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Wisdom on writing a business plan, raising venture capital, and launching a startup.

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Do You Know What Your Customers Really Want?

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I talk to a lot of would-be entrepreneurs that think they have a killer idea, but in many cases, they have not adequately field-tested the need for their product or service. Understanding a customer's need and then helping the customer fill that need...

...is the basic goal of any new product development initiative whether you are a startup or an established company attempting to field a new offering. Yet, as many as 75% to 97% of all new product launches fail according to this Harvard Business Review article and as we've written before, so do most startups (Do 9 out of 10 Startups Really Fail? and Why Do Most Startups Fail?).

This high failure rate of both new products and new companies highlights the need for a sharper customer focus and more thorough research into the customer's need. Even the best marketers often get this wrong. (See What is the Best Way to Actually Launch a New Startup for more on the type of customer interaction that should take place prior to launching).

When I was a strategy consultant at the Boston Consulting Group, we had a client that made a bug killer product packaged in a spray can. This client spent millions of dollars each year on R&D in their attempt to fine-tune the chemical formula for their product - and they were quite proud of their efforts in this regard. But the real breakthrough in customer understanding was when we convened customer focus groups and watched as customers actually used the product to spray bugs that were released in the room.

The insight was that the typical user was a housewife who would point the can of product at the bug and spray and spray until they literally drowned the bug to death. What these women really wanted was a heavier and faster spray that would drown the bug quicker. This led to a different product design that shot out forceful volumes of spray that quickly overwhelmed the bug, rather than a precise chemical formula that would kill the bug by attacking its nervous system. Now you can image that the R&D team was quite proud of their formulation work and did not like this outcome, but the customer is king and the way they actually use a product - and the need that they are trying to satisfy - must be paramount.

The bottom line for a successful startup in terms of customer requirements:

  1. Develop a deep understanding of the customer's underlying motivation
  2. Develop a deep understanding of the way the customer actually uses a product or responds to a service offering
  3. Develop a  deep understanding of the competitive offerings and potential substitutes
  4. Create a compelling value proposition that meets the customer's need better than anything else
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