• surveys
• automated customer feedback mechanisms (e.g., uservoice, get satisfaction, et. al.)
• embedded product use analytics
• marketing analytics
• feature request mechanisms
• sales calls
• product demo
• usability testing
• focus groups

Each has its place in the Customer Development process, but without live Customer Development Conversations, you are likely compromising your ability to learn your way to Product-Market fit or startup scaling.  What you seek to learn evolves over time, as do the tactics you employ, but every step of the way should be grounded in real time conversations.

Generally speaking:

Pre-Problem-Solution Fit, you concentrate on learning as much as you can about the problem, who are the real customers (user? buyer? boss?), and possible solutions.

Pre-Minimum Viable Product, you concentrate of learning, developing and testing the minimum features and functionality required o solve the problem to a degree the customer will buy.

Pre-Product-Market Fit, you concentrate on learning about funnels, testing messaging and positioning, and likely iterating on product and market segment in search of P-M fit.

The conversation itself is difficult for many. The key to effective conversations is in developing the conversation around your objectives for the discussion.  Establish 3 or 4 “must learns” for each conversation.  Depending on what you’re trying to learn, you can use “open-ended” questions and direct questions.  Use your conversations to calibrate your other tactics.  Are you asking the right questions in your surveys?  Do responses gibe?  Are product demos necessary from the buyer’s perspective?   Are users using the product the way they say they want to?

I thought I’d share some recent experiences my clients have had with customer development conversations to help illustrate conversation tactics.

1. Talk problem first, not solution.

Client: “I can’t stop talking about the solution.  It’s how the conversation starts.”

Clearly, whenever you meet someone for the first time, you need to introduce the space your product is in.  You must provide a context for the conversation.   You need to be able to state what you’re about succinctly, so you can move on to the purpose of the meeting.  Otherwise, you spend the whole time trying to explain what you’re doing.  This is why the elevator pitch is so important.   In a conversation, you don’t necessarily repeat the pitch verbatim, but you use components of it to steer the conversation.  So, for example, if you are testing your problem assumptions, use a classic sales cold call method of “flipping” the conversation from talking about yourself (solution) to the customer (problem):

Hi, I’m Brant Cooper from Market By Numbers, and I teach Founders Customer Development principles to help get their startups off the ground; (intro that provides context)

I often hear from startup CEOs like yourself, (The Flip)

That they have trouble figuring out how to prove their business model and how to prioritize what they should be working on; (problem hypotheses)

Do you experience this at all? (Open ended question)

Follow up questions depend on the answer.  If answer is no, you might say: “That’s great, it sounds like you have things under control. “What are the primary issues you face as CEO?” or “Do you hear other CEOs that talk about these issues?”

2. Except when that doesn’t work.

Client: “I couldn’t get her to describe her pain.  She kept wanting to know how she could help me!”

The contact was a senior person in the exact type of company needed to confirm a key hypothesis.  My solution would help her company’s relationship with its clients, but I couldn’t get her to talk about that.  Instead, she talked about problems her clients had and the opportunities available to solve them.  I asked if she was a sales person and it turns out she was.    I said it sounds like she’s a good sales person, who understands the needs of her clients, and a good contact, but not his customer. I suggested my client ask her to refer him to her company’s product managers who would be more likely to be interested in his ideas.  “More contacts to speak with” should always be a core objective.

If a problem statement doesn’t resonate, either your problem statement is not articulated correctly, is flat out wrong, or you are not talking to the your customer.

3. This is not feature mongering.

Client: “Conversation inevitably turns to features discussion.”

If you are talking about features, see 1. above.  If your contact or customer is talking features, slow it down by by asking why.  Use the same 5-whys approach Eric Ries talks about to discover a problem in your development process to figure out what is driving the feature request.  Continue to ask why the customer wants specific functionality until they are able to tell you the actual problem they’re trying to solve.  This helps you consider a couple of things.  First, is the feature a high priority to the customer?  Second, are you building the right Minimum Viable Product?  Obviously, one data point is not enough to draw conclusions, but it contributes to the analysis.

4. How to test messaging.

Client: “Can’t I just A/B test?”

