How To Do Customer Interviews

How To Do Customer Interviews + Lean Startup Challenge Final Eight Announcement 12/15: Lean Startup Challenge Finals Members: 1704www.chicagoleanstartup.com

Rocket Fuel For Your Product Growth Lean Startup Strategy User Experience Design Agile Software Development Customer Acquisition and Retention http://pathfindersoftware.comhttp://pathfindersoftware.com Copyright © 2011 Pathfinder Software

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The CLSC Semi-Finalists• ScoutMeCoach• myTalentLoops• travel720• Sidestax• Vreaze

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The CLSC Semi-Finalists• ScoutMeCoach • SoapBox• myTalentLoops • Myeuphoria.me• travel720 • Cribhunters/ PropertyPanda• Sidestax • Farmﬁxe• Vreaze • Red Radius

The Five Minute Lean Startup An Introduction Bernhard Kappe Founder/CEO Pathﬁnder Software

Business Model Problem Solution Unique Value Unfair Customer Proposition Advantage Segments Top 3 Problems Top 3 features that address the problem Single, clear, Can’t be easily Target Customers compelling message copied or bought why you are different and worth buying Key Activities Channel Activity that drives Path to customers acquisition/revenue for marketing and sales Cost Structure Revenue Model• Customer acquisition costs • Revenue Model• Distribution costs • Lifetime Value• Hosting • Revenue• People, etc. • Gross Margin

Existing Business Problem Solution Unique Value Unfair Customer Proposition Advantage Segments Top 3 Problems Top 3 features that address the problem Single, clear, Can’t be easily Target Customers ✔ ✔ compelling message copied or bought why you are different and worth buying ✔ ✔ Key Activities Channel Activity that drives acquisition/revenue ✔ Path to customers for marketing and ✔ ✔ sales Cost Structure Revenue Model• Customer acquisition costs • Revenue Model• Distribution costs• Hosting• People, etc. ✔ • Lifetime Value • Revenue • Gross Margin ✔

New Business ? Problem Solution Unique Value Unfair Customer Proposition Advantage Segments ? Top 3 Problems Top 3 features that address the problem Single, clear, Can’t be easily Target Customers ? compelling message copied or bought ? why you are different and worth buying ? ? Key Activities Channel ? Activity that drives Path to customers acquisition/revenue for marketing and sales Cost Structure Revenue Model ? ?• Customer acquisition costs • Revenue Model• Distribution costs • Lifetime Value• Hosting • Revenue• People, etc. • Gross Margin

The Lean StartupDiscover a Lean: ReduceBusiness Model waste, don’t doThat Works unnecessary work.Before You RunOut of Time and Pivot: Change andMoney. test again when you’ve invalidated Copyright © 2011 Stratealign LLC

Test Hypotheses• Customer Segments and Problems? - Problem Interviews• Solutions - Solution Interviews?• MVPs: Smoke Tests, Concierge Services, Kickstarter Projects• Pricing - Solution Interviews, A/B Test pricing pages• Channels/Marketing: campaigns and landing pages• Product/Market Fit: A/B or multivariate testing of acquisition and retention funnels, solution features, etc. Copyright © 2011 Stratealign LLC

Startup Scoreboard How do investors, employees, advisors and partners evaluate a startup?Prioritized Criteria Risk Traction Metrics Value Low Proﬁt High1.Traction Revenues2.Team Pilot Customers3.Social Proof Non-Paying Customers4.Model High Validated Hypothesis Low Idea/Non-Validated Too Hypothesis High Copyright © 2011 Stratealign LLC

Lean Canvas Problem Solution Unique Value Unfair Customer Proposition Advantage Segments Top 3 Problems Top 3 features that address the problem Single, clear, Can’t be easily Target Customers compelling message copied or bought why you are different and worth buying Key Activities Channel Activity that drives Path to customers acquisition/revenue for marketing and sales Cost Structure Revenue Model• Customer acquisition costs • Revenue Model• Distribution costs • Lifetime Value• Hosting • Revenue• People, etc. • Gross Margin Copyright © 2011 Stratealign LLC

Problem Solution Unique Unfair Customer Value Advantage Segments Proposition Key Channel Activities Cost Structure Revenue Model Problem/Customer SegmentsWhat Problem do you solve and for whom do you solve it? Copyright © 2011 Stratealign LLC

Problem and Customer Segments Problem Customer Segments What are the top 1 - 3 Who you think needs these problems you are solving? problems solved most? Use separate canvases for each problem/customer pair if the buyer is •Who are your early different •What are the existing adopters? alternatives? •Who are the buyers? •How do people solve these •What characteristics do problems now? the buyers have? •How do your target them? Copyright © 2011 Stratealign LLC

