The sales strategy hidden in Four Steps. Part 4: gearing up for dramatic action

A practical guide to customer development: gearing up for action

In 2005, renowned entrepreneur and academic Steve Blank published The Four Steps to the Epiphany. Inspiring tons of new ideas for start-ups, the book advocates a renewed focus on customer development as a cornerstone to building a solid business. In this new series, we’ll crystallize Blank’s theory into a few tactical steps, cut to size for young fledgling companies.

So, you’ve developed your "Problem+Solution" presentation and handpicked a second circle of Problem owners to present it to. In this final episode of the series, you’ll learn how to get the most out of this confrontation. Not only will you meet your most valuable customers; you’ll have a clear indication of the right asking price for your solution as well.

The more you know…

How do you get this information? The first thing you’ll need to do before presenting your Problem+Solution presentation, is redesign your feedback collection tool so that it helps you lay bare valuable and concrete information. You can do this by making sure you touch upon all of the following points—in the available timeframe of your presentation and Q&A, of course:

  • Does my solution address a meaningful problem? Does it adequately solve said problem?
  • Is it different from what’s currently available?
  • What is the major area of "Pain" the problem causes?
  • What is the problem’s impact on an organizational and individual level?
  • Where in the organization is the budget to acquire my solution?
  • Via which channel would my future customers most likely buy my solution?
  • Where can I find more customers like these?
  • What is the "whole product requirement" in the eye of the prospective customer? Does my solution – as designed today – cover all the aspects a future customer would expect?
  • How do my future customers and their companies purchase such products? How do they find them, and what is the approval process?
  • Any useful distribution-related information: what would it take to get an order through those channels?

The price is right

In addition to the above, you should take your chance to talk about the pricing of the product as well. There is a neat trick to winkle out this information without being too direct. First, you have to make sure you’re talking to the right people. Now state this: if you were to offer the product for free to them, would they take it? If their reaction is rather lukewarm, go ahead and drop them: they are useless to your cause and chances are slim they will ever change their minds. In case of great enthusiasm, go ahead and ask if they’d buy your product for an exuberant sum (e.g. one million Euro). Usually, you’ll get an answer in the vein of “Are you crazy? This thing shouldn’t cost more than…” And that’s how you get a very clear indication of the right asking price. If you want to further refine your pricing figures, be sure to ask your potential clients about the cost of any “inevitable customization and installation services”. If you’re selling or planning to sell through channels, make sure you spend some time with your future channel partners: it is paramount that they too understand how to price and position your product.

Ready for take-off

When you’ve discussed all of the above during your second round of presentations, you’ll possess most of the information you’ll need to get started. Make sure you reflect the new knowledge on your earlier hypotheses. Re-assess, for example, how well your preliminary product features solve customer problems: this will give you a natural ranking of features and your development roadmap, will help you review those features and, if necessary, adjust the roadmap release schedule. Try to write a release schedule for up to two years. Also, you now hold all necessary information to design and roll out your Minimum Viable Product, i.e. the simplest and crudest version that customers be nevertheless want to pay for.

Another thing your second round of presentations will reveal is your most valuable kind of prospect: people who aren’t only willing to buy your product, but who have told you how to sell it to them. Needless to say, they will be the first generation of buyers and users. Make sure you have neither too few, nor to many of them: their number is key in achieving sufficient driving force for your business take-off phase. Good luck and Godspeed!