It’s fine to use split testing to test messaging, but it’s most effective when you’re optimizing your funnel. If you do it too early, you actually don’t know if you are optimizing for the right product and market.  Also, you can find out that one message works better than another, but you can’t learn why.  In a live conversation, not only can you ask why a message doesn’t work, but you can test several iterations in the same conversation.   When testing messages live, I like to use the “pause method.”

5. Ask them.

Client: “Everyone says I need Facebook, Twitter, a blog.  How do I know?”

If there are two things the world doesn’t need more of, they are Internet Marketers and Social Media Gurus. It’s easy to get caught up in the excitement and clearly Internet and social media marketing can be effective.  But their effectiveness depends less on which expert you hire than whether your customer and their buying process intersect with your online tactics.  I spoke with a CEO recently who had two B2B deals in pilot for his new startup.  He had personally orchestrated the sales process through 1-1 relationship building in a carefully honed market segment. Yet his marketing plan called for Internet and social media marketing that didn’t jive with his experience.  He immediately described a shotgun approach to figure out what the right online channels would be.  While it might be the case that online marketing would be successful and even necessary to scale, at that time all evidence pointed to offline methods.  Using the “Flipping the Funnel” idea, I recommended he Ask his existing customers!  Here’s a question you can ask straight out to your contacts:  Do you belong to social networks?  Do influence your buying decisions? What blogs do you read, etc.

I hope you find this helpful.  What issues do you encounter during your Customer Development Conversations?

The more one adopts these principles, the more one can find ways to adopt them in all areas of life — they become “meta,” as Patrick Vlaskovits would say — and this event was no exception.  It was Lean Startup Machine’s Minimum Viable Product.

By all accounts (that I’ve heard), the event was a rousing success.  Here are some more or less random thoughts about the weekend, some of which I hope to cover in more depth soon:

1) I’m blown away by the people who attended: smart, opinionated, creative, dedicated team-players with some really interesting ideas.  And they all want to be startup founders.  Many will scoff at whether this is a good thing or not, but I think it’s great.

2) Customer Development is a great conflict resolution tool.  When you reach a loggerhead, formulate opposing opinions as hypotheses and go test them.

3) While there was reluctance among some and a few Engineers stayed inside completely, whole teams hit the streets of NYC to engage customers.  It was awesome to see!  I can’t wait for the video.

4) Clearly enterprise B2B ideas are at a disadvantage when it comes to weekend customer development.  But B2C rocked it and B2SMB took advantage of New York’s vast number of local businesses.

5) Good team balance was essential.  Those teams with naturally social members kicked customer development butt.  People were making phone calls to business owners across the country, setting up Craigslist ads, conducting surveys, interviewing by telephone and pounding the pavement for person-to-person discussions.  There was more combined customer development in one weekend than most startups do in a year!

6) Customer Development is hard.  Several assumptions were crushed over the weekend and for the more brutal failings, there were no easy follow on steps.  It’s one thing for a market segment to fail, it’s another when a core idea is roundly  rejected.  But it happened.   It’s easy to become demoralized by negative validation, but the teams pressed on.

7) We saw some amazing pivots, product mockups that reflected the changes, and then customer validation of the pivots!  That’s pretty amazing for a weekend’s work.

8 ) Some people had a tough time understanding the difference between seeking evidence for their idea and testing their assumptions.

9) This event has great potential.  There were some rough spots, but no major problems and the learning that went on was tremendous.

10) It will be interesting to hear more feedback, but my general impression is that this was the first real encounter with customer development for most of the participants and that the experience they gained was invaluable.  My belief is that to truly grok customer development, you must “get a win;” meaning you need to experience first hand the empowerment that comes from customer validated ideas.  I think we had a lot of that!

If there’s something in particular you’d like to hear more about the weekend, please let me know in comments.

I’ve written about market segmentation before both on this blog and as an important concept to understand in The Entrepreneur’s Guide to Customer Development. I think it is vital to grasp because it’s fundamental to achieving Product-Market fit and building a scalable business. I’m writing about it again because it has come to my attention that I have perhaps not explained one of its primary precepts well enough.

As I wrote before, Geoffrey Moore in Crossing the Chasm defined a market segment as:

* a set of actual or potential customers
* for a given set of products or services
* who have a common set of needs or wants, and
* who reference each other when making a buying decision.

