Starting a Company, Part 3: Developing a Product

The previous post in this series was a method for identifying your customers. This post is about developing a product. The next and final post will be about ramping up your business.

What is a product?

Product is a pretty vague word. Let’s start by trying to define it. Open up a text editor, or grab some paper and a pen, and write down a definition of what a product is. Take as long as you need, I’ll still be here whenever you’re finished.

I’m serious, do it!

Done it yet?

I’m going to assume you’ve either written it down now, or that you’re not going to bother. If you haven’t written it, then at least spend a second getting an idea in your head.

Done?

OK, so let’s think about some things you might have written down. Did you say something like “a product is a tangible item that people will pay money for”? This is MBA-speak for a product, used to distinguish products from services, where what the customer gets isn’t an object. It’s the difference between a Mars bar and a massage. I’m going to treat those two just the same because, when you’re starting out with your business, the difference doesn’t matter. The MBA definition of a product is where you want to end up, but doesn’t help that much while you’re still building your product. It’s obvious that you want to make something that people will pay you money for, but how do you know what that is? If you make the wrong tangible item, no-one will pay you anything.

Maybe you said something like “a product is an output, a deliverable created at the end of a process.” This is project management-speak and it’s good because it includes the idea of the process involved in making a product. Unfortunately, it misses out on the idea of making something people will pay you for. It also suggests a product as the end of a process. The best products are developed iteratively, by continual refinement using a process of trial and improvement, they’re not outputs at the end of a process, they’re the subject of a process which continues indefinitely.

If you’re being a smart alec and you remember your maths lessons from school, you might also have defined a product as “the result of multiplying two numbers”. Obviously, this misses the whole side of a process to develop something, but it does make for a nice metaphor for the fit between your customers and your business idea. Just as a mathematical product depends on x and y, the product you make should depend on your idea and your customer. That second bit, the customer, is vitally important. Lots of people leave it out, then spend ages making something that customers don’t really want. That is a waste of your time.

For the purpose of this series, a product is whatever you have to do or make to validate with customers that you’re making something they’ll pay for. Remember this diagram from part 2?

The development of customer and product hypotheses.

Developing customer and product hypotheses.

Remember how I said that actually making the thing you sell was only a byproduct of the important task of understanding what customers need? I really meant it. A product is a single step on the journey to understanding as much as possible about your customers. Even when you have a product that is making you lots of money, this loop remains the same: you should continue with making variations on the product to improve it and make it more profitable. More on that next time.

Humble beginnings

It’s day one of your business. Like everyone else on the planet, your time is precious. It’s the only thing you’ll never have more of. We need to help you find out who your customer is as soon as possible.

Product #1: Google Trends  Google Trends is amazing. If you’re new business has any kind of online component or is likely to appeal to people who are heavy users of the Internet, Google Trends will show you whether people are already looking solutions to a problem. Knowing that these people exist is an amazing thing for your business. One day they could all be your customers.

Let’s take the dog-sitting example from the last post. Immediately, you can tell a lot from the search trends. There’s a lot of people searching for it in the UK, where I’d be starting out, which is good news. Lots of people instead search for “pet sitting,” which could mean that some of my customers aren’t that interested in whether I especially love dogs. There are also a reasonable number of searches for “dog house sitting,” which is an even smaller niche of business which would be worth looking at. However, the search “dog sitting business” appears as “breakout” in the rising searches, suggesting that there’s a big upsurge in people considering starting out as dog-sitters. This is probably a bad sign for my dog-sitting business as I’ll have lots of competition. If I refine the search to just the UK, I can see that demand is highest in Bristol and Milton Keynes, so those are probably the cities where I’d try to find my first customers. The search for “dog sitting business” is on less of an upsurge here, so maybe I don’t need to worry about that. I can also see that “dog sitting London” is increasing in search volume, even though London isn’t one of the highest-demand cities. Maybe people in London assume there are specific dog-sitting agencies that only cater to London, and people everywhere else assume they can use a national directory to find a local dog-sitter. That sounds like a promising concept for my business.

