Customer Development Hacks for SaaS Startups

The two main concerns SaaS vendors looking to ramp customer acquisition have are 1) how do I get my product in front of my ideal customers and 2) how do I identify those ideal customers in the first place… the answer includes Customer Development.

For super-early SaaS startups, however, the second question is the main one… who am I going to sell to when I launch?

Just this week I did an online workshop – for SaaS vendors at any stage – specifically about identifying your Ideal Customer (join my mailing list to get notified of upcoming workshops) and we spent 3.5 hours going over everything that this process entails.

And a couple times a year I do an online workshop – again, for companies at all stages – focused specifically on getting your SaaS in front of your ideal customers (again, join the mailing list to find out when the next one is).

Clearly, there’s a lot to creating an Ideal Customer profile – I mean, we spent 3.5 hours just going over the process in my workshop – and there’s even more to actually using that profile to ensure you’re attracting the right customers into the top of your sales funnel.

But if you’re just starting out, it’s tricky. While it’s wise to do Customer Development ideally before you even create or modify your product for that new market, the reality is you don’t really even know who to talk to yet.

The core idea behind Customer Development – if you’re not familiar – is that it allows you to question and test the basic assumptions you have around your new business idea, rather than simply going forward solely on your gut and hope.

But as my friend Greg Pietruszynski from growbots said to me the other day… Customer Development is great, but you may have to talk to 50 companies before you even figure out which ones are worth targeting, and that can take a while!

But Greg has a faster way.

He has a method for pre-launch and super-early startups to quickly come up with a list of companies to do Customer Development with – what he calls his Customer Development Hack 2.0 – and he’s been kind enough to share it with us.

I have a couple of thoughts in the Afterword, but for now I’ll turn it over to Greg.

Customer Development Hacks – 2.0

As an avid practitioner of the Lean Methodology I’m fully aware of the importance of Problem and Solution Interviews as a part of improving web applications. However you cannot argue with the fact that the traditional approach to Customer Development sometimes lacks efficiency and speed.

I personally know a lot of people who “got out of the building” and stay out there for months, unable to move forward. I want to show some alternative methods that allow for loads of useful feedback while retaining high data quality.

Find your niche in 15 minutes

Especially B2B founders struggle to find their perfect niche, as usually multiple customer segments can benefit from their products. So let’s say your product can be used by 5 different customer segments. And according to customer development methodology you should interview at least 10 people from each segment. It means conducting 50 interviews just to find out where problems are most painful. Come on, that would take ages!

But there is a better way. I’ll show you how we help growbots customers choose their best customer segment to interview in 15 minutes. The idea is bloody simple – just rank all of your potential customer segments in a special table.

I’ve read about this approach on Justin Wilcox’ blogpost and decided to adjust it to B2B market needs. Here’s how it works: assign points, from 1 to 3, to all your potential segments, in the following categories:

• Budget – how much money can they spend to solve the problem
• Market Size – how many potential customers are in the target group
• Accessibility – how easy it is to reach decisive people
• Pain level – how painful is the problem you’re solving for this customers
• Customer Life Cycle – how long will they use your product

After you’re done with scoring just sum up the points for each customer segment and there it is: your perfect niche. Let’s say you’re developing a new customer acquisition tool. Here’s the original Justin’s SPA Table tactic in action:

B2B targets are usually very specific, so we’ve added additional criteria to make it work for SaaS products:

It’s much better now! What if your products is targeted at a very narrow and specific niche? Just divide some segments into smaller ones, but don’t go to deep to avoid confusion:

UPDATE: Abhishek Agrawal from Restified.com put together a Google Spreadsheet version for you.

Remember that this table is all about quick results! Is this accurate? Accurate enough!

Learn to read customers’ minds

Congrats, you’ve just avoided 40 unnecessary customer interviews! Fancy saving even more time? How about learning what your potential customers think without even talking to them? The truth is that people share their most painful problems, deepest thoughts and private opinions without being asked to. All you need is an efficient methodology of evaluating opinions found on the internet!

Amy Hoy calls this tactic Safari, because you can compare reading discussions in the internet to watching wild animals in their natural habitat. However I would not be myself if I didn’t modify her approach to get results faster.

It’s like a safari in a jeep with a jet engine now! Enter Jet-Safari – your ultimate customer research methodology. Before trying it out, download a sample Jet-Safari board.

Start with gathering about 5-10 threads touching on the problem you’re solving. Usually I search for discussions on Quora, LinkedIn and in the comments under popular blogposts. Amy would tell you it’s best to pick up threads with 50+ comments, but it’s often impossible in case of B2B products.

