On Customers

1
On Customers

• MGT 709 New Venture Creation

2
Agenda

• Readings
• Juice Guys
• RelayHealth

3
Adams On Customers

• Before you build it, validate the market
• Dont have a solution looking for a problem (like
  me)
• The ready-fire-aim approach
• Common illusion I know my customers
• Limited feedback and personal experience generate
  the illusion
• Why validate?
• Get the product right the first time
• A beta community emerges
• You generate a ready-made contact list of first
  customers
• You can more easily raise smart investment
  capital
• You use capital more efficiently
• You clarify your competition

4
Market Validation

• You cannot sell to everybody
• A target market is a limited, discrete subset of
  companies or individuals whose pain is so great
  without the product that they will readily buy it
• Your solution should be a must-have for your
  targets
• Pyramid of influence
• Stage 0 Secondary research
• Stage 1 Primary market research
• Stage 2 Quality influencers
• Stage 3 Leverage influencers

5
Stage 0-1

• Secondary research
• Market size, trends, growth
• Research competitors, customers
• Read the industry press specialized reports
• Remember that secondary research is not
  validation
• Primary research
• Who needs the product most?
• Who has the worst pain?
• What does this market look like?
• Test at least 3 hypotheses with data
• Be prepared to revise hypotheses and start again
• Interview at least 100 customers
• Understand the customers and develop a sense of
  their pain
• Make it everyones job to interview even
  engineers!
• Get a professional firm to develop questions and
  analyze data
• Eliminate temptation to lead customers or offer
  solutions

6
Stage 2

• Quality influencers
• Have high pain, interested in a solution, a
  willingness to be contacted again
• Also use thought leaders (speakers, writers,
  analysts) who also understand the pain
• Presentation prototype
• Outline the pain, the target segment, and
  solution
• Demo a prototype
• Results
• Feedback on essential product features
• Cultivate core customers
• Fine-tune presentation and prototype

7
Stage 3

• Leverage influencers
• Analysts, thought leaders, editors, consultants
• Get them excited!
• Results
• Visibility in analyst reports publications
• Revenue possibilities (from consultants)
• Easier financing
• Customers change keep validating
• Build what the customers want and only what they
  want

8
Entrepreneurial Marketing

• EM is
• Balancing an obsession with the customer with the
  allocation of the firms scarce resources
• Matching the right subset of possible customers
  with the right subset of possible products to
  maximize value
• Knowledge of the market and ability to assemble
  people and partners with specific relationships
  and know-how is the key
• Moore Crossing the chasm
• Visionaries versus pragmatists
• Speaker example

9
EM Questions

• Customers
• Who is the perfect (pragmatist) customer and what
  do they want?
• What do relevant visionaries want?
• What is the right backward path from pragmatist
  to visionary (risk/reward)?
• Are your resources allocated to the right
  projects and visionary customers?
• Visionaries are high maintenance!
• Who are the people and partners you need to
  assemble and deliver the pragmatist product?
• Do your people have a track record of dealing
  with the appropriate pragmatists, visionaries,
  and partners? Get the right people on the bus!
• Can you afford experiments?

10
Juice Guys

• In your business plan teams
• Pretend one of your team is a customer
• Interview your customer using Exhibit 3
• Group statements from your customer and the
  other five customers to identify What is the
  ultimate juice shop
• You have one hour

11
RelayHealth

• Questions
• Should RelayHealth change its current marketing
  focus?
• 55 health plans, 35 doctors, 10 patients
• Should they offer pricing concessions to get as
  many health plans as possible?
• How should they allocate funds between marketing
  and product development?
• How many product enhancements are necessary?
• How can they prevent competitors from entering
  the market?
• Do they need to change their business model?
• Use the concepts from Entrepreneurial Marketing
  to frame your answers

12
Epilogue

• Nantucket Nectars closed Juice Guys on Beacon
  Hill after one season, continues to operate
  summer outlet
• RelayHealth was acquired by McKesson Group
  (ranked 16 on Fortune 500) in June 2006