Customer Development Hierarchy of Needs (Maslows theory applied to Customer Development)

Maslow’s hierarchy of needs applied to customer development

Yesterday, I had an entrepreneur reach out to me to ask me a few questions about his #napkinStage idea. He was doing customer development, he said and before he’d get to far into the development of the product, he wanted to talk to customers.

One thing that he mentioned to did not surprise me as much, but was indicative of the state of the challenges faced by all entrepreneurs.

I have sent over 110 emails (20-30 were warm introductions, rest were cold).

“I have been trying to get to talk to potential users on the phone so I can ask more open-ended questions”, he said. “I have gotten 2 people willing to talk on the phone”. The rest have been reluctant to phone and prefer to email or message.

Yesterday I was reading the survey results by attentiv (the graph shows the # of mobile phone users who use various capabilities on the phone with some level of frequency.

Social Networks, Email and Text, No Calls

Social Networks, Email and Text, No Calls, Credit: (attentiv)

Turns out, the entrepreneur was facing the problem that 90% of marketers face. We just dont like to talk any more.

I would have not been surprised about this if this was only that they did not want to talk to strangers.

That’s not the case though.

In the customer development hierarchy (or Maslow’s hierarchy applied to customer development), while the pre-purchase may be the pinnacle of the customer development outcomes, the customer calls are the hardest.

Customer Development Hierarchy of Needs (Maslows theory applied to Customer Development)

Customer Development Hierarchy of Needs (Maslows theory applied to Customer Development)

I have seen many of the entrepreneurs at our accelerator give up on the “Talk to actual customers on the phone” portion of the customer development sprint.

This is for both B2B and B2C companies.

Most customers are comfortable with online surveys, many are willing (even at the expense of getting spammed) to even provide their email to be notified when a product gets launched. While pledging on Kickstarter and pre-paying revenue are the ultimate goals and more indicative of traction, the customer call still is the holy grail that every accelerator program asks their participants to do.

I think that will have to change over the next few years. If messaging is what most of the customers prefer, I suspect entrepreneurs will start to focus on getting potential users to “join their public #Slack channel”.

Open discussions are much more simpler and easier to manage using Twitter or Slack, compared to phone calls, which require a lot of commitment in terms of time, attention and focus.

Most people are losing the stamina and energy it takes to have a long conversation on the phone.

#NapingStage marketing people at startups are becoming more product managers than brand builders

Yesterday we talked about the changing nature of the sales person’s role at the #napkinStage of a startup. While many people still prefer the “closer” to the pipeline builder, I think if you have a great product that customers can try, use and then buy you dont need to “close”. Customers will “buy” or “close” themselves. Enterprise and SMB software use to be “sold” not “bought” – that’s now changed. Only if you have a poor quality product or an expensive one, do you need to “force” people to buy.

Today I am going to talk about the role of Marketing folks in the #NapkinStage of a startup. While many startups may not hire a marketing person early, I think the role of the “marketer” is being performed by someone who is responsible for “getting traction”.

10 years ago, the Marketing person at a startup was focused on building analyst relations, attending and participating at events and building a “brand”. They spent a lot of time with agencies building the right creatives, making sure they had good “brochures”, giveaways and promotional content.

Changing Role of the SaaS Marketing Professional

Changing Role of the SaaS Marketing Professional

The marketing person’s role is now more like an early stage product manager – I call them opportunity managers than product managers actually.

If you have a good product, then it sells itself in a 15 min demo (or a 3 min video). Yesterday, one of our companies (Beagel) told me about how they have a 70% conversion to paid customers in less than 30 min, so this is not a rarity.

The role if marketing manager is now focused a lot more on metrics like Customer LifeTime Value (LTV), CAC (Customer Acquisition Costs) and CTR (Click Through Rate), then results of “Brand surveys”, or “generated leads” and analyst reviews. They are becoming more data driven.

Attending events, writing whitepapers and delivering webinars is being replaced by creative copy writing – SEO, engaging on social media (Twitter, etc.).

With this change it is becoming obvious that most marketing is now focused on measurable outcomes associated with revenues, business and product than purely brand.

Surprisingly, even at larger companies (such as Microsoft), I am finding that most Marketing folks are coming to learn about these techniques of “Lean marketing” from the startups at our accelerator.

Tomorrow I will talk about the changing role of the #NapkinStage development team and how they are becoming more Customer service organizations than product engineering.

Most early sales people at startups are becoming more marketers than closers

Over the last 6-7 months I have been helping #napkinStage companies hire their first few sales people to grow from the founders selling the product to growing a sustainable team to help sell.

The most important thing I have noticed is that most of the sales people are learning the science and art of marketing – building an email list, engaging on social media, writing short opinion pieces on trends, etc.

The primary reason is that most of the sales folks at startups have to build their funnel first, and most of them have few relationships or existing customers to get referral customers from.

