Thursday, May 24, 2012

Know Thy Customer

One very important thing I've noticed in participating in startup events is the need to focus on the value your business provides to the customer.  The simple way to address this issue is to say it solves some problem for them.  But the "problem" goes far beyond simply defining the value of your product for the customer.  It involves knowing your customer on a deeper, dare I say, sociological level.

How can I get to know my customer?  
Talk to them!
Yes, I mean literally talk to them.  Don't just ask your friends who are just like you.  Talk to people who a different age, gender, whatever.  Think about who might use your business or service..  You may be surprised at what you hear.  Here are a few questions you can ask:
  1. Here's the product/service I'm working on.  Do you think you'd use it?  How often?
  2. Would you pay for my product/service?
  3. Where do you go now if you're looking for a product/service like mine?
If you're concerned that people are giving you overly-positive feedback and are hiding their real feelings out of politeness (sociologists call this response bias), ask these types of questions in terms of friends, as in, "do you think your friends would use this?"  By putting the focus on someone else, people sometimes feel more comfortable giving negative feedback. And getting constructive criticism in the beginning is much better than launching a lousy business model!

Find out what else they like.
Knowing the kinds of activities your customer is interested in may help you better understand how to relate to them.  Do they like fast cars?  Gadgets?  Sparkly things?  All of these can help you design the feel of your brand around the customer you've already figured out wants your product or service.  Be targeted, but make sure the market is broad enough that you're not shortchanging the potential size of your market.

But won't everyone want to use my app?  It's so awesome!
No.  And if you think your market is "everyone" you are wrong.  Before getting into more specifics, check out this graph from Nielsen that shows the proportion of people who use smartphones by age.

Note that even in the group with the highest use of smartphones, age 25-34, only 62% of them actually have a smartphone.  That means that 38% don't even have a smartphone on which to download your app.  That doesn't mean your app won't make money, it just means that you need to recognize that your market is not "all people ages xx to zz." 

What else should I know about my customers?
Once you get a handle on the basic demographics of your target market, find out how much money they spend on stuff related to your business.  A great place to start is the Bureau of Labor Statistics, which provides FREE (paid for by your tax dollars) information on how much people spend on various items, broken down by demographics like income and age, in the Consumer Expenditure Survey.  This is a great resource to get a feel for the market size.

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