Most of this is pretty intuitive. In a nutshell, a market segment is comprised of like buyers who share the same pain. But there’s more to it. The reference part trips some people up. The key point to understand is that the customers and potential buyers must be willing AND able to reference each other.

This doesn’t mean that two customers need to know each other or even speak to one another, but simply that one respects the opinion of the other for a particular purchasing decision and that somehow the sharing of that opinion happens. Go to any well-marketed B2B web site and you’ll see case studies of successful customer implementations, often arranged by vertical industry, because the decision maker in one company likely respects his or her counterpart’s decision making about specific products.

Note that verticals are not necessary to define segments, since for some products, buyers may not consider industry a significant factor. Same holds true for other classic market segment variables, such as geography and buyer profile (gender, age, income, etc.). Those factors may come into play, but only as defined by “willing AND able to reference each other.”

One can quickly understand the tremendous importance of social media marketing within the context of market segments. Facebook’s “Like” feature by itself instantly expands the scope of “sharing a reference” by several orders of magnitude.

Market Segments and Product-Market Fit

As you search for Product-Market Fit, you are likely to investigate multiple market segments. Ideally, you want to reach Sean Ellis’ 40% “very disappointed” metric in one segment. In other words, if you have achieved 40% across your user base, you still need to segment those users and measure within the segments.   You don’t want to find yourself in the situation of treating a group of users who are only willing to pay $5/mo — or nothing at all — with one willing to pay more.   By segmenting those users, you might discover a lower score among the group you assumed you were targeting. Or you might find your 40% “very disappointed” is in a segment that is ridiculously small or has no money. In this case, you might choose to continue to work to get over 40% in the more promising segment.

Market Segments and the Scalable Business

Simplistically speaking, your Startup becomes a scalable startup when you have learned how to acquire and convert a big (or multiple) market segments.  If you are raising money, part of your story should be detailing your target segment and how you will convert its members, as well as how winning this segment will lead to a scalable business.
As in the diagram to the left, you might find that your total addressable market (TAM) can be split into various segments.  The TAM includes all users who share a problem to some degree and who you believe will be receptive to your solution.  The level of pain might differ, however, between some identifiable groups of users.  The features required in the solution might also differ.  Further, who the buyer is, who they consider trustworthy references, and how they are acquired and converted (funnel) are likely not the same across all the groups.

Your growth strategy — how you build a scalable business model — will depend on your strategy to capture these segments.   Best practices dictate that you choose and focus on 1 segment at a time, the reasoning being that 1) you don’t have the resources to tackle specific functionality required by the different segments; and 2) you don’t have the resources to acquire and convert multiple funnels simultaneously.

Whether this is truly best practices depends on your startup.  How different are the feature requirements?  How different are the funnels?  How much bleed over into adjacent segments does your social media marketing provide?   For web-based business models anyway, as the costs of online marketing have decreased and the ability to track the return on your marketing dollars has increased, the need to focus on only 1 segment has diminished.  (When you are  first starting out, however, there’s still a lot of benefit to the learning that is accomplished by focusing on narrowly drawn segments.)

The one core principle that remains, however, is to focus on one core value proposition. If you start selling to a segment with a different need or change the product for a group of users because they’re solving a different pain, in actuality you are “pivoting.”   In this case, you are better off not serving multiple masters and must “fail one” in order to pursue another.

Market Segments and Early Adopters

Early Adopters are not a segment unto themselves.  Early adopters are those prospective customers who readily recognize the problem you are trying to solve and are often looking for solutions for themselves.  Early Adopters are important since they are likely closer to the pain then you are and will help modify and validate your core customer-problem-solution assumptions.   They will also likely champion your product if you are successful at solving their problem and will form the base of core passionate users you seek that determine Product-Market Fit.  In the early going, you will likely find that your early adopters represent different segments and you will eventually disappoint some of them.

I hope this clarifies some of my past writing on market segments.  What has been your experience?

In January, I modified the image and added tooltips.

In April, a newer, tighter version was released in The Entrepreneur’s Guide to Customer Development. (We will update the image in the ebook with this one.)

