A half-baked B2B product shown to a few "early adopter realtors" runs the risk of 1.) Losing that potential customer forever as it would be much more difficult to get in the door again, or 2.) Irreversible reputational loss in Boston (example) if the customer landscape is a tight and chatty one.
There are three critical areas of differences between B2B and B2C customer development:
- Return on Investment (ROI)
- Client Relationship
- Decision-Making Process.
ROI estimation is an essential part of making any kind of sale in B2B.
B2B is market-first. To succeed in B2B, you have to be a consultant regardless of what your previous occupation was. You need to solve a problem before creating a product or, like Thomas and Michael, you’ll end up creating a great portfolio piece, not a business.
The following graphic can help explain the sequence of validations a B2B startup must go through: Vision -> Market -> Jury -> Problem -> Solution
Our objective is to avoid one of these quick dismissals when contacting prospects:
- This has never been a problem for us (problem is too specific).
- We don’t need to do that (company doesn’t fit the identified process or doesn’t exist).
- You don’t know ABC Inc.? They do just that (comparatives and competitive landscape not understood).
- With the current freeze on expenditures, we don’t have the budget for new technology (timing and company reality not understood).
Value propositions bringing in new money by increasing revenue are always the easiest to sell and justify.
If you understand how money is currently being spent, you can understand your prospects’ priorities.
For (target customers) who are dissatisfied with (the current market alternative). Our product is a (new product category) that provides
In total, you’re looking for 50 potential customers you can test your ideas on.
Pretending that you’re big is a huge mistake; prospects can see straight through that.
Remember: Personal Credibility, Commitment, Reliability, Passion and References.
Here are the top ten things you can offer to motivate early adopters to meet with your team:
- Competitive Edge
- Visibility
- Discussion
- Action
- Intelligence
- Fun
- Networking
- Ownership
- Promotion
- Equity
You should be looking for a big pain or a big gain that can be tied to a budget, a problem that will deliver a big ROI.
A "hair-on-fire" problem is one that a businessperson is aware of without you having to tell them. They want and are actively looking for a solution to that problem, and are willing to overlook switching costs to pay for a solution.
Sometimes, with a varied set of profiles it can take up to 40 interviews before seeing any patterns emerge. Other times, when the profiles are very similar, it takes only 12. In general, plan for 20 to 30 problem interviews.
Five ways to score (prioritize) problems:
- By frequency – Is that pain shared by a lot of early adopters?
- By intensity of pain – Is this a painful problem? Are prospects actively trying to solve it?
- By budget availability – Is this the pain of a buyer? Have budgets already been assigned?
- By impact – What kind of ROI can you expect if you solve this problem? What impact will it have on the organization?
- By market education – Is there competition? Would you need to create a completely new paradigm?
µarkets are rarely dominated by first-movers.
It’s hard to get honest feedback. Hearing, "It’s interesting" is not really validating a product. There’s a scale of comments with or without value. Entrepreneurs need to judge if the feedback is valuable and stay skeptical.
With a good personal network, it is possible to ride relationships and land your first five deals without really learning anything.
The reason why most startups fail at this stage is that they can’t tell the difference between real and false validation. They might think that they have some traction, but they’re listening to the wrong signals.
In most cases, free pilots never get activated. Prospects take your product, put it on a shelf and you never find out its real value.
Don’t start free if your goal is to make money. It’s really hard to charge after you’ve given your product away.
A complete product is not required to start selling. You need just enough to communicate the vision and benefits of your solution.
Initially, you must be laser-focused on a single market, a single problem and a single customer profile. Absolute focus is the key to reaching P-M fit in your target market.
Startups that solve real business problems always have to replace some kind of solution.
Because most people are visual 57 it’s much harder to get feedback on a feature or an idea if prospects have to imagine how it’s going to work. You need to put something concrete together for validation.
Your entire success will be based on one or two features, no more.
In the late 1970s, Japanese professor Noriaki Kano established that there are three main types of features required to develop a product people want to use.
If you add a great user experience to a product no one wants, they will just realize faster that they don’t want it.
The right way to approach preparing an offer is to position it as a partnership. Prospects help you develop the product.
It can be useful to leave a one-pager or a pitch deck with your prospects — especially those who are coaches — for them to share internally. Let them do the selling!
If revenue is the first form of validation, retention is the ultimate form.
Your product doesn’t have to be flying off the shelves, but there has to be a pull from the market.
"Interesting" is a distraction. Watch out.
We started building the first part of our solution because it felt like we were on the right track, but our solution turned out to be just interesting. Prospects were not lining up to buy our product. In retrospect, the opportunity to learn about a hot topic was probably more enticing than our solution. "Interesting" was a false signal.