Cash isn't King, User Feedback is
Issue 4 (07/02/2021) - Discussing the importance of User Feedback in an early stage startup. Analyzing common mistakes of startups when they don't infuse user feedback into their model.
Welcome to Issue 4 of Startupology! Today we are discussing a bit of startup theory. I hope you enjoy!
We have all heard the saying ‘Cash is King’, but why do people say it? I mean, it sounds cool and exciting but can this notion be translated into startups? First things first, by startups, I’m implying the very beginning stages such as ideation and the building blocks of implementation. Here, I firmly believe that user feedback is far superior than cash but agree that both are incredibly important. I would even argue that user feedback is more important in the later stages as well, however, slowly decreasing in rate.
User feedback is twofold: one, is approaching your customer and asking about their experience using your product or their views on the industry that your product aims to satisfy but perhaps equally as important are the reviews they post online. These may include online reviews, ratings, and critiques about your establishment, service, or product. Simply, it could be any interaction with your target customer in hopes to iterate and improve your product, its value proposition, and marketability.
If you remain in the ideation phase of your startup, in the process of developing your Minimum Viable Product (MVP), or in the process of acquiring your first 10,000 customers, you should prioritise user feedback instead of cash. That is not to say, however, that you should stop obtaining feedback after these phases; user feedback should be a valuable asset at every stage of the company whether you are a fresh startup or large as Amazon. After these phases, the notion of capital and funding becomes increasingly important to scale the business and acquire more customers, but never forget the power of user feedback.
User feedback is paramount because it teaches the founders on how to iterate, build on the value proposition, show care and consideration towards target customers, and retain superior customer service.
Try it Before you Buy it
Customers will not pay for something and/or continue coming back if they cannot see tangible benefits and instant gratification. There is a reason that we have startups bringing up new initiatives for customers to interact with their product prior to paying for it both in the service and good sector. Services such as apps provide a ‘freemium’ business model whilst other services such as gyms or car washes have plans for the ‘first 3 sessions free’. I mean surely they would not be making as much money as they could, or worse, actually losing money with this initiative. This is how they get their customers to stay. Customers who actually want and believe in the service opt into paying for it, and their customer lifetime value (CLV0) remains significantly higher than other individuals
Services
Value Proposition! A freemium model allows customers to directly engage with the features and understand what benefits they get from using the service. The conversion rates for free trial users to paid customers alternates between 25% and 60% for no-card-required free trials and card-required free trials respectively. This not only increases foot traffic for an application, but with this, startups can expand their paid customer base. With increased competition, startups need to not only be disruptive, they must also find seamless ways for the customer to actively realise why they are disruptive. The best way? For customers to ‘try it before they buy it’.
I personally love gyms! Not because I frequent them often, but because I believe they are one of the most creative companies with how they attract customers. They pioneered the free trial phenomena that is now used in every industry imaginable, and for good reason too. Gyms maintain among the highest conversion rates through this medium and often this model tends to be the best source of paid customers in comparison to other marketing methods.
Goods
Services have an advantage over goods to provide the “try it before you buy it” initiative. However, companies are finding interesting ways for customers to engage with their products as well. Sending samples has become a staple in this field where the company ships an eclectic collection of their products to test free of charge and if satisfied, customers can purchase them. Warby Parker, a predominantly eye-wear company, rolled out their ‘Home Try-On’ feature that allows customers to test five different styles of glasses for five days from which they can purchase one at the comfort of their homes. An increasing number of companies are opting for this not only to bring comfort to their customers but to constantly iterate their products and services to optimise it for the end-user.
Such initiatives have become key differentiators in an increasingly competitive market. I believe that the capitalistic market has shifted from a predominantly seller’s market in the 20th century to a buyer’s market nowadays. This is due to an increased selection of goods and services and the ease of transferability from one product to another.
