You can see this phrase in most of today’s books on best business management practices. And it is inarguably a good piece of advice. But is it really true at all times? My post on solving customers’ problems started an interesting discussion that has exposed at least three instances, in which listening to your users or customers might not make sense.
Before we dig into them, it is important to note that these instances share the same cause: people lie. When asked, we lie about what kind of product features we would be likely to use or what kind of design would smoothen our experience with the product. As Gerald Zaltman of Harvard Business School wrote in his book How Customers Think:
The correlation between stated intent and actual behavior is usually low and negative.
Most of us don’t lie about stated intent on purpose; it seems that our mind simply has a hard time predicting what will make us happy or what kind of product we are likely to use. While this limitation has far reaching consequences in many aspects of our everyday lives, let’s focus on just three that are very relevant in early stages of building a product.
Designing your product: pay attention to what users do, not what they say
While conclusive evidence of such limits of our minds is available for decades, it is still shocking to see how many entrepreneurs rely on what their users say, as opposed to what they do, when it comes to product design. It is even more surprising given the fact that the digital world allows for an unprecedented amount of user tracking. Even spaghetti sauce is designed this way. There are too many tools for rapid prototyping out there to list them all, but I found this comparison quite helpful, although it is a bit dated.
Validating your product: only cash counts
The same limitation applies to product validation. You have only validated the assumption that your customer is willing to buy your product if her cash lands in your account. You have only validated the assumption that your user is willing to use your product if she is actually using it.
This is a very important point when it comes to fundraising as well. You are much more likely to receive a seed investment if you have at least created a pre order or future signup site, which clearly describes your future product and generates solid buzz. Even Central Europe has some great examples of pre-product validation: just look at Goldee’s site (it used to accept pre orders for its crowdfunding campaign).
Claiming something along the lines of “I already have XX customers lined up who said that they will buy/use my product as soon as it comes out “ without any data (ideally cash) to back it up equates to having 0 customers, 0 users and no proof of concept.
Big customers requiring custom features: the art of saying no
We have all been there: a potentially big customer says she will buy your product if you build X, Y and Z feature and integrate the whole product to her system. If such customer could boost your revenues by XX%, shouldn’t you move heaven and earth to sign her up?
This is a really tricky problem that rarely offers a straightforward answer. You are dealing with the same mind trick, only this time the only available data is your lead’s stated intent. She is telling you what she wants, but how can you know if that is really true? Especially now that you know that even she doesn’t know what she really wants? Steli Efti had a great presentation at Pioneers Festival last year dubbed You Gotta Be a Hustler (I recommend watching the whole thing, a lot of insights delivered in a very entertaining fashion), the 27th minute described the very same scenario. Steli refused to accommodate the lead’s demands for extra features and discounts and she ended up signing up anyways. I have also heard stories with the exactly opposite outcome: startup decided to do all this custom development, gave the lead a hefty discount and at the end the lead walked away from the contract anyways. Does that mean that you should say no every time an important lead asks you for some extra work? Certainly not.
In theory the decision should be simple. You have just a handful of variables to consider:
(a) the lifetime value of the lead if you build the extra features,
(b) probability that the lead would not walk away from contract if you build the extra features,
(c) revenue you think these features can generate from other customers,
(d) the cost of building the extra features including opportunity costs,
(y) lifetime value of this lead if you didn’t build those features (and she would buy the product anyway),
(z) probability that the lead would buy your product without the extra features.
Then you compare the alternative of building the extra features (A*B+C –D) versus not building them (Y*Z ). The one that scores higher is the alternative you should pursue.
The issue, of course, lies in the fact that you are not certain what values to assign to each variable. So you do what a startup CEO does every day: gather as much data as you can, make an educated guess and hope for the best.
Know the limitations of our minds
The point of the three examples above is not to put together a case-specific manual for customer-related decisions. The key take away should be the understanding of how our mind limits our (and our customers’) capacity to make accurate predictions about how we will behave at some point in the future.
The impact of these limits on customer behavior may seem huge, yet it is dwarfed in significance when compared to how they influence our everyday lives, including the ability to be happy or build meaningful personal relationships. But more on that some other day.