Today’s version is tighter still, I believe and is self-explanatory.  I don’t think the tooltips are necessary, if you carefully read through the boxes from left to right.  (Reading the old tooltips might provide some clarity, if necessary.)

I’ve added a few notes on funnel stages, as well as a blank version (in a variety of formats) to my Customer Development Tips download. (Other tips included, too!)

Here’s the new version:

click on image for full size

Founders get out of the building (physically or virtually) to test their hypotheses against reality. There are times when customers are going to tell you something that you don’t want to hear.  Or you’re going to hear something completely unexpected or orthogonal to what you expected.

As I like to say, those that hold the assumptions need to test the assumptions.   In the comments, several of us pointed out that teaching Customer Development is a viable service for which entrepreneurs can hire outside consultants. Sean Murphy:

We work with teams as they prepare for and then execute the customer discovery and validation steps in B2B markets. We helping them rehearse leaving the BatCave, we often go with them on customer discovery interviews or sale calls, we debrief from prospect meetings to formalize lessons learned and adjust the sales presentation or the target prospect definition or sometimes the feature set.

Clearly, there’s some value being provided here.  In my experience, entrepreneurs have repeatedly sought help with both Customer Development basics, as well as some of its more nuanced components.  Sean Ellis raises a separate issue, agreeing that consultants can provide value, but wondering how the economics work.

I believe the need is there and most consultants have the expertise to fill the need; the problem is that their cost exceeds their value at this stage.

There is no doubt in my mind that this is a challenge, but there’s more that one way to skin a cat, so I’m not sure such a blanket statement is accurate.  (Note that Ellis isn’t suggesting that consultants don’t provide fair value for their compensation, but that the compensation is likely to be too high for the particular stage the business is in.)

This begs the question, what exactly can be outsourced and at what cost?

What Part of Customer Development Can be Outsourced?

It’s worth pointing out that one of the best Customer Development practitioners I know is Cindy Alvarez, who is a Product Manager and not a founder at KISSMetrics. Theoretically, at least, Alvarez could be doing what she does as a consultant, rather than as an employee.  If she had internal assistance (say, a less Senior PM  or a technical marketer), she could potentially have two or to three clients and perhaps make a pretty good living.  And while KISS is likely at or near Product-Market Fit, Cindy has been executing Customer Development for them for quite awhile.

As with employees, the key element to working with consultants is trust.   Further, Founders must process outside information to make decisions.  Is it better, for example, for Founders to pivot based on analytics than Customer Development information provided by a trusted adviser?  If a Founder has a “salesperson mentality,” and cannot stop selling when supposed to be listening, does that doom the company?  Or can a trusted adviser steeped in Customer Development best practices provide better information?

The more I reflect, the more I think blanket statements about what can or cannot be outsourced are dubious at best.  Learning must happen.  How it happens is not particularly relevant.  The key measure is willingness to learn.  If you belong to one of the archetypes of anti-lean, you are not likely to do Customer Development anyway.  If you are willing to learn, you can likely learn from a trusted consultant, too.  I do think the level of understanding potentially suffers, however, so the stage of Customer Development you’re in should influence who the lead CustDev actors should be and what other roles might benefit the process.

In the book, Entrepreneur’s Guide to Customer Development, we break Customer Discovery down into three stages:

• Problem-Solution fit, i.e., validating your core C-P-S (Customer-Problem-Solution) assumptions:  This is the most important stage for Founders to be heavily involved in.  Consultants might help you articulate your assumptions, define market segments, find prospects to talk to, help prepare the presentation and the presenter, and help analyze results.  I have, in fact, also done the interviews for a Founder with both positive and negative results.
• MVP development: Best if Founders are still heavily involved with early adopters, since they likely need to hone in on the core value they’re providing.  I don’t see much value in consultants here, other than help with process,, like coaching Product Managers (and Founders) to not engage in feature mongering.  This phase requires a dedication to minimum viability, and a balance between customer-driven solution and vision.  If the two diverge, a pivot is required and only Founders pivot.
• Proposed Funnel, i.e., learning your sales and marketing roadmap:  Founders need to be engaged relative to their adamancy regarding their sales and marketing assumptions.  Other business model assumptions are typically exposed here, as well.  I believe consultants can play a larger role in this phase, since many founders can use a lot of help thinking through marketing basics.  Consultants might help with defining market segments, proposing funnel hypotheses, and preparing (or conducting) conversations, surveys, etc., to test and validate assumptions.

