because it’s possible that if you choose the wrong first customer, that you may be led down a path that constrains you or artificially traps you without actually getting paid by that first customer.”
Don’t try to please everybody; you will fail big time. I often take the example of the graduation party I threw with three of my graduating friends back in early 2007 for my first degree. We had a great party, e.g. tons (=0,5t) of free liquid refreshments, lots of free food, a magician, a sauna, a nice venue, and a big bunch of great people. Still, 2 out of 100 complained that the voluntary 20€ donation was too high; yes, we did a customer survey! First I was, like, WHAT! But then it really daunted on me that there is no way I can please everybody. Peace returned.
You need to analyse your customers and pick the most suitable one for you as your best first customer. Eric explains that you need to try to find numerical answers to three questions:
1. “How much does this problems cost to your customer?
2. How frequent the problems is?
3. How large is their budget?”
With this information, you should categorise your customers and pick the one with the money, ability to buy, and high motivation (meaning that the sum of problem frequency and problem cost is higher than for others). Stick to this and success will ensure.
The Iteration Towards Product-Market Fit Stage
“You can always feel when product/market fit isn’t happening. The customers aren’t quite getting value out of the product, word of mouth isn’t spreading, usage isn’t growing that fast, press reviews are kind of “blah”, the sales cycle takes too long, and lots of deals never close.
And you can always feel product/market fit when it’s happening. The customers are buying the product just as fast as you can make it — or usage is growing just as fast as you can add more servers. Money from customers is piling up in your company checking account. You’re hiring sales and customer support staff as fast as you can. Reporters are calling because they’ve heard about your hot new thing and they want to talk to you about it. You start getting entrepreneur of the year awards from Harvard Business School. Investment bankers are staking out your house.”
Do you get the point? This is the difference between big business and small business. Of course, you can use all these tactics to aim to become a small giant, like Bo Burlingham explains in his book “Companies That Choose to Be Great Instead of Big”, but if you want to aim big here is the door you need to walk through.
Okay. I am convinced. Where is my Unicorn door?
Eric points us to Rahul Vohra’s, Superhuman’s CEO, amazing blog post on how to build the indicators and metrics -engine with which you can hands-on iterate towards product-market fit before you have actually launched. It is all in this article's theme; how you can use your customers' insights to build even a better service/product.
I read Rahul’s article, and I have to say it is mind-blowing. Read it; no debate. I will not even try to summarise. It would need to be a whole another article.
This is how you can build unicorns!