Problem and Customer Segments Example Problem Customer Segments • Difﬁcult to manage churn SaaS (Software as a Service) • Cohort analysis is very time companies consuming • Need to write code to redirect user to loyalty behaviors • Patchwork of analytics software (Google Analytics), platform based • Startups personalization, Excel • Entrepreneurial web companies • Email Autoresponders • Do nothing Copyright © 2011 Stratealign LLC

Problem Solution Unique Unfair Customer Value Advantage Segments Proposition Key Channel Activities Cost Structure Revenue Model The SolutionHow do you solve your customer’s problem? Copyright © 2011 Stratealign LLC

SolutionExisting Alternatives: • How do your early adopters address these problems today? • Doing Nothing?Your Solution: • Top features or capabilities you need to deliver to solve the problems. Copyright © 2011 Stratealign LLC

Solution• Problem: Difﬁcult to measure churn/loyalty• Existing alternatives: Google Analytics, Homegrown Solution, BI tools, Mixpanel, Inaction.• Solution: Instant, one-click cohort reporting• Problem: Need to write code to redirect user to loyalty behaviors.• Existing Alternatives: Homegrown solution. Inaction.• Solution: Point and click to set up an intervention that any marketing analyst can use Copyright © 2011 Stratealign LLC

But ...• I don’t like talking to customers.• They won’t talk to me because I’m trying to sell something.• I can’t ﬁnd them• I don’t have time• I already talked to a bunch of people, and they all think it’s a good idea Copyright © 2011 Stratealign LLC

Problem Solution Unique Value Unfair Customer• Difﬁcult to manage • Easily redirect users to Proposition Advantage Segments high loyalty behaviors churn • Instant, one-click • Startups• Cohort analysis is cohort reporting Easily create loyal • Thought Leadership very time consuming • Point and click to set customers • Outstanding ease of • Entrepreneurial web• Need to write code up an intervention that companies use to redirect user to any marketing analyst loyalty behaviors can useHow they are solving it Key Activities Channelnow •Create an intervention• Patchwork of • View cohort analysis analytics software • SEO, Blogs, (Google Analytics), Speaking, Twitter, platform based YouTube personalization, Excel • SEM, Newsletter• Email autoresponders • Automated Sales• Do nothing Cost Structure Revenue Model • 1/2 time product manager • $49/user/month • 320 hours development • Heroku @ $100/month (free initially)

Plan Example: Be Sticky• Problems • Need to write code to redirect user to loyalty behaviors• How they are solving it now • Email autoresponders• Hypotheses • Customers are writing personalization code or using email autoresponders to drive loyalty behaviors Copyright © 2011 Stratealign LLC

Plan Example: Be Sticky• Customer Segments • Startups • Entrepreneurial web companies• Hypotheses • Revenue stage startups and web companies are actively managing churn through a patchwork of tools Copyright © 2011 Stratealign LLC

Problem Interview - CollectDemographics (2 minutes)• Ensure they are in your target group• How long has your company been around?• Are you at revenue stage?• Tell me about your product Copyright © 2011 Stratealign LLC

Problem Interview -Problem Ranking (4 minutes)• Summarize the top 3 problems• Do these problems resonate with you?• Are there other problems that I didn’t talk about?• How would you rank these problems?• Tip: use index cards to present and rank Copyright © 2011 Stratealign LLC

Ask Friends for HelpEmail Request TemplateI have a quick favor to ask.I’ve got a product idea that I’m trying to validate with [type of customer]. My goalis for them to visit my splash page at [URL] and indicate their interest (or lackthereof). I will only contact them if they explicitly give me permission to do so.Could you send this message along to people you know who ﬁt this target? (Feelfree to change it a bit if you like):[Message - be sure to include the goal, the URL, and your contact information]Twitter Request TemplateI have a quick favor to ask.I’ve got a product idea that I’m trying to validate with [type of customer]. My goalis for them to visit my splash page at [URL] and indicate their interest (or lackthereof). I will only contact them if they explicitly give me permission to do so.Since you have a number of followers who are the type of customer I’m trying toreach, could you tweet this for me? (Feel free to change a bit if you like):[Message - include the URL, the topic, and keep it under 115 chars so it can beeasily retweeted] Copyright © 2011 Stratealign LLC

Check• Review your results weekly • You should do 10-15 interviews a week• Good to review with an advisor• Determine which hypotheses are true and which may not be• Hone in on who your early adopters are • What are their common characteristics • Determine how to reach more like them• Pay attention to words customers use often Copyright © 2011 Stratealign LLC