Clearly I believe a high level of Founder involvement is necessary.  Founders who actually practice Customer Development themselves are arguably in a better position than those that delegate.  But not only are there parts of Customer Discovery that can be effectively delegated, consultants may have a role as well.  The question remains, however, whether (1) consultants can make a living doing this, and (2) whether startups can afford fees that result in (1).

What Model Works for Outsourcing Customer Development?

I know several individuals who practice customer development as consultants.  Clearly, Sean Murphy has found a model that works for him and his clients; Nick O’Connor is another.  I have helped several clients, though finding the right model has been a challenge.  I am passionate about working with early stage companies and have done so for years as a volunteer mentor at San Diego’s CONNECT Springboard program.  Figuring out how to make some money, too, isn’t a bad thing and admittedly, I’ve struggled to find the right model that serves well early stage Founders.

Recently, Patrick Vlaskovits, pointed to me a startup lawyer with a unique business model, Kevin Houchin. Houchin charges a low monthly retainer for a long(ish) range commitment, which allows clients unlimited contact, but not unlimited access.  So I’m trying the same thing. So far, so good!  I haven’t solved my scaling problem, but I get to work with some great entrepreneurs who are willing and able to execute on Customer Development principles.  They are high-energy, have bought into Customer Development and truly value (and benefit from) feedback, pointers and actionable recommendations.  For more information, see here.

In light of this more in-depth conversation regarding outsourcing and leaving aside for a moment, the general evils of consultants, what do you think about outsourcing components of Customer Development?

As of this post, they have raised $176,165 from 4,860 backers and still have 15 days to go.  I maintain that aside from tapping into the current anti-Facebook zeitgeist among the tech elite, their success is partially fueled by a pricing/bundling strategy that cleverly (or accidentally) includes t-shirts that signal hard-to-fake social proof of geekiness at a good price.

I have updated my two quick-and-dirty graphs on how pricing/bundling these sorts of social signals/proof (read: t-shirts, in this case) may help with raising micro-capital below.

Enjoy!

Data table below:

The way it works is this: people who create projects to be funded by micro-capital on Kickstarter offer differing levels of sponsorship.  The more you pledge, the more you get.  In this case, if you pledge $10, you get a CD (with the source code), a note from the Diaspora team and a bunch of stickers.  If you pledge $2,000, you get the same as well as phone support, hosted service and a computer.

They seem to have done a few things right, either intentionally or unintentionally.  (Most likely a combination of the two.)  They appear to be riding a recent upswell in anti-Facebook sentiment with regards to privacy (or lack thereof) in a select minority of techie folks.  Their video pitch seems to have hit the right chords (moxie, passion, hard-core geekiness), which appears to resonate with many of the same people.  Lastly, I think their dandelion logo/look is, in a word: cool.  (Get it?  Seeds of a diaspora?)

But that is not what this post is about.  This post is about how to raise micro-capital via clever pricing and bundling strategies.

Now, check out this chart I slapped together.  It shows the Number of Backers per Pledge “Bucket”.  One might expect, very reasonably I would add, that the number of backers declines as price increases.  In other words, you observe the classic, negatively sloping Demand Curve you learned about in Econ 101.  As price increases, demand lessens.

But here it doesn’t quite do that, does it?

Now, take a look at the chart below, and see how that translated into revenue.  Shooting from the hip, one might expect, in terms of revenue by pledge bucket, to see a bell-shaped/normal distribution.

But we don’t, do we?

So in this case, the secret of their success is a pricing/bundling strategy that uses t-shirts as social proof of geekiness.  Or another way to look at it is:  the Diaspora team has utilized Kickstarter to sell +$40,000** worth of t-shirts!