Phew! All of that came from a single search on Google Trends, and we already have a bucket-load of new ideas for who our customer might be and what they’re looking for. You can do more detailed searches to get more ideas.

Product #2: WebPage + adverts Now that we have some ideas of what our customers might be searching for, we can try to catch some of them. Take what you’ve learned a create a webpage that lets users sign up if they’re interested. This webpage might be a blog post, or it might be a landing page (LaunchRock is a company that specialises in helping you make landing pages so try them if you’re not very tech-savvy). This page needs to have three things:

  1. Show the customer you understand their problem (“You’re busy but you love your dog. Work keeps you late and your dog’s alone all evening.”)
  2. Tell the customer you’re solving their problem (“CanineCompanion gives you the peace of mind that your dog is being looked after when you can’t get home.”)
  3. Give the customer an incentive to give you their email address (“Give us your email address below to be one of the first members on CanineCompanion.”)

Next, sign up for some adverts that people can click on that will go to the page you just created. I recommend Facebook ads for targeting demographics and locations, Google AdWords ads for finding people who are already looking for solutions to a problem and StumbleUpon ads for high-volume mass-market ideas. Which one you use depends on who you’re appealing to. It’s normally a good idea to use different adverts to target different people.

Hopefully you can see how powerful this is. Not only do you get to test your understanding of your customer with the copy you write on the webpage, but you start gathering a list of email addresses of people who are really keen to use what you’re planning to make. At this stage, you can start using split testing (more on that next time) to try out different versions of your pitch to customers to understand exactly what they’re looking for.

This only takes a day or two to set up and run, and a bit of cash for the adverts, which is at least 10x faster than developing a  tangible thing and trying to sell it.

Solving the problem

By this stage, you’ve got a really strong idea of what your customer is looking for. Now it’s time to present them with your idea for a solution and validate that it’s what they need.

Product #3: Mock-up

Building a real product is time-consuming and expensive, but building a mock-up of a product is much cheaper and tells you just as much. A mock-up can be a “wireframe” of a website or app, or a video showing how it will work when it’s made. Lots of companies help with this.

It’s crucial at this stage to be open-minded about changing your ideas. Think about what the simplest solution to your customer’s problem would be, then sketch that out. Show it to your customers and check out their level of interest. Do they ask whether it’s ready for them to use? Or do they ask why you’ve chosen to do x instead of y? If you didn’t include a price for your solution in your landing page before, include a price and business model (one-off payment, subscription, freemium, etc) in your mock-up of the product.

The ideal mock-up at this stage is a video that you can include on the landing page you’re directing adverts to. You can then include the price on the landing page and see how it affects sign-ups with split-testing. If you have two different solution ideas, you can split-test to see which videos attracts more sign-ups, and which solution people are happy to pay more for. This is so much quicker than actually making two different products but it avoids you wasting your time on the less successful product.

Product #4: Solution You’ve come a long way. You now know that demand exists for the problem you want to solve, you’ve learned as much as you can about the customers and what they want, and you’ve got a strong idea of what the solution should look like. And you’ve done it all without spending time and money on developing a product.

Having gone through this process, building the first iteration of the solution itself is now easy. There’s little doubt about what it needs to do, how it should work and how much it should cost. Make it, and contact the early users who expressed interest. Like everything else, it’ll need refinement, but the groundwork you’ve done means you can be confident that you haven’t gone a long way in the wrong direction.

Summary

A product is something you do or make to understand more about what your business should be doing – it doesn’t have to be a tangible thing. You can learn a lot about what your customers want without wasting time and money on dead-end solutions that customers won’t really want. When you go ahead and build your solution, you already know who you’re selling to and you already know that they want it.

Thanks to Tom Carver for reviewing a draft of this post.

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One thought on “Starting a Company, Part 3: Developing a Product

  1. Pingback: Starting a Company, Part 2: Identifying your Customer | Technology for Startups

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