There’s loads of information out there showing you how to start a business. Paul Smith, start-up scientist and co-founder of Ignitor, explains the critical first steps in market definition and customer interviews.
Starting with market definition, how do you pin down who your customer is?
The big thing to think about here is your go-to market strategy. What you’re trying to do with any kind of start-up is get a monopoly in a very small market. Facebook, for example, targeted one university.
They got a monopoly there and subsequently expanded it. Using author Geoffrey Moore’s principle of early adopters, try to find a small enough market that you can break even in and also have at least a 50% market share.
Where do a lot of entrepreneurs go wrong in defining their market?
In many cases the initial target market definition is too broad. The first thing you want to do is chop away. Let’s take a hypothetical business of an ID platform for domestic workers.
The typical mistake when defining the target market would be ‘anyone who can afford a domestic.’ But that wouldn’t be the ideal early adopter market that would help you refine your value offering.
You’re not looking for the general market at first. Early adopters tend to experience huge amounts of pain with the problem – and they’ve spent money and time trying to find a solution before you come along.
What tips can you offer for finding good initial candidates?
Write a list of up to 30 potential customers. Talk to them and do your problem interviews. When you’re reviewing the information, look for a certain set of people who have a bigger problem than the rest of the group, even if this is only two or three people.
You’ll find these people at trade shows, and scout out wealthy people in high end grocery stores. Look to family and friends, then LinkedIn and Facebook.
Identify who fits your definition and deploy a defining question that will tell you if they’re in your target market.
What are some good and bad questions used in initial customer interviews?
A good initial question will be one that quickly narrows down your interviewees. For example, if you’re creating a travel app, you’ll ask people: “Have you travelled recently, or are you planning to?” If the answer is no, they’re not in your target market.
Consumers are bad at following through on their own predicted behaviour. If you ask, “Would you buy my product?” they’ll say, “Yes of course!” but then back out.
Good questioning would help you understand previous behaviour and emotions, while bad questioning would ask customers to predict future behaviour and emotions.
What techniques help with questioning?
We teach a technique called PCS comprising the categories: Problem, competitors and spend.
How important are emotions when interviewing customers?
Through your experiments you come to a theory – an evidence-based model of how the world works in a repeatable and predictable way. These theories will help you discover areas where you can model customer behaviour. By tapping their emotions you can predict whether they’ll react to your value proposition.