Demand Testing

Andrew Verboncouer:‍

So today I want to talk about testing customer behavior and trying to figure out if there's demand for your idea. So, as we look back to what Ryan talked about, we figured out who our customer would be. We also brought that forward and went and tried to interview our customers and see are they the right people that we should target based on who we thought would, would value this?

Did we uncover the right problems? Are we using the language that they would ultimately use? Using the decisions you've made around your target segments and the customers you're looking to serve and going from this general market opportunity into the primary research world, where you're getting real stories from customers, you're understanding the struggles that they have understanding how you can help them when the next step from here.

The next part in your journey is really taking all of that information. All of that insight. And figuring out how do you create a value proposition around it and how do you go and actually test demand? So one important thing to note is that what people say they'll do and what they do are two different things.

And so in your primary research, this is where a lot of founders get stuck. This is where they stop. They, they maybe do some problem discovery inside of that interview and ultimately are so excited about the vision they have for how they might change that. Or the product they might bring their solution, their app, whatever it might be.

They're so excited about it, that they usually bring it up in those interviews and try to say, Hey, since you're struggling with this and they try to use that opportunity to sell, even though they haven't really crafted a value prop yet. And this is where we see a lot of people in a lot of founders stop, where they ask people, would you buy this?

Hey, I know you're struggling with that, but what if I could solve that? Would you, and that kind of feels like the next evolution, the next step in the process. And it is. But when you do that and when you stop there and customers say, yeah, trusted you haven't really thought or worked through pricing at that point.

You haven't crafted an offer that takes all of these problems and all of their perspectives and tries to push that forward into a solution. And you say we're solving it because acts here's the benefits. Here's the outcomes that you're going to get from this. Here's the price point. And that's definitely an important part, but make sure that you follow through on this journey.

And don't stop at, hey,I have a bunch of people that said they would, our goal is in building businesses and building ventures is trying to test true demand and tranquil to actually validate or build evidence that somebody is willing to pay for this. And so, as I mentioned what people say they'll do and what they actually do are two different things.

So our job on this journey is to figure out how do we go from, would they buy to, will they buy and how do we bring them along that funnel?. So there's usually three ways to test them. Or, or three common ways that obviously there's, there's segments of this that go deeper, but the first one is money. So if we can get an exchange or a letter of intent or a purchase order, or someone's credit card for a future purchase, we can understand that they have really high intent to buy and follow through.

And that's something that you'll want to know as a business founder that Hey, people are actually willing to pony up and you've seen this in different ways through wait lists. You've seen this, I'm sure you maybe you've signed up for them. I'll bet you see this all the time. The other one is. So is somebody willing to go beyond that initial discovery call with you that, that primary research, those interviews, somebody willing to go beyond that and give you their time to tell you even more nuance for how how they're solving their problem today.

Why they can't? The other one that you're looking at is reputation, and this is true for. And this is true for B2C companies. This is true for B2B companies where you're trying to see is, is this problem valuable enough for someone to solve? Do they know other people that would be interested in a potential solution and will they actually put their name on the line?

And so you see all of these three things converge a lot on landing pages where you might have a pre-order she's Kickstarter's really successful with physical products and even digital products. Time and reputation. That's all part of it where you there's this referral loop to try and figure out is somebody motivated enough to solve it, that they would pay for it that they would give their time or that they would put their name on the line and, you know, send an email, have a conversation with someone at work around getting them in too..

So as we look at bringing someone through and testing behavior, we like to refer to this pirate model of startup metrics made by Dave McClure from 500 Startups. And one thing that you'll note here is that the awareness is greyed out. This is an important for early stage ventures, because nobody's going to know you by name, unless you have previous exits your you know, have previous companies that you've started.

No, one's gonna really know the next evolution or the next, the next product idea that you're pursuing. And so we focus on the bottom part of this funnel. And when you look at it this, we have acquisition. So can we acquire someone's interest on a landing page, their sign up, can we activate them? And this goes beyond this demand testing into how you actually deliver for customers where activation is getting someone's profile filled out, getting it actually implemented into someone's business.

Retention is making sure that we're creating this habit loop and really creating the behavior. We want to ultimately bring users closer to the value that, that we can serve and we can deliver to them. The next one is a referral and revenue, but when we look at early stage ventures we often want to try and demand test earlier than that.

You know, we don't want to wait until the end to figure out if somebody would pay for this. So oftentimes we'll. When we launch these demand test campaigns for new ventures, we're looking at bringing up revenue and bringing up referral into part of that top, top of funnel. And so we're really trying to test what's here in acquisition.

We're trying to to test, if we can acquire someone's interest, will they sign up for a newsletter? A will they sign up for, you know, early access? The revenue part of that is for when you really test, if someone will buy. And so the way that you can do this is by integrating Stripe Sam cart any myriad of tools that allow you to collect someone's payment information now to build them later all really high signals.

The other one that we want to test in this phase is. And so when you're thinking about crafting your offer, crafting your landing page and doing demand testing, we're trying to figure out one, can we acquire someone's interest? And that usually looks in the form of ads, which we'll we'll look at now.

That's headline copy. That's the images that's, that's what the body copy says in the app. Can you resonate and reach your customers to where they see that on Facebook or they see that on on one of their platforms and they click. And that's a good indicator of this top of funnel activity where you're saying, Hey, this problem resonates, or this solution resonates depending on how you're, how you're phrasing it.

And as you go beyond that, as I mentioned on the landing page, your landing page is bringing to life all of the different. Ideas, the problems, the benefits, all of the things that you're gathering from those primary interviews, where your customers are almost writing the copy for you. They're telling you their perspectives are telling you why they can't solve it today.

And what you're trying to do is craft a solution that brings forward or craft an offer that brings forward a solution where your clearly positioned to solve that problem. So, as we look at. You know, some examples here of demand gen testing campaigns that we've run, you know, it's about going to, to the market and channel testing and trying to figure out can we acquire someone's interest to go from here's an ad on a, on a network to they're on our landing page.

And once they're on our landing, Can we get them to convert how many people bounce right away. You're trying to measure the interest in, and essentially your funnel activity before you go and build your product. And this is really important because if you were to go build your product first, you would have no insight into the buying cycle.

How people thought about your offer, the messaging. Are you talking about it the right way? And that's really risky. And so when you're thinking about building your venture, whether that's building a business. For you, that's something that you're going to bootstrap in our lifestyle. You want to get to revenue quick.

And if you think about the other side of that, which is VC funding, you want to get to revenue quick because you want to make sure that you're building traction that builds good business. Your business is going to be worth more. Investors are going to invest more and you're going to keep more of the slice of the pie if you focus on getting customer and revenue traction early on.

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