Taking a Step Back; Do you really understand your customer?

 

This is a continuation post, read the previous post that explains our assignment to BUILD a company for window panels.

Here’s a summary of our journey – After talking to potential customers and experts, we decided to make a market-segment pivot. Moving from housing associations to “Homeowners looking to renovate their house in the Amsterdam area”

 

We also identified new assumptions:

  1. We can find renovating homeowners.
  2. Homeowners find it difficult to find the right product and supplier.
  3. We can deliver a solution that meets the need of our customers.

We tested Assumption No.1 within three weeks. We were able to capture the attention of “renovating homeowners”. We were create a steady stream of demand.

 

Our test case (Hypothesis)

Test card - Assumption 1By spending xyz Euro on online ads we are able to talk to at least 20 homeowners. They have a problem we can solve. They are willing to provide us with additional information.

This test passed with success.

While talking to customers we learned they had difficulties finding the right information to select a supplier they trust. This validated our the 2nd assumption.

With the first two assumptions validated we were happy with the results in  “SELECT your customer” step.

 

Next, we focused on our 3rd assumption:

We can deliver a solution that meets the need of our customers?

 

IBCKozijnen Innovation Curve startup journey vo1

Since we deliver a commodity product we thought light about the PROTOTYPE  part. Innovations on the product have been done in the past, therefore our focus moved to efforts on SELLING our product 10x.

The next step

How do we fulfill the demand with our product? How do we build a sales system that works? What should our sales price be? Does this prove our business case and finally can we turn our customers into ambassadeurs?

5 Innovation curve SELL 10x I want to have

The results
We proved that the assumed margins were realistic and the business case was healthy.
We are able to create a smooth sales flow run by a small team.
The satisfied customers referred us to others.

What we learned
We found an effective way to attract customers. We needed a way to manage that.
We focused on creating a sales system (a SELL 10x activity). In a matter of weeks a sales system was created to allowing a small team to work together smoothly.

However we are too unhappy with number of leads won.

While being busy selling to our customers we realized too many leads were lost. We lost sight of customer problems. We were pushing our product into the market instead of understanding customer problems and needs.

Why do we lose? Did we really understand their needs? Do we focus on the right activity on the right time?

This made us realize we should go back a view steps and really understand the customer.
What is most important when purchasing our product?
What are his challenges in solving his problem?

In order for us to better understand them, we returned (to one of our suggested tools) – the right side of the value proposition canvas.

Right side Value Proposition - Innovation curve

With the customer conversations we can validate and improve the Value Proposition Canvas and win more leads.

 

Want to know more about the Value Proposition? Watch this video and learn all you need to know.

https://youtu.be/ReM1uqmVfP0

In next weeks post we will zoom in to the way the customers solves his problem now.   How is the current customer journey for homeowners?

 

 

 

Where an early stage customer pivot helped us forward

Food for Thought
A message from Leander, co-founder of The Innovation Curve:

“It is common start with an idea and get stuck without understanding what’s blocking you when building a business. As it can get quite frustrating (in addition to it being a lonely journey), I always try to take a step back and do a little reflection. My reflection led me to write this blogpost.”

This is my journey on how I applied the Innovation Curve on a business.

Currently, I am working with a client to help him BUILD his business in window panels. In Holland, it has been a long time tradition to make window panels from wood.
The company I am working with is able to produce high quality window panels against a competitive price. It has sufficient qualified staff for installation but lacks the sales capacity to promote the product and grow the business.

Hence, the assignment given to me was to assist the client to BUILD and SCALE the business.

6 Innovation curve BUILD I want to have

This sounds great, we can’t wait to get started!

Where do we start to build and grow the window panel business?

Yes, this is a right question to ask but there are many other questions we need to answer first before thinking about building the business. Ideas are great, it may work for you but is this a solution that the market needs to solve the problem?

Examples of questions we asked ourselves where:

  • Is there a large market potential in this industry?
  • What is the current alternative solution customers are using right now?
  • Do they need your service when they have an alternative solution?
  • How much are they willing to pay to replace their window panel?

 

Estimated market size

My first step was to estimate the market potential. What could the potential benefit be? What is the margin, cost of sales and how much time needs to be invested?

Using the Bottom Up Calculation method, we managed to gather some findings.

Window Panels Market size

We estimated that a 10% profit would be realistic and aimed to earn 10,000 Euro/month.
Our first question would be:

Would a sales target of 100,000 Euro/month be realistic?

Based on the calculation above and the segment we targeted, we had to contract 5 mid-sized housing associations.

With approximately 120 associations in our market, we were confident with the market size and assumed this was a realistic number.
Step 1. TEST your IDEA – Activity: Can I Earn Money with This Idea?

Window panels Market calculation

Talking to experts we learned find a better customer segment

We highly believe it is important to constantly test the water of the business. Hence, we talked to experts to learn about the challenges and quality of the product. We talked to customers to find out how much they are willing to pay for the product. This allowed us to identify several customer segments and understand their needs.

Window Panels Market selection

Our initial thought was to target the Housing Association Market mainly because of their Market size and relatively little sales effort needed to attract them.
We learned that they have a longer relationship with their suppliers and are usually not looking for alternatives.In other words:

Housing associations don’t have a problem that we can solve.

They are also asking for quality certificates making it less easy to create a prototype.
This was especially the case for the New Construction Market. We decided to leave this market untouched.

However, we learned that homeowners find it difficult to find suppliers and fail to understand their options (Depth/Pain). They searched high and low online for suppliers, product options and cost indications.

What if we :

  1. capture their attention and
  2. provide the information they need?

This would bring significant upsides:
We could solve their first pain by providing the information the needed. It would allow us buildup knowledge by solving their questions.

Talking to experts help us to select our target market:

Owners renovation their house in the Amsterdam area.

What we learned

In assignment is to BUILD and SCALE a company in window panels. To do so we calculated our target market size, selected a customer groups based on the best assumptions we could make in our first view hours at work.
We spend several days talking to experts we happen to know. For us these were housing associations, constructions companies, architects and home owners.
This talks let us in refining our customer segment and finding a problem we could solve.
We formulated new assumptions and started to test them.