My gut tells me that the Diaspora team hit some sort of nerve that has nothing to do with the potential success or failure of their project.  People think the project is cool and sticking it to The Man (i.e. Facebook), whether or not these guys succeed or fail is almost irrelevant.  So, if I think the project is cool and if the project is likely to provide me substantial geek street cred — well then, what better way to demonstrate my geekiness/validate my support for Diaspora then by sporting a Diaspora t-shirt.  And looking at their de facto marketing materials, the t-shirt is likely to look good.

And if I want that t-shirt, I’d better pony up $25 for it — which, incidentally, seems like a fair price for a t-shirt.  And apparently, I am not the only one who thought that way.

Lessons learned:

• If you can harness yourself to a growing/popular social trend, you may benefit in an extraordinary manner.
• You need to think of pledges/sponsorships in terms products, pricing and value.  In other words, WIIFM (What’s In It For Me?).
• People get value from feeling that they have done their part (sticking it to Facebook), even if it doesn’t amount to anything concrete (aside from a t-shirt).  You can and should capitalize on that.
• Don’t forget about reference pricing.  My reference price for a generic “cool” t-shirt is around $20.  Meaning, that is what I would expect to pay in a store for a t-shirt that was adequately “cool”.  The Diaspora t-shirt, in that light, seems like a bargain.

Full Disclosure:  The only reason I noticed this pricing strategy was because I actually pledged $25 because I wanted a t-shirt (and I think about pricing stuff all the time).

For the record, I actually don’t think that a self-hosted peer-to-peer social network will get off the ground in circles other than amongst hard-core geeks.  As someone mentioned on a Quora thread, no one actually wants to host their own social network on a server under their bed.

But I still think these guys are worth backing.  And are cool.

Lastly, I don’t think this sort of hyper-success is easy to replicate, if at all — but that doesn’t mean you shouldn’t think about your pricing/bundling strategy if you are trying to raise micro-capital.

Before I forget, you should check out the pricing page for book Brant and I wrote.  Not only should you check it out, but you should go buy a copy of our book.

——–

Data table here:

**Actually more since anyone pledging at $25 and above gets a t-shirt.

***The actual numbers in this post are already outdated, but conclusions are the same. Will update later.

Before you hire a PR agency or even consider PR, the first thing you need to understand is what you are trying to accomplish, what is your objective.  Second, you should consider whether that objective is right for the stage of your business.  If you are an early startup, pre Product-Market fit, or even pre “Sales and Marketing Roadmap,” you should not hire a PR firm.

Hiring an agency is wrong, because, generally:

• You do not need press releases
• You do not need a campaign blitz of articles and press mentions
• Your PR firm does not know how to do your customer messaging or positioning for you
• Your PR firm should be no where near your social media
• Most PR firms will tell you need all of the above, that they are the experts and you aren’t, and will try to charge you a retainer of at least 5K/month

You do not need press releases.

Do your customers read press releases?  Does anyone?   Press releases were originally intended to notify media of a newsworthy story.  In the high-tech world, releases have been so abused by businesses blasting trivial events on the one side and by media outlets writing “stories” that repeat the content without critique or judgment that the credibility of releases has diminished significantly.  And it’s getting worse.  Online releases are used not to provide notice to interested parties, but rather to generate external links in  order to boost PageRank.  If your objective is the latter, there are several online PR services that will accomplish your goal for a lot less money.

You do not need a campaign blitz of articles and press mentions.

An agency orchestrated analyst and media tour and blogger outreach program is called “awareness” marketing, is intended to create “buzz” about your product and company, and can indirectly lead to increased visits to your web site by prospective customers.  Hiring an agency to lead this effort is still the best way to go, because a good firm not only has a great rolodex of media contacts, but the principals have relationships with the media that mean increased credibility and better press.  The problem is that startups are not ready for the buzz.  You can only launch once and if you blow it, it’s blown.   If your selling process isn’t tuned to your customer’s buying process, if your target market segment isn’t finely tuned, if you product doesn’t provide enough value to retain users and you need to pivot, you’ve likely wasted your one chance at not blowing the Techcrunch bump.

Further, as you grow and learn more about the market, you want to cultivate your own relationships with key figures in your industry.  Since reporters and analysts participate in social media, access to them through your network without the assistance of a PR agency is pretty easy.

