Identifying, Validating and Sustaining Customers in a startup
I met Mr. Premnath Murthy at CCD in Bangalore early 2013 on the possibility of mentorship. We spoke for few hours on my startup. After the meeting I received an email with a distilled version of our discussion.
Though it has been many months since we met, I read this often and every time I read, I get new and fascinating insights.
Find below his view on customer segments and other areas that comes along with it.
“Identify, define, and clearly understand your customer segments, to some level of depth. Each customer segment will have its own value proposition (the value it receives from you, for which it will pay you money – or some other value, but usually money). You should understand and define value (and therefore dependencies) of each segment over the other, and why / how you alone can fulfil the dependency. i.e. each segment MUST depend on the other, and YOU should be the person who can best bring them together for fulfilling the dependency. Based on this clear understanding, identify and focus on a few segments to begin with, where you have a good bet / good chance of wins. Your value would typically be easier / or sure matchmaking between the segments, better probability of deal between the segments than without you, reduced costs (or higher volume / higher margins / higher measurable value) for each segment for realizing its value / need.
Each customer segment should have its own independent revenue stream for you – identify this, validate its growth, validate its sustainability. The wider / deeper the value / offerings, the greater the probability of sustained revenues. Or you should have such a unique and repetitive offering, that the customer segment gets dependent on you for repeat transactions. Or you should have a very large number of unique transaction experiences, that a very large volume of people would be attracted to do, even if only rarely – if the volumes can make up for the reduced frequency.”
Identify and define your customer segments
Define the value proposition – a) Value it receives from your product/service and b)Value for which it will pay you money
Your value proposition has to be in such a way that “Customers should be dependent on your product/service for doing an activity. You should identity this dependency and exploit it”. To rephrase it much simpler way – “Customers will be finding it very difficult to do a job without your product/service”. The success of a startup will be heavily influenced by its ability to provide a unique and repetitive offering thereby creating a dependency.
Identify whether the customer is ready to pay to use your product/service or identify where the money will come from.
Identification, Validation, Sustenance are the key steps in any process/activity that you do in a startup