Customer-Driven Research

Do a quick experiment for me: Google “David Cancel customer first company.”

What comes up?

This is what comes up for me

Go ahead and give that article a read for me. What I’m going to tell you next is not going to be fun: If you’re not ready to SERVE your customers for the rest of your company’s existence, don’t bother creating a product for them.

SaaS 1.0 put the company in control and made the customer jump through hoops. SaaS 2.0 puts the customer in control and makes the company jump through the hoops.

Remember, customer is king. The market is so fierce, the competition is so fast, and the customers are so smart that if you don’t listen to your customers and put them before everything else, you WILL lose them.

Only the customer-driven companies will move fast enough, listen well enough, and make stuff that customers will want for years and years to come.

This is the difference between Netflix and Blockbuster, Airbnb and Hilton, Uber and the cabs. The SaaS companies that put their product and stakeholders before their customers will be left in the dust.

In today's SaaS industry, there's no justification for not talking to your customers. Treating people like people isn't just the right thing — it's the smartest business decision for your SaaS company.

Speaking from experience, Des Traynor of Intercom talks about how the two most important things a startup can do in the first year is to write code and talk to it’s users. At the time, he didn’t see it as marketing. But most of their early customers came from the same people he spent talking to about the product and what to build.

So to build a product that people want, or to keep building a product that people want, we’re not going to look inward and jot down ideas on the whiteboard — we’re going to look outward, and ask our customers what they want.

The #1 startup killer is the mistake of building a product with no market and no demand. The reason it happens? Not talking to customers.

Thus, one of the keys to a successful startup is to build an audience before building a product.

What do I mean when I say “build an audience?”

I mean find a group of people who you share something in common with and get to know them — what frustrates them, what’s valuable to them, what they’re trying to accomplish.

The most sound startup advice is to solve a problem that you share with other people because that way you can intimately get to know the problem that you will set out to solve.

Point is: Just freaking help people, and you’ll find all the opportunity you’ll need.

There’s no data on empathy

Helping someone starts with empathy, which the ability to understand and share the feelings of another person.

You need to feel your customer’s pain and their frustration with a problem.

Conventional marketing wisdom will advise you to be “data-driven.” And there’s nothing wrong with using data to make decisions, but surveys and graphs will only tell you so much. That kind of data is often surface level, and doesn’t get to the root of the problem like a real conversation can.

Unconventional marketing wisdom starts with the customer, and the real problems, emotions, pains, and frustrations they feel.

The most helpful data you can get is qualitative, not quantitative data. And guess what, you don’t need to pay a research firm to go out and do a study or buy some expensive software to scrape the web.

All you have to do is listen. Listen, learn, and repeat.

This will build a solid understanding of who your customer is and how you can serve them.

The traditional terms for it are “customer profile,” “buyer persona,” and “target customer.” I don’t care what you call it, but you need to be able to answer some fundamental questions about your customer at any time:

1. How would you describe who they are?
2. How do they do their work?
3. What problems do they have?
4. What do they want to achieve?
5. Where can you find them?

Here’s an example of how I would answer these questions about myself so you can see the train of thought:

“Corey Haines is a mid-level marketer at a venture-backed SaaS company in his 20s. He uses more than 10 tools a day on average to perform various digital marketing tasks and finds it hard to accurately and repeatedly report on everything going on across all the tools he uses. He’s looking for a way to automatically pull all the data he needs into one standardized report so he doesn’t have to manually do it every day. Corey goes to 1-2 conferences a year and spends most of his time on Reddit, Indie Hackers, and Product Hunt.”

Now, just with this little description, we can start forming a much more accurate representation of your market. Some of the questions you need to be able to answer are:

1. How many people are there like Corey?
2. How much money does Corey have to spend on solutions?
3. Does Corey have the authority to buy a solution or is it someone else?

Answering these questions will give you an idea whether or not it’s a good idea to build a product and try to make a business out of it.

Something to keep in mind is that your customers will become your boss, your best friend, and your mother. They give you the money, talk to you every day, and tell you what you’re doing wrong.

So choose your customers wisely.

Let’s say, for example, that you’ve chosen real estate agents as your target customer. Sure, real estate agents are easy to find, have lots of problems, and are eager to spend money on solutions. Do you really want to depend on real estate agents to give you money? Do you really want to talk to real estate agents every day? Do you really want real estate agents telling you what you’re doing wrong?