10 years ago, or even 20 years ago, most of the techniques sales people used to fill their funnel was “cold calling” or “smile and dial”. There were few emails as well, but largely attending events to network and cold calling were the prevalent strategies.

Now targeted emails have replaced cold calling. Initial connection on social media – Twitter, LinkedIn have replaced connecting at an event. Writing a blog post or participating on a podcast have replaced sending PDF files of marketing collateral.

The role of the sales person as a closer is becoming less relevant now, and their role as a facilitator is becoming more important. The effective sales professionals I know are learning the art and science of coordinating a concerted campaign to get access to individuals within an account who can help become champions at a prospect.

Changing Role of the SaaS Sales Professional

Changing Role of the SaaS Sales Professional

Sales people are becoming more “industry experts” and learning about events prospects should be attending, having an opinion on current trends and curating content that they believe will be useful for their prospects.

That used to be the role of the marketing person.

In tomorrow’s post I will examine the changed role of the marketing person. Their roles are moving from more being more art and creative to science and data driven.

How the 6 digit Apple passcode requirement wastes $6.551 Billion annually

Apple this week announced that they are going to require 6 digit passcodes instead of 4 digit passcodes for the lock screen.

Newer ipads and iphones will require the 6 digit passcodes. That’s apparently more secure than 4 digit passcodes.

The only reason to go to 6 digits is when your phone gets stolen by someone who can brute force 10,000 codes (with 4 digits). Well, apparently, most people use pretty common passwords, so if you only try 27 known passcodes (such as 1111) then your chances of unlocking the phone are at 67%. That means only a third of the people actually use complicated passcodes that will take more than 15 minutes to crack.

If however, you have 6 digits, then the combinations are a million (versus 10,000+) so, it should take longer and more effort to crack your password.

I doubt that. 90% of people will go with 111111 instead of 1111 is my guess, or 123456 instead of 1234. Now, your stolen phone will take 22 minutes to be unlocked instead of 15. Yay!

Apple has sold 512 Iphones to date and about 200 million iPads. Of those, about 75% or 534 Million devices are still in active use. 83% of them run the latest version of iOS.

I am going to assume that most people will upgrade to the new OS version so about 500 million (534 million to be exact) iOS devices will be upgraded to 6 digit passcodes.

The median salary in the US is about $42,000 and the median iPhone users salary worldwide is higher – $53,000.

90% of the iPhone users move to 6 digit passcodes and each user actually unlocks their phone 50 times a day (given that most users glance or unlock their phone 150 – 500 times a day, it is a reasonable assumption).

The extra two digits will cause 1 second more to unlock is also a fair assumption to make.

This equates to $6,551,388,888.89 in productivity loss every year.

iPhone 6 digit passcode Migration Wasted Productivity

iPhone 6 digit passcode Migration Wasted Productivity

With no discernible added security. All for a feature going from 4 digit passcodes to 6 digits.

There were 1.6 Million phones stolen in 2014. The average price of the stolen iPhone was $250, equating to a $400 Million market.

End note: I know the value of a stolen iPhone to a user (especially if there is a loss of life tragically in some cases) is much more than $250, but a 6 digit passcode is not going to change that for the better.

The ultimate list of sources for competitive analysis on your #startup rivals

After doing a competitive analysis of your market landscape the next level of detail most people want to perform is a key competitor analysis.

When I was a product manager, I tended to focus only on the product features, user experience, design and technology during my competitive analysis of a company.

That’s usually what most CEO’s do – after all product is the #1 thing that most customers see, touch and feel that matters to the most.

Turns out that’s an incomplete view of competition. I had a chance to see a complete view when we did a comprehensive audit of the top 2 competitors before we sold our company.

It is pretty obvious now, but you can get so much information from external sources such as social networks, email newsletters and blogs that to get a comprehensive 360 degree view of the competition, you can clearly understand where they came from, and where they are headed.

Comprehensive Competitor Analysis

Comprehensive Competitor Analysis

I put a partial list of sources that you might want to consider to get competitive information from in the chart above.

Here are the top questions you might want to consider getting answers to understand your competitors strategy overall.

  • What events are they attending? Speaking? Presenting?
  • What are they announcing? Investors? Management? Customers?
  • What are their open job positions? Who have their hired?
  • What is the segment of customers they are going after?
  • Who have their hired? What’s their background likely to tell you about their plan?
  • How do they price? What are the tiers?
  • What have they learned about their customer needs?
  • What are they sharing about their company?
  • Where are they looking to start new offices?
  • Where are they looking for talent / customers?
  • Who reports to who? How many people in the company? Background?
  • Promotional Plans? Who is following them?
  • Who likes their page? Who are their customers?
  • What questions come up? What are customers complaining about?
  • What messages are they pushing?
  • What keywords do they rank for? What are they bidding for?

