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Vernon’s Razor

BUSI 701Artistic Entrepreneurship

Class 9

Customer Pain

Vernon’s Razor

Videos

•Verma: “Passion and Customer”

•Levinson “Talk to Customers”

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Go or No-Go?

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Go or No-Go?

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1.Value Proposition

2.Market Potential

3.Return

4.Team

5.Competitive Advantage

6.Business Model

7.Customer Pain

Defining

Opportunity

Minimizing

Risk

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Customer Pain

•Will the dogs eat the dog food?

•Will the fish bite?

•Keyword: validation

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Brook Byers, KPCB

•If you don’t have any customers yet, youneed to show that you know who yourcustomer is going to be and that you havegone out and talked to them.”

•“Acid test” for early entrepreneurs:resonance with customers

Byers: know your customers

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Value Proposition

•Recap: the reason to create a new venture isto create value

•“Customer Pain” is a validation thatsomebody will directly benefit from thatvalue

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Ways to Validate Customer Pain

1.#1 – paying customers

2.Beta testing

3.Competition

4.Surveys and focus groups

5.Letters of Intent (LOIs)

6.Eyeballs

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#1 – Paying Customers

•Like Team is #1 for lowering risk,paying customers validate pain

•Understanding this is #1, strategizeto make it happen

•Consider rolling out early imperfectproduct to start customerrelationships

Validating Customer Pain

Validating Pain

1.Paying customers

2.Beta testing

3.Competition

4.Surveys/focus groups

5.(LOIs)

6.Eyeballs

Vernon’s Razor

Beta Testing

•Concept test

•Non-paying customers

•Small or scaled down product

•Customer feedback is key

Validating Customer Pain

Validating Pain

1.Paying customers

2.Beta testing

3.Competition

4.Surveys/focus groups

5.(LOIs)

6.Eyeballs

Vernon’s Razor

Competition

•The existance of competitionvalidates the customer pain

–May create other problems

•You still must validate that yourventure is differentiated to capturex% of that market

Validating Customer Pain

Validating Pain

1.Paying customers

2.Beta testing

3.Competition

4.Surveys/focus groups

5.(LOIs)

6.Eyeballs

Vernon’s Razor

Surveys and Focus Groups

•Moving from qualitative assertions(gut feelings) to quantitative datapoints

–From “This seems like it would work”to “95 out of 100 software engineerswere likely to buy”

•1st step towards excellent customerfeedback skill sets

Validating Pain

1.Paying customers

2.Beta testing

3.Competition

4.Surveys/focus groups

5.LOIs

6.Eyeballs

Vernon’s Razor

Survey Article

•What is the purpose of the survey?

•Title the survey

•Do not make the survey any longer than it needs to be

•Use plain English

•Avoid long questions

•Ask one question at a time

•Avoid influencing the answer

•Ensure that the answer format allows meaningful answer

•Consider how the compiled data is going be analyzed

•Ensure that the questionnaire flows

•Target your respondents

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Survey Article

•Allow the respondent to expand or make comments

•Be confidential if needed

•Consider anonymity

•Give careful consideration to the best response format

•Give the respondent an idea of how much time thesurvey will take.

•Inform the respondents of the survey end date

•Pilot the survey

•Before publishing the survey proof read the surveyseveral times

•Remember to say thank you

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Letters of Intent (LOIs)

•Shows a commitment from potentialcustomers

•Particularly relevant with:

–Very high price points

–Long-term contracts

–Long sales cycle products/services

Validating Customer Pain

Validating Pain

1.Paying customers

2.Beta testing

3.Competition

4.Surveys/focus groups

5.LOIs

6.Eyeballs

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Eyeballs

•Website traffic

•Showing any interest is morecompelling than none

•If your business model isadvertising, this moves to #1

Validating Customer Pain

Validating Pain

1.Paying customers

2.Beta testing

3.Competition

4.Surveys/focus groups

5.LOIs

6.Eyeballs

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Business Model & Customer Pain

•Specific target segment

•Roadmap to future segments

•Verticals and horizontals

•Decision makers (do you solve pain for thewrong people?)

Kawasaki: create something great

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Segmentation

•Target Addressable Market

•1st Pin

•Influencers (Tipping Point)

•Crossing the Chasm(Geoffrey Moore)

Early Market

Mainstream Market

Chasm

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Product Attributes

Atribute B

Atribute A

Kawasaki nitch thyself high right

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“Marketing Mix” 4 Ps

•Price

•Product

•Promotion

•Place