PR firms do not know how to do your customer messaging or positioning

I find this one particularly irksome, because PR firms often tout their ability to develop messaging and positioning.   And they can do a good job when targeting the media and analysts. PR firms do not know your products, customers, or competitors.  You do, so it’s your responsibility to learn what messaging and positioning works in your market.   The key verb here is learning. You should be testing your positioning through Customer Development interviews and A/B testing.  There’s a large pool of talented and creative people (including PR professionals) who can help you brainstorm concepts and wordsmith phrases, but outsourcing the effort to an agency is a recipe for bland, undifferentiated marketing-speak.  Further, wrong positioning, like placing you in the wrong market, could ultimately lead to your startup’s demise.

PR firms do not belong any where near your social media

Big companies hire PR agencies to manager their social media streams, because they don’t want to screw up their brand.  It’s spin, baby, spin.  It’s used as a continuation of traditional one-way communication from company to consumer or as a new (mostly) one-way communication from consumer to company black hole.  This is likely not your social media strategy.  Your strategy likely is to belong to a community through active participation (in ways that don’t directly benefit you), and to provide value unique to you and your business.  You might retweet interesting articles that relate to your industry, answer questions unrelated to your business, or even give props to competitors who have done something positive.  Such activity requires intimate knowledge of your products, customers and community and you cannot expect a PR agency to have that level of knowledge.

Most PR firms will tell you need all of the above, that they are the experts and you aren’t, and will try to charge you a retainer of at least 5K/month

PR agencies are in a tough place.  Online PR resources; reporters, analysts and influential bloggers easily accessible to businesses; decreased use of traditional (e.g., print) media; and a legacy of a high-priced retainer fee structure portents poorly for traditional agencies.  Hence the move to make their case as the natural purveyors of social media marketing.  For the reasons given above, however, I beg to differ.

Which isn’t to say, you should never do PR.

At Eric Ries’ Startup Lessons Learned conference last month, I participated on the Customer Development panel and we were asked if PR was ever justified.  While moderator Sean Ellis and fellow-panelist David Binetti rightly pointed you shouldn’t do PR campaigns, as I discuss above, I mentioned that there are ways to use PR activities in “small” ways to help you achieve discrete objectives.  Low-level PR can help build an “expertise reputation” for a Founder without compromising the company.  Low-level PR might help you access specific industry contacts who you feel may be early adopters. The distinction here is that you’re not trying to build “buzz,” but rather are taking discrete steps to achieve a defined objective within the context of the stage of your business.  For these tasks, you can do them yourself or you might hire a PR consultant and pay them by task or by hour.

Finally, some believe that buzz is required to raise capital.  I don’t know, but I have a hard time believing that’s true.  I do know that I’m not sure I would want money from someone who could not see through the ruse of manufactured buzz.

Comments welcome!

We’ve had the pleasure of speaking with Jeff Smith (Smule), Fabrice Grinda (Zyngy, OLX), Ranjith Kumaran (YouSendIt), and Bruce Moeller (DriveCam).  We’ve condensed their experiences into case studies which are featured in the book.  However, there was so much great material, we simply could not include all of it.  Therefore, I’d like to take this opportunity to share an insight that came out of our interview with Bruce that we found quite edifying, one that goes to the heart of the Customer Development methodologies.

Background:  DriveCam uses video technology, expert analysis and driver coaching to reduce claims costs and saves lives by improving the way people drive.  From the DriveCam website:

DriveCam’s palm-sized, exception based video event recorder is mounted on the windshield behind the rearview mirror and captures sights and sounds inside and outside the vehicle. Exceptional forces such as hard braking, swerving, collision, etc. cause the recorder to save critical seconds of audio and video footage immediately before and after the triggered event.

[Emphasis mine.]

Bruce shared an interesting story about how assumptions made in the lab, based on data and “sophisticated” math undertaken by “sophisticated” analysts, fared in the real world of cement mixer trucks.  Remember, the DriveCam device’s core feature is to record audio and video when triggered by exceptional forces such as swerving.  When DriveCam went after the cement mixer truck market, they calibrated their devices based on the assumption that cement mixers would flip only if subject to a large sideways g force.

Seems reasonable, right?  After all, cement mixers are big, heavy trucks, and not to mention, filled with, well, the eponymous cement.