While these are tactical questions, the key parts of your competitors strategy you are trying to understand are:

1. Who are their customers – what segment of the market are they going after?

2. How are they targeting customers?

3. What is the problem for their customers they are solving?

4. How are they solving the problem? What features in the product support that?

5. How do they plan to scale and grow?

Typically after this detailed analysis you will get a clear idea of what your competitor is doing beyond their product to help differentiate from others.

The ultimate list of competitive analysis landscape charts with 7 complete examples

Depending on the audience you will be asked to show a “competitive landscape chart” of your domain and the major players in the market. The main purpose of the competitive landscape chart is to position your company or product against others in the market. You need not to go into details, but, will be required to provide enough clarity for the audience to make out the differences between you and others in the market.

There are 2 important things you need to consider when putting together the competitive landscape analysis chart –

What you show (Features, Customer Segments, Market Requirements, etc.) and

How you show it (Visualizations such as Venn Diagrams, Harvey Ball Table, Process Map, etc.)

I follow a 3 step process to come up with the competitive analysis landscape:

Step 1: Identify: List all potential and possible competitors on a spreadsheet – one for each row

Step 2: Analyze (What you show): Start putting a list of features that you can claim you have they don’t, or segments of market which are market determined or a list of capabilities you intend to build which your customers care about or any other set of capabilities you can distinctly and objectively bucket each offering by.

Step 3: Visualize (How you show it): Look for patterns to showcase a small subset, (2-3) of the key dimensions you can differentiate and then choose the right visualization.

From the many hundreds of competitive analysis charts I have seen, here are the 7 most frequent.

  1. Market Size – Dimensional Bubble

Market size analysis is typically good for early stage investors (institutional). The size of market tends to be a big determinant for many investors, so if you can show the potential size on a chart featuring bottoms up numbers in the X and Y axis and the cumulative size of the market as the size of the ball, you will end up giving them a sense for the potential of your company. In the example below I have shown the # of users and Price per user in the X and Y axis. The size of the bubble is (not to size) will then indicate size of the market.


Market Size Competitive Analysis Dimensional Bubble

Market Size Competitive Analysis Dimensional Bubble

  1. Customer Segments – Multi Tier Axes

A good way to differentiate if you don’t have a different product is to differentiate by segment of market. You can segment markets by any number of ways, and the type of company / user / customer you are going after is a good way to show your competitive landscape. Most consumer companies tend to do this. As an example, Twitter is good for 30-45 year old males, Pinterest is good for 25-40 year-old women, Snapchat is for 20-30 year olds, etc.

It is okay to have an overlap of companies across multiple segments and the other twist I have seen is to show the value proposition to your customer on the other axis. In this example the key 3 capabilities of Price, Ease of Use and Integration is what I have showcased.


Customer Segment Multi Axes Competitive Analysis Chart

Customer Segment Multi Axes Competitive Analysis Chart

  1. Customers Process and Systems – Process Map

The Process map is best used when you have a lot of companies in the “space” but they all do different things for the customer in terms of their usage and solve different portions of the same larger problem. For example, when I was starting BuzzGain, the listening solutions were good to get an understanding of what was being talked about a brand on social media, but engagement products were used by customers to interact and respond and analysis solutions were used for market research.

This chart could be a double-edged sword. One on hand a customer or investor could see this as clear positioning of where you stand in the process map, but on the other hand they could see the other products wanting to build the different capabilities across the process, which leads to consolidation, which to them indicates, they should wait until the market settles, or buy from a “large vendor, who has a significant but not best of breed products across the spectrum of their process”.


Customer Process Competitive Analysis Chart

Customer Process Competitive Analysis Chart

  1. Feature Capability – Venn Diagram

Best used when you want to convey that customers need the best of 3 (or 2/4/5) different capabilities or features which all make the product unique. For example the fact that you have not he lowest price or the easiest to use product or integration alone will not rule your product out in the customers’ mind, but the fact that you have all 3 covered in the perfect blend makes it appealing to customers or investors.

The Venn diagram is best used when you can show that you have the capability to showcase you in the center and competitors on other intersections.


Venn Diagram Feature Competitive Analysis Chart

Venn Diagram Feature Competitive Analysis Chart

  1. Key Features – Quadrant by axis

The simple McKinsey quadrant is actually the most used in investor presentations. This shows 2 axes with opposite ends of the axis values for e.g. simple vs. complex and fast vs. slow on the implementation speed.

You want your company to be on the top right ideally and others to be at the other quadrants. The way this sometimes backfires is that investors believe that the person in the center will win because they have the “perfect blend”.


Feature Quadrant Competitive Analysis Chart

Feature Quadrant Competitive Analysis Chart

  1. Feature Spectrum – Silo Systems

Silos are best when you have a short list of 3-5 features alone to compare competitors with, and you have more than 3-5 competitors to show. That means a market where there are many competitors but few things to differentiate them by. Most used in rapidly growing markets, they tend to show why and how you can build a product or company quickly if you focus on a set of features that spans multiple silos.

