For every start-up everyone they meet seems like a customer. It is this heightened optimism that makes entrepreneurs who they are, but it looks like this is the same reason why many fail as well!
Yesterday, I met a young entrepreneur and he was telling me that over the last six months he has been meeting number of exciting customers but almost all of them back off at the last moment, just before signing an engagement. On deep probing it struck us that may be they were not customers in the first place!! “Who, then, is our customer?” – asked this puzzled entrepreneur to me.
I am sure all of us have passed through this phase but here are a few thoughts on some parameters which can help decide if someone is a customer or not:
Need: Do they need our offering at all? Does it help them solve a problem or overcome a challenge? This is the basic question. If ‘yes’, then they are not customers, we ask the second question.
Ability to pay: Do they have the ability to pay? Though it seems like a strange question, basic marketing theory asserts this as a fundamental qualification for someone to become a customer. If answer is a ‘yes’, even then they don’t become customers, we ask the third question.
Willingness to pay: Do they want to pay? Do they prefer paying for overcoming the problem or challenge? It is only when the third question also gets a ‘yes’ for an answer does someone qualify to become a customer.
Without someone passing through all three questions, they should not be part of your target market. While it may seem simple and straight, it is rare to see an entrepreneur who quickly screens potential customers through this simple list before selling to them. It is only when entrepreneurs start saying ‘no’ to all others, the start-up begins seeing right customers in its client list.
Having customers is not the solution to a start-up’s problem of revenue, it is having the right customers that makes all the difference. Of course the actual target market may or may not be who the entrepreneur thought before going to market, but the market will reveal itself. It is up to the entrepreneur to remain flexible with the target group, but inflexible with the qualification questions. This can make or break start-ups.
Need + Ability to pay + Willingness to pay => Customer
Think about it!