Nivi · December 23rd, 2009
The comments to our interview with Sean Ellis turned into an awesome Q&A — this post is a roundup.
(Feel free to keep asking questions here or there and I’ll try to get answers from Sean.)
Is my product a nice-to-have or a must-have?
Jae Chung wonders whether his product is a nice-to-have despite the positive press:
“I spent the past 24 hours poring over each of the points [in the interview]. We also formed about 8 months ago and the site is currently undergoing beta testing and has received positive feedback from many of our users and the press. However, my gut tells me we are in the “nice to have” category, and could never quite put our finger on what it was that users found appealing. We’ll definitely be implementing your survey to find out where the “love” is!”
The survey he’s talking about is survey.io.
Should I charge users before fit?
“I think that it is easier to evolve toward product/market fit without a business model in place (users are free to try everything without worrying about price). As soon as you have enough users saying they would be very disappointed without your product, then it is critical to quickly implement a business model. And it will be much easier to map the business model to user perceived value.”
“…freeing yourself (pun intended) of paying customers early on would seem to allow you to make more radical moves (pivots), since you don’t have to worry about angering anyone that has given you money and expects you to deliver on their expectations in return.”
Instead of charging users for a part of the product they don’t even want, first find the part they love, and then figure out how to get users to pay for it. Entrepreneurs who advise you to charge from day one probably had fit early on in their startups.
How do I tell users that I’m going to charge someday?
“Do you communicate to the users that the product will have a price someday?”
“I would communicate that “it is free during Beta” or if “beta” is too techie, then free during the introductory period. If you plan to have a free version, you can also let people know that.”
Should I pay users to send feedback?
“What about offering a gift or paying users to send feedback? Is this a useful technique, why or why not?”
“I haven’t needed to offer a gift for feedback yet. However, on SMB targeted products I tend to create a formal beta program that includes feedback requirements. Those people that participate in the beta program lock in a discount on the product (generally I don’t announce price at this point, just that they will receive a 50% discount). In addition to providing great feedback, these people tend to convert at a very high rate (since they worked for a discount).”
What if my customers aren’t filling in surveys?
“From my experience, many SMB users don’t like to fill in a survey for an unknown startup. Should I take that as a bad sign? In other words, is the survey response rate an equally important metric as the “must-have metric”?”
“Yes, I’ve found survey response rate directly correlated to the percentage of users that consider the product a “must have.” For “must have” SMB products I often see the response rate over 10%.”
How do I find the love in a hardware company?
“Sean, how can this “find the love approach” apply to hardware companies? What needs to be adapted to the method when you sell a product that is worth several $k’s?”
Sean:
“Samuel, I haven’t worked on a hardware product, so I’d just be guessing… Given the cost of getting a hardware product to market, I’d spend a lot more time up front on “where’s the need?” Steve Blank’s book Four Steps to the Epiphany gives great guidance on this.”
If you can build a product in a day, show customers the product. If the product is going to take weeks, show customers a PowerPoint instead.
Play us out
Ryan Nile knows what it means:
“This basically describes what we need to do after the MVP is up.”
Topics Customer Development
Thanks for the interview and posting the nice follow up questions. Every bit of insight I think is a great help.
I have not seen much regarding how to best implement pricing and establish market value for products once you have a market fit. Are there any best practices in this area that you prefer? Bucket tests? Or just start at the top and work down until you can establish the outline of a demand curve?
Hi Tristan – I wrote a blog post on this about a year ago. First I try to understand which parts of the product experience users consider most valuable for determining the overall biz model. Then I hone in on max yield pricing by surveying the purchase likelihood at different price points (surveying separate groups each time). Generally surveys give me the same demand curve as actual bucket price tests. This process works great for most software or web services. Of course pricing is tougher with hardware or web services that have a high marginal cost. Here’s a link to the full blog post on pricing: http://startup-marketing.com/how-to-determine-the-optimal-price-for-your-web-service/
Hi Sean,
Thanks for the link and the response. Guess I should start going through the back posts.
The survey approach is interesting to me. You imply, but don’t explicitly mention that people accurately self report on their purchasing behavior in surveys. This surprises me. I would have thought there would be over reporting and that when it comes to putting the credit card info in the rates would drop off although the shape of the demand curve predicted would be the same. Is there any further information available on that? Is there any difference between type of product and reliability of reporting?
Thanks again.
Sean – What are your thoughts about surveying customers versus users. Our customers will be the ones eventually paying for the service, and our users will be those coming to the website for information.
Should the survey be the same for both groups, and if so, should we then get to the 40%+ must-have for both groups… with the same answer of being very disappointed?
Jim, I think Sean would say to survey the users who’ve experienced the core value you offer and have been back recently, say, in the last few weeks. Later, implement the business model.
However, I’m interested in how you later survey paying vs non-paying users and what you look for.
Nivi- Makes sense to first focus our survey on the “users” to get the right product fit. Once established, implement the business model by surveying the “customers” to make sure there is the right fit for them.
We will work to implement both pieces as we get closer to our launch. Any additional thoughts or ideas on the customer surveys would greatly be appreciated. Likewise, we will let you know how we end of surveying both groups…
Jim, I don’t totally understand your distinction between users and customers. If users are coming to the website “for information,” I wouldn’t survey them for fit. Survey the people who are experiencing your value proposition. In your case, that’s probably the customers.