Feature spectrum Silos are also very useful if you expect the number of competitors to increase. That way your investors don’t get alarmed when a new post shows up on a tech blog which has them sending you emails asking if we have a good plan “to compete against this new startup”.


Feature Spectrum Silos Competitive Analysis Chart

Feature Spectrum Silos Competitive Analysis Chart

  1. Feature details – Harvey Ball analysis

Customers prefer this landscape analysis best on the website. Sometimes if you are talking to corporate venture teams, they tend to like this level of detail as well. The Harvey balls indicate the “feature completeness” of each of your competitors versus your feature set. Typically you want to highlight features where you will be “complete” and those where others are “less complete”. I have found though, that if you do a more objective analysis and focus on which features your customers really want and show a ball or two where you are less complete than others, it will give you more credibility.

The other way to do Harvey Ball analysis is to provide a list of key scenarios where the customer has to choose one product vs. another. In this situation, you will find customers self-selecting one product because of their own situation.

The table format is the most detailed and most useful only if your audience is potential customers. Most investors prefer a high level analysis of direct competitors, potential threats and incumbents. Your customers are currently using some solution (even if it is manual) or an incumbent (old dinosaur company) as a solution possibly, but they are competitors as well, which you must acknowledge.

Feature Detail Harvey Ball Competitive Analysis Chart

Feature Detail Harvey Ball Competitive Analysis Chart

What to do if you notice another #startup that launched with the same idea a few months before yours?

Short answer – there’s nothing much you can do, but a lot you need to think about – positioning, differentiation, pricing, advisors, funding, etc.

There are many times when you find a new idea and after a lot of customer validation framework for your ideas,you decide, “this is the idea to go with” and you decide to plunge and build.

Then a month (or a few weeks, or days) before your launch, a competitor launches. With the exact same features you expected to launch with, with the same problem statement, going after the same customers.

I put together a framework that I used with BuzzGain. A month before launch, Radian6 launched and a week after was the launch of Techrigy, and a few weeks later, Scout Labs launched as well.

While we were all launching “different products” at different price points, the market was the same was what investors told me. Well, they were wrong. Turns out we all got exits – Radian 6 raised the most money and was sold to Salesforce for > $200 Million, Techrigy and Scoutlabs sold as well, and I did exit as well.

Just do your startup already

Just do your startup already

Here are the 5 questions I asked myself when I saw the Radian 6 launch:

1. Was I still passionate about the idea? That was the first question I should have asked, but unfortunately it was not. So, in retrospect I am suggesting you do this instead. Think about if you still are curious – intellectually and enjoy learning about the market for a long time – 5-7 years at the minimum.

The answer to this question wont come to you in an hour, a day or a week, it might come to you after multiple discussions over a month or so.

If the answer is no, I’d recommend you go do something else.

2. Was the problem the customers I had been talking to real and a huge pain? I had shortlisted about 35 beta customers after talking to over 1000 potential targets over 6 months. What I realized later was that MOST of them knew about my competitors and were still willing to try my product because a) they knew me b) they thought I was solving a different problem for them than my competitors c) I had taken time to build a relationship with them.

If the answer to the question is that you have not done customer development yet, then I’d suggest you go and do that first, or do something else if you dont like the market.

3. Was the “market” large? Large is relative. Investors (who were largely clueless), thought this was going to be a small market for 1-3 “marketing automation” products and that HubSpot and others were going to come into the listening platform business. Turns out 10 years later, they still have not.

If you believe the market is large, it is not sufficient to internalize it. If you want to build a large company, you have to build a convincing case to help your investors understand that.

If the answer is the market is relatively small, you can still build a good business, but it wont attract investors given that one competitor was already in the market. The surprising thing is that sometimes (thanks to the herd mentality) many investors now will be interested if one company was funded in the space and they need to “check the box”.

4. Would I be able to differentiate my offering? If you were going to build a similar product aimed at the same market, then I’d advice you to rethink. If not, then spend time honing in on your differentiation.

BuzzGain was aimed at SMB, Radian6 started with agencies and others were focused on mid-market companies.

We focused on building tools that a marketing consultant could use for their clients, as opposed to agencies use for their larger clients.

In fact, you can see from my day-in-the-life analysis that we started out aiming a the same market – mid-sized agencies, but we changed based on Radian6’s launch.

Bonus: 5. Why was I wasting my time thinking about the competition?

Rule #1 – Dont care what they do. Rule #2 – There are no other rules. Rule #3 – What? Are you still looking for more rules? Go back and read Rule #1.

You will still have to do a comprehensive competitive landscape analysis (and then a competitor analysis, which is different), which I will cover the next 2 days.