If the answer to any of those questions is no, then you should think about choosing a different target customer.

Human beings have a tendency to associate themselves with people who remind them of themselves, and avoid people who are different than them. Your best friend is your best friend because you share the same interests, humor, goals, and morals. It’s hard being friends with someone who you share nothing in common with.

So think about this, who do you want to make your boss, your best friend, and your mother for the foreseeable future?

Finding your tribe

Seth Godin introduces the idea of a modern-day tribe in his book Tribes, which argues that people can create mini-movements with just a small amount of people with a shared set of beliefs, opinions, hobbies, or skills. The idea of a tribe is incredibly relevant to discovering and defining your target customer because you’re looking for people who are not only qualified to buy, but who will also be your evangelists.

So how do you find your tribe? Let’s take a look at some ways you can widdle this big world down into a single tribe.

Founder/product fit:

You need to be able to create, manage, and be passionate about the products. If you’re a passionate Apple fanboy or girl, you probably wouldn’t enjoy creating Android apps. If you’re a cat person, you probably wouldn’t enjoy designing a new leash for dogs.

Founder/market fit:

You need to be able to socialize with, understand, and be passionate about solving a problem for a specific set of people or businesses. If you hate coffee, you probably wouldn’t want to make a product for coffee shops. If you’ve never been to a chiropractor, you probably have no business making products for chiropractors.

Founder/channel fit:

You need to be comfortable with and have experience with the marketing channels (the online or offline places you use to find customers) you would use to market to your customers. If you hate conferences, you won’t enjoy marketing to a customer who goes to multiple conferences a year. If you hate cold calling, you’re going to have a hard time reaching a customer who doesn’t check their email or hang out anywhere online.

Find other people like you

Just like you would at a new school, new church, new city, or new company, find people that are like you.

Start with a problem you have and see who else has it. Go talk to people who have the same job as you.

Find people “near” you

Start by finding people locally in your city or who congregate online somewhere, whether that’s a group, a particular social network, or a slack channel.

It’s important to remember that not everyone is online. And people behave very differently online. For example, very successful entrepreneurs may only be found active on paid, private slack channels whereas wantrepreneurs and Shopify startups can be found roaming Facebook groups all day.

Finding people locally is a vastly underrated tactic in my opinion. Going to meetups, coffee shops, workshops, or even door to door through businesses can get you real time information and face time that the internet never could.

A 20 minute conversation with a group of entrepreneurs in a co-working space could yield double the amount of information you would normally have to spend weeks collecting online through threads and messages.

Want to find a problem that barber shops have? Go find 5 on Yelp and ask them if they have 5 minutes in exchange for a coffee.

Small things like that go a long way.

Find people with buying power

Not everyone has $50 per month to spend on a new product. Again, a prime example of this is real estate agents because depending on how well they are doing and what city they are in, they could be rolling in the dough.

The coffee shop on the corner may not have any money to spend on a new Point of Sale system but a financial planner may have plenty to spend on a new prospecting tool.

This is what makes the B2B market so attractive is because businesses are much more willing to spend money on SaaS products than consumers. $100 per month for a consumer is a big investment that requires ample decision making whereas $100 per month for a business could be a drop in the bucket.

More specifically, buying power is what historically makes SaaS products priced under $50 per month vastly more popular than products priced over $50 per month. Many businesses hold a policy that anything over $50 requires approval from a manager, so buying a $20 per month SaaS product requires about as much thought as buying a coffee.

Find technologically savvy people

One of the biggest mistakes you can make is creating a tech product for someone who isn’t technologically savvy.

Many founders assume that a business desperately wants to move off of a traditional pen and paper system, when in reality they are perfectly happy with it.

It’s the #1 startup killer: Trying to solve a problem that doesn’t exist.

Let’s take your local donut shop for example. You walk in for a donut and see that they still use a cash register and only accept cash. You decide to bring them into the digital world by creating a simple PoS system with Stripe so they can better manage their money and accept more forms of payment. While this may be an amazing idea that they SHOULD want, they still might not want it.

And you can’t do anything about that.