Turns out, not so reasonable after all.

Bruce recounted that when one of their first customer’s cement mixer trucks flipped over, the DriveCam device had failed to record what had occurred and what may have caused the accident — the customer was irate and Bruce was more than a little embarrassed.

Turns out that (outside of the lab!) cement mixers trucks can flip at very low speeds (1-2 mph) while at normal g forces when encountering things in the chaos of the real world, very ordinary and common things such as soft road shoulders.  Bruce’s customer knew this and was counting on Bruce and the DriveCam team to know this as well.

Lesson learned:

“My philosophy is you don’t know what you don’t know and if you were ever right in a given moment, and if your guesses were ever true it would be serendipitous.  You must attack your assumptions at all times. My basic tenet: question yourself, because the world is ever-changing.”

-Bruce Moeller

For more insights that speak directly to the Customer Development processes, please purchase The Entrepreneur’s Guide to Customer Development:  A cheat sheet to The Four Steps to the Epiphany.

I liked one question in particular, because it concerns something I’ve been thinking about recently.  Erin Turner asked about landing pages as Minimum Viable Products (@23:05 in video).  I didn’t opine, though I would have enjoyed challenging my friend David Binetti with an alternative take, and since the subject is covered in my new book, The Entrepreneur’s Guide to Customer Development, I missed an opportunity for shameless self-promotion.   One that I will now partially remedy.  ; )

I’m not sure where it all got started (I want to say The Four Hour Work Week), but for those that don’t know, there’s a “school of thought” around testing product viability by:

• Building a landing page
• Including a clear “call to action”
• Buying AdWords at $5/day

Then sitting back and watching your hypothesis proved or disproved.   Clearly, the approach has appeal: it’s fast, low cost and easy to measure.

There are pitfalls:

• Are your prospects searching for a solution (otherwise, PPC fails)?
• Are there any keyword phrases that will generate enough traffic at $5/day (I don’t think so)?
• Are you taking the time to optimize the landing page and messaging? (If so, for whom?  The whole wide world?)

As I discuss in the book, multiple MVPs can be designed to take you down your “Value Path”, where a value path is a series of “phase gates” that test key elements of your business model to mitigate risk.  As Andrew Chen says, “Test the riskiest thing first.”

There’s been quite a bit of discussion on LSC and elsewhere about the need for a “real” MVP to include the payment of money for use of the product.  Only in this way, can true “viability” be tested.  Generally, I agree with this.  But as Andrew points out, some businesses need to test something other than viability, where viability means financial viability. My approach is a bit different, but gets us to a similar place and allows for “intermediate MVPs”.

In my view, viability is defined by the tester.  In other words, a Minimum Viable Product is “A product with the fewest number of features needed to achieve a specific objective, and users are willing to “pay” in some form of a scarce resource.”

So for example, the intermediate MVP for a landing page might be defined as the minimum features required to achieve the objective of “demonstrating market interest”, via the currency of “clicking on the more info” button.  Now you might argue that you risk losing all meaningfulness of terms if you define it too loosely and I would agree that there is that risk.  But like many things in life, the true measure is in how you apply Lean Startup and Customer Development principles.   In the case of a landing page MVP, you might learn that there is some interest after all, but it will be difficult to prove the negative.

The definition works to measure “desirability” based business models, too:  “what are the minimal required features to (objective) scale users to xM/month, who are willing to (currency) “pay attention,” as measured by some individual usage metric.  An intermediate MVP for a hardware product might test a technical hurdle (e.g., audio latency on the iPhone) or market interest (objective: demo requests; currency: LOI or beta sign-up).

The art of entrepreneurial discipline is in defining objectives and currency.  Your goal is to test as early as possible, make or break decisions.  In other words, “if this doesn’t work, we need to pivot.”  Further, you should define your “final MVP” (how you will actually monetize your features/users/technology), before figuring out your intermediate MVPs.  Finally, time and money may be important variables when considering your MVP strategy.

As Rich Collins pointed out to me after the conference, if it takes nearly as long to develop an intermediate MVP as the ultimate version, why not build the latter?

Appreciate any thoughts you have on MVPs.