Go for shorter ones, but make sure they contain opinions about the problem and discussion between people. I sometimes even use threads with 3-5 comments! Once you’ve listed enough threads it’s time to dive into analysis! Reading through the threads one-by-one note down the following information:

• Your main focus while reading is gathering hypotheses. Each time you see an important opinion about the problem or your solution – write it down in the hypotheses section. Use “x” or “|” to mark the hypothesis each time you spot it again. Sometimes people write in a straightforward manner what they think about the problem you’re trying to solve, but sometimes you have to come to conclusions on your own.For example if you see common expressions like: “I love the design”, “It looks awesome”, etc., then a probable hypothesis is that design is very important to your target. Focus on 10 most often recurring hypotheses – you can use them while designing a solution interview script.
• In the keyword section collect expressions regarding the problem, your solution and potential features – all in order to learn the language of your target group. What keywords they use to describe:
  • Problems they’re facing (examples: “high-priced software”, “no internal email”, “complexity”, “controlling workflow”, etc.)
  • Solutions they’re trying to use to solve those problems and opinions about competitor products (examples: “love Asana”, “to-do lists”, “calendar”, “excel”, etc.)
  • Feature ideas (examples: “graph/charts”, “multiple users access”, “time/progress tracking”, “intuitive/simple interface”, “premium support”, etc.)
• Use “x” or “|” to mark a given keyword each time you spot it again. Keywords about your solution and it’s features disclose what’s most valuable for your target. There’s no single, best strategy in formulating these keywords – keep it convenient for yourself. After summarizing most popular keywords many new hypotheses may come to mind – write them down in the hypotheses section. Most popular words will create the core of your communication and a base for keyword research of your SEO strategy.
• In the people section collect contacts – influencers and potential clients. You’ll have a database of contacts to conduct solution interviews and a list of persons whose activity you should follow.
• Collect data on your competition to prepare for a quick analysis after you’re done with sifting through the threads. Thanks to using “x” or “|” to mark competitors names each time you spot them you will know which companies are most popular among your target group.
• In the places section collect all sites that are being talked about, because those likely are the places where your target group is active. After you finish your analysis you should check out all of those websites!

Alright, that’s enough theory! Here’s how we do it at growbots. Let’s say you want to build a new conversion optimization tool, but you have no idea what is the most painful problem there. Have a look on this thread on Growthhackers.com.

I’ve analysed only the first answer and already found 2 problems, 2 probable hypothesis, 2 important blogs and 3 competitors: Jet-Safari – how to do it?  I hope it helps you to get a picture of a complete Safari board after analysing more threads.

Continue until you observe what hypotheses and keywords are most popular. If you feel like you’re not getting any new insights – it’s time to wrap up. For example – it took me 5 minutes to list 3 most painful problems concerning the e-commerce discount coupons, but I needed about two hours more to confirm they were truly the popular ones:

Now you know the most important issues without even asking anybody! During customer interviews just get more into the details and try to understand everything that remains unclear.

Once you’re ready to start interviewing the right people about the right problems you will most likely encounter another roadblock: you need a list of people to contact. You’re in a great position after finishing your Safari, because you already have a contact list to start with, however there are other quick methods you can use:

Launch a super-fast product’s landing page and fit it with an opt-in form to collect e-mail addresses from potentially interested customers. I recommend to use launchrock.com or Unbounce.com, if you feel like creating something more sophisticated. Additionally start a Twitter account, link it to the landing page and start following about 200 people for your target a day.

• You can improve your follow-back rates with testing different versions of your pitch – be very clear about the problem you’re solving. Contact all of people who signed up on the landing page or followed you on Twitter with a kind interview request.
• Ask other startup founders for help. There are many websites dedicated to providing feedback on new initiatives, such as: http://betali.st/, http://startuplift.com, http://erlibird.com/, http://ratemystartup.com/, etc. You also can try to attract a much more demanding audience and post a request for feedback on HackerNews or reddit.com/r/startups – just remember to add the magic “SHOW (HN or r/startups)” in your thread title. Last but not least – you can find a lot of startup groups on Facebook, Google+ and LinkedIn – join them, introduce your idea and ask for 30 minutes call to discuss the problem.
• Hit growbots team with an email. We will select 50 people to contact and convince them to talk to you! We can also make sure you’re focused on the right target group and have designed your solution interview script properly. Don’t worry about the price – we have a decent offer for everyone making first steps in business.

You shouldn’t worry about Customer Development slowing you down any more! Now you know how to quickly collect loads of useful customer feedback and move on to test your ideas on the market!

Greg Pietruszynski is CEO of growbots and you should follow him on Twitter.

Afterword by Lincoln

Lincoln here again.

It’s cool to see the evolution of Customer Development over the last few years and how, with some practical knowledge and outside-the-box thinking, the process can be streamlined – or hacked – to quickly get you moving in the right direction.

While I’m a big believer in Customer Development and believe that it is a serious process that needs to be treated that way, I’m all for “hacking” the process if that will get people to do it.

I mean, if the decision is between doing the type of hack Greg presented here vs. doing nothing (because the process is typically overwhelming), then by all means take the shortcut… it’s so much better than avoiding the CustDev process entirely!

Of course, as I said in the intro, I can spend well over 3 hours just describing the myriad ways to develop an Ideal Customer Profile, especially for established SaaS vendors or startups that have reached some level of Product / Market Fit… but sometimes a quick “hack” like this is at least a great way to get started.