Don’t inject money into a product hoping the customers will like it. Customers will switch out and opt for a different product. Iterate to your customer’s requirements for it is they who pay, to loosely paraphrase Shakespeare.
The Customer is Always Right
Cliche! Yes, I know it but surprisingly this phrase has some reality to it. Although they are not ‘right’ per say, they are integral to your business. Alongside selling your product, you need to satisfy your customers in terms of warranty, engagement, and future products. You need to establish a relationship with your customers. You must show them that you care. That’s what ‘the customer is always right’ means to me.
Nowadays, selling a product is no longer as simple as the old bartering days. We, as entrepreneurs and business owners must sell an experience. To get this right, we must understand the customer’s needs and wants of our products. This can be achieved through user interviews, user engagement, and user feedback. Simply, interact with your customers. We need to understand our intended value proposition for the product, ask customers and tweak said proposition to shell out even more value than we initially saw. We must iterate the product and change the go-to-market, features, experience among other things to better suit the customer’s needs. This not only makes the product more appealing, but perhaps more importantly, opens the customer to feel part of the decision making process. We establish trust, support, and care through user feedback and iterations which sets the stage far better than any amount of money could in the early stages.
But I will say one small detail, don’t change everything your customer is asking for. Sometimes the perception of what they need is drastically different from their actual needs. Therefore, conduct these interviews as a guiding method, one that helps you iterate throughout.
Something is Burning
Startups are strapped for cash and how they spend the little money they have may determine the future level of success and survival rate for the company. Below are three direct consequences of fiscal mismanagement and reasons that reinforce the idea that user feedback supersedes money.
Bandage Solutions
Many startups try to find affordable short term solutions with the thought that they are saving money. In other words, they are stalling and putting up bandage solutions for problems. A more appropriate way to go about this would be to iterate the product to rectify and consider the problem. These bandage problems, or so I like to call them, are problems in the product itself rather than the circumstance or situation. Therefore finding cheap short term solutions are absolutely futile for the longevity of your business.
Premature Scaling
Don’t you just get excited over the thought that your product could be used nationwide? Or even better, WORLDWIDE? I mean I have certainly dreamed of that for my startups. Although thoroughly exciting, it could potentially set a worrying precedent for your go-to-market and scaling prospects.
Many businesses push to scale their businesses too soon before consolidating their current markets. Don’t expand before you know that your intended market is satisfied with your product. This reminds me of a fantastic podcast by Entrepreneurial Thought Leaders at Stanford by Mark Gainey titled “How Strava Found its Niche”. When asked “what your target market is” at a coffee shop, Mark responded by pointing at 3 bicyclists sipping coffee at the corner of the shop. His mentor was relieved, stating that when she asked the same question previously, many would answer with “everyone at the coffee shop”. Now, striving to accommodate for everyone’s needs is fantastic, but certainly not feasible as an early stage startup.
You must decide your target market and ensure that your product caters to their needs. Once successful, you should look into expanding your market both geographically as well as in terms of people. The moral of the story is never forget your initial target market and never scale prematurely.
Fine Tuning Before Going Live
PUT YOUR PRODUCT OUT THERE! Too many times do we hear “it’s not ready yet”, “I’m scared”, or “what if people don’t like it”. Let the market decide how good your product is and then iterate it accordingly.
We spend a lot of time and money trying to change the product without knowing how to change it or what to change. The best way to answer these questions is to ask. Whether that’s through user feedback and interviews or through understanding how the market reacts to your product. So, if you are scared or unsure of launching your product, don’t be. Just launch it and continue to constantly get feedback.
Final Remarks
Simply, focus on user feedback as if it is your lifeline for the company. Without the customer, there would be no market, no demand, no reason to sell your product. Bring them into the discussion, make them feel part of the change, part of your movement, part of your vision.
Reference
“8 Proven Strategies for Converting Free Trial Users to Paying Customers | Databox Blog.” Databox, 26 June 2019, https://databox.com/converting-trial-users-to-paid-customers.