Last month, this column discussed ideas, and the need to continually reframe the idea at the core of your business until it creates a viable opportunity. To understand how one might go about that process, you need to understand how to gain a deeper insight into your customers and the problems they might pay you to solve for them.
At the Sussex Innovation Centre, one of the most valuable services that we offer to our members is to scope and conduct extensive customer research projects, which are overseen by our in-house support team. This helps businesses to gain an objective understanding of their customers’ needs and values, and redefine both their offering, and the ways in which they deliver it.
Customer-led design is a mantra that many leading digital businesses have adhered to in recent years, with companies releasing a minimum viable product into the marketplace, and redesigning successive iterations of that product after receiving customer feedback about what features they would like to see integrated into its design. It’s also why massive technology companies like Google, Facebook, Microsoft and Apple continually release updates and patches for their products, feeding in a stream of new features that their most valuable customer segments are asking for.
This process of ‘lean development’, as it is often called, is a particularly suitable method for the digital industries, which can typically respond faster to customer demand than traditional bricks-and-mortar businesses. However, it would be a big mistake when laying the groundwork for any new business not to engage with as many potential customers as you can, and uncover some of the underlying motivations for their behaviour.
When businesses assume they know what their customers want, and design features for these imagined customers instead of listening to their actual customers, it can lead to expensive mistakes. HMV’s much-publicised downfall was in large part due to a failure to appreciate the changing mechanisms of delivery that entertainment fans were increasingly using, with senior executives infamously assuming that online stores could not compete with the experience of browsing for music and film in a physical store.
While it’s true that there are still many consumers who do enjoy this aspect of buying music, books and films, HMV failed to understand the place they occupied in the market for their core customers. As a nation-wide, high street retail chain, their offering appealed to mass consumers, who generally prized convenience and value above all else. These customers were much more likely to stream and download media when that option became viable, while the niche audiences who valued experience-based features such as curation and customer service were more likely to buy from smaller, independent outlets.
Claire Pasquill is an Innovation Support Advisor at the Centre, specialising in customers, sales and marketing, and is an advocate for customer-led design. “From working in the crowded marketplace of the events industry for many years, I learned that trying to sell your business to everyone just dilutes your message and leaves customers without a hook to understand what you offer,” she says. “That’s why it’s so important, not only to be influenced by what your potential customers tell you, but to define some really tangible groups that you want to appeal to first.
“It may seem counter-intuitive, but it’s better to create something that suits a smaller, dedicated market, than to start by trying to please everybody. If you’re trying to sell to a million different people at once, they’re going to have tens of thousands of different ideas as to what they want. Customer segmentation is always the first step.”
In basic terms, the key to customer segmentation is to think about the features your idea has that differentiate it from the competition, then try to understand the problems that those features might solve. Which clearly-defined groups of people feel these problems most keenly? What industry do they work in? How old are they likely to be? Where are they? What are their behaviours like?
It’s a case of immersing yourself in every piece of information that you can gather about the potential customer groups you’ve chosen to focus on. Find out what they do currently when confronted with the problem that your business solves, and if they suffer from any related needs that you might not have thought of. Most crucially from your perspective, would they pay money for a better solution?
If you can, try to interview your customer segments, but – and this is the tricky bit – don’t ask them directly about your idea! Instead, ask open questions, respond neutrally, and just let them talk. The way we ask questions shapes the way that people answer them. You’ll learn much more about how to shape your idea if you respond to the issues customers want to share with you, rather than giving them your solution fully formed and asking them for their response.
Howard Sandford, CTO and founder at Singing Horse Studio Ltd, recently commissioned Sussex Innovation Centre to help with a customer-led design project. “If we were a typical software studio, when building our recent MavenRocket Google AdWords tool, we would probably have rushed in feet-first, and delivered what we thought the customer should want,” he says. “Had we done so, we would have built a ton of features that no one wanted, and would probably have ended up with an expensive online app devoid of customers.
“Instead, thanks to Claire’s help and guidance, we garnered feedback before committing anything to the whiteboard (in fact, we really use the white board wall), and in the process discovered that who we thought would be our typical customer, turned out to be the exact opposite. Instead of building for the archetypal AdWords user, our app is now laser-targeted for AdWords/PPC/SEM Agencies, making them more profitable, and as a side benefit, because of the customer-led process, we also have a list of interested prospects, some of whom welcome the opportunity to participate in the pre-beta release.”
Hopefully, designing your idea with the help of input from your customers will start to win you those first, all-important sales. The next problem is keeping them coming, and keeping a close eye on how the numbers add up. Next month, we’ll look at the matter of finance and costs.
Joseph Bradfield is a communications specialist at the Sussex Innovation Centre, an incubator for high-growth businesses based at the University of Sussex, where he works with growing businesses to help share their innovative ideas with the world. He writes a monthly column for entrepreneurs and start-up companies, drawing on the experience of the Centre’s dedicated business support team to provide step-by-step advice and insight, helping readers to navigate some of the challenges involved in launching a new enterprise.