You will do yourself a huge disfavor by trying to convince people that they have a problem, and that you can solve it.

You need to find people who are tech savvy, know they have a problem, and are willing to accept technology as a solution to that problem.

Find enough people

As a final note, remember that just because one person may have a problem and is willing to invest in a technological solution like yours, doesn’t mean that there are enough of those people to support a whole business.

SaaS products often have the opposite problem of most other products. Many people think “my product is for everyone! My market is anyone and everyone who will pay money for it!” The struggle you have to balance in SaaS is to make sure that your market is defined enough to be a viable solution while being big enough to support a business.

For example, you may have a great idea for indie game development companies who focus on open world RPGs, but there may only be a handful of those in the world.

Your customer is too defined and narrow = no business. Your customer is not defined and too broad = no solution.

Business dynamics

It’s important to find people like you, but it’s just as important to consider what kind of business you are selling into.

While industry, location, revenue, and other factors definitely give good insight into the business, you can generally tell the most about a business by how many employees it has. You’ll see four different kinds of businesses based on its size:

Less Than 10 Employees

• The company consists of founders and generalist employees.
• Act like consumers because they are 
usually spending their own money.
• Have to sell to them like a consumer app: no sales people and make it all self-service.
• High-quality content lets you reach a much wider audience than 50 cold calls a day, and you’ll know the people coming in are at least slightly interested in your product.

11-25 Employees

• Focus is still on developing the product or service.
• At this size organizations need tools and they tend to get a lot done with a few of them.
• Willing to spend real money on tools.
• Prefer self-service because the individuals making decisions are used to doing everything themselves.

26-75 Employees

• Another management layer is introduced and not everyone reports to the CEO.
• Decisions take time, approval, and consensus.
• As the number of employees grows, so do budgets, process and managers.
• You can add a sales team to your company (if necessary) to focus on this size of firm; it’s justified by the amount of money they have to spend.

75+ Employees

• Many management layers and complex reporting structure.
• Decisions are made using a robust system, sometimes involving an RFP (Request for Proposal).
• Budgets are large, but closely monitored.
• The sales team is a large part of the organization with an emphasis on process and quotas.

The dynamics selling into a business with 5 employees can be vastly different than a business with 30 employees. Marketers need to understand the business dynamics so they can best understand the context their customers are buying.

For example, price might be a deciding factor for a business with 5 employees, while it may not matter at all for a business with 30 employees. A business with 20 employees might give their employees free reign to buy whichever tools they prefer, while a business with 100 employees may not allow anyone except managers to make purchasing decisions.

Many startups make the mistake of trying to dictate the buying process for their customers, when it may not be suitable for that business. For example, a startup might hire a sales team, create a really refined demo, and cold call the small businesses they can find when the businesses they’re selling into may much prefer a self-serve model with a free trial.

Design your marketing for the customer; don’t force your buying process on a business just because that’s way you want to do it.

Your homework

If you don’t have customers yet:

Your homework is now to record 10 unique and specific places that you can find your customers. They need to be exact. And preferably, they need to be from a couple different places, including:

1. At least one online community

2. At least one meet up or conference

3. At least one social network

For example, you could find them at a specific conference every year, on a subreddit, commenting on a hashtag, following a thought leader on twitter, commenting on someone’s linkedin posts, in the Indie Hacker’s community, in Hubspot customer discussion posts, going to specific meet ups in their cities, listening to a specific podcast, and blogging on specific topics on Medium.

If you do have customers:

Here’s a few ways you can dig into who your ideal customers really are:

Access your CRM and Find companies that have a combination of the highest LTV (lifetime value), shortest sales cycle (short trial period or time to close), and lowest churn.

Ask your customer success team which customers had the lowest support needs, highest product adoption, their favorite customers, and customers that have upgraded or bought additional products or services.

Hop on the phone or a video conference and ask what their goals, challenges, and day-to-day operations look like. Ask who they look to for advice, what websites they read, communities they’re apart of, and social networks they’re on the most.

In summary

Choose your customers wisely. Build your tribe and really get to know the people your business serves. It’s important to make sure that you’re marketing to the right people, at the right company, and that you personally know them and their needs.

In the next chapter, we’ll discover why your customers would buy your products and the framework to make a compelling offer to them based on their needs.