Act• Take the results of Check and pivot or exit• Exit Criteria • You can identify the demographics of an early adopter • You have a must have problem • Can describe how customers solve this problem today • You have interviewed at least 10 people who have met the above criteria Copyright © 2011 Stratealign LLC

Problem Interview Summary• Business Model is all hypotheses• Get out of the building to validate/invalidate them• Start with the problem and the customer• Figure out how their solving the problem now• If your assumptions are invalidated - pivot Copyright © 2011 Stratealign LLC

The Solution Interview Problem Solution Unique Value Unfair Customer• Difﬁcult to manage • Easily redirect users to Proposition Advantage Segments high loyalty behaviors churn • Instant, one-click • Startups• Cohort analysis is cohort reporting Easily create loyal • Thought Leadership very time consuming • Point and click to set customers • Outstanding ease of • Entrepreneurial web• Need to write code up an intervention that companies use to redirect user to any marketing analyst loyalty behaviors can useHow they are solving it Key Activities Channelnow •Create an intervention• Patchwork of • View cohort analysis analytics software • SEO, Blogs, (Google Analytics), Speaking, Twitter, platform based YouTube personalization, Excel • SEM, Newsletter• Email autoresponders • Automated Sales• Do nothing Cost Structure Revenue Model • 1/2 time product manager • $49/user/month • 320 hours development • Heroku @ $100/month (free initially) Copyright © 2011 Stratealign LLC

Plan Business Canvas HypothesisSolution• Easily redirect users to high loyalty The “Manage Cohorts screen” will be a compelling solution for the behaviors “Difﬁcult to manage churn problem” The “Cohort Report Screen” will be a compelling solution for the “Cohort• Instant, one-click cohort reporting analysis is very time consuming problem”• Point and click to set up an intervention The “Create Intervention Screen” will be a compelling solution for the that any marketing analyst can use “Need to write code to redirect user to loyalty behaviors”Revenue streams • $49/user/month Early adopters will agree to pay $49/month/userChannel• SEO, Blogs, Speaking, Twitter,YouTube Early adopters will ﬁnd Be Stick through search, our blog, from our• SEM, Newsletter speaking engagements, our tweets and through YouTube videos• Automated Sales Copyright © 2011 Stratealign LLC

Demo (15 minutes)• For each problem: • Show how the mockup solves the problem • Ask if they have questions • Go on to the next problem• Which screenshots resonated the most with you?• Which could you live without?• What is missing? Copyright © 2011 Stratealign LLC

Test Pricing (3 minutes)• Test the price with your guesstimated pricing• Notice their reaction immediately after you suggested the pricing• If said they would pay it • If they hesitate before answering, its the right price • If they say they would pay it immediately, the price is too low• If they say no • Ask what they would pay • What they say they would is usually less than what the real price is• For things with high switching costs, ask if they would use it if it were free Copyright © 2011 Stratealign LLC

Check• Review results weekly• Add/kill features • Keep it to MVP • If you add one, try to kill one• Reﬁne pricing • If there was no resistance, raise the price • Compare your price to the existing solution price• Review all of your hypotheses and revise appropriately Copyright © 2011 Stratealign LLC

Act• Based on the Check step, you exit Problem/ Solution Fit if you can conﬁdently: • Identify the demographics of an early adopter • Have a must have problem • Can deﬁne the minimum features to solve the problem • Have a price the customer is willing to pay • You can build a business around that price (using back of the napkin calculations) Copyright © 2011 Stratealign LLC

Solution Interview Summary• Validate solution channel and revenue model• MVP at this stage should not be the product• Determine what the most important screen is• Ask about price Copyright © 2011 Stratealign LLC

Customer DiscoveryBusiness Model Problem Generation Interviews MVP Solution Solution Design Interviews

Drill down toMinimum Viable Product (MVP) 1 4 2 5 X 3 X 6

Example MVPQuestion: Are enough people interested in our service?Measure: People signing up for the productExperiment:• Create a video of clicking through visual mockups• Post it on a landing page with a sign up button• Post and promote on Digg, Hacker News, etc.

Example MVPResult: 90,000 Signups in less than three daysDevelopment completed 18 months later

Example MVP

More on MVP• Not one snapshot, but a progression of experiments• At some point, you need to start development. That’s where Agile comes in

Questions?Bernhard Kappe Todd WyderFounder and CEO, Pathﬁnder Software CEO, BrokerSavantbkappe@pathf.com todd@brokersavant.comTwitter: @bernhardkappe Twitter: @toddwyder Copyright © 2011 Stratealign LLC

How To Do Customer Interviews

by Pathfinder Software on Dec 03, 2011

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