I was talking with an entrepreneur the other day about his company. He said to me, “I’ve asked customers if the would buy my product and they said they would. That counts as validation, doesn’t it?”
I was talking with an entrepreneur the other day about his company. Ezra said to me, “I’ve asked customers if the would buy my product and they said they would. That counts as validation, doesn’t it?”
I laughed and said, “No it doesn’t count as validation for your idea.”
Ezra seemed taken aback. He asked, “Why doesn’t it?”
So, I told him:
“The only true way to determine if your customers will pay for your product or service is for customers to actually pay for your product or service.”
There literally is no substitute for this step.
Let’s be honest. You’ve probably told someone yes to the, “Would you buy it at this price” question (or some form of it) at some point in your life.
For example, you probably told your kids (or your parents told you) you did a good job on something when the reality was quite different. Most people don’t want to hurt someone’s feelings.
You can verify the demand for your product or service, but that’s not the same as customers buying from you.
Part of the original strategy for my company was building exact replicas (what are called “second sources” in the semiconductor business) of popular products. It’s a strategy that has worked for companies like AMD, Intel, and Maxim Integrated Products (the company we were targeting with our products), so we knew the strategy worked.
We went the extra step of verifying the demand at specific customers just to make sure we were targeting the right products. Sounds like we had it all figured out, right?
There was one step we didn’t do: We still didn’t have validation that customers would actually buy from us. It turned out, in our case, that customers would buy from us, an unknown company, so you could say we got lucky.
Here are some things you can do to get that total validation that customers will buy your product:
You can ask for a pre-order or a deposit.
But let’s say it costs money you don’t have to build your product, and you want to verify demand ahead of spending the money. One way you can get validation is by asking people to buy the product (at a discount) or provide a deposit.
It’s when a customer actually has to dig into their wallet that you know they’re serious. Even if the deposit is just $1.
Your fear is what’s keeping you from asking for payment.
The pre-revenue phase of building a company is a stage full of hope and excitement. You just know that customers are going to love what you’re building.
And if there is one thing that most of us fear as first time entrepreneurs, it’s asking to be paid. And the reason you fear asking to be paid is what if the customer says no.
That’s why asking to be paid is so scary. Reality hits you right in the face at the point.
Hearing people don’t want to buy your product can be the best news you can get.
Yeah, it sucks if your idea is worthless. It’s like the world is telling you that you’re not worthy. I get it.
However, you need to look at hearing that rejection in a totally different way. The question you need to be asking is, “What can we learn from what we are hearing?”
- Maybe your price is too high?
- Maybe your product is not differentiated enough?
- Maybe you’re emphasizing the wrong product benefits?
- Maybe your pricing structure is wrong?
- Maybe you’re trying to market and sell to the wrong set of customers?
I’ve had all of these happen to me during my career. The key is trying to learn from what customers are telling you.
Sometimes you can make a minor adjustment and your business will take off. Other times, you need to move on to another opportunity.
The worst thing you can do is ignore what you’re hearing. Then, you deserve everything that’s coming to you.
For more, read: What Are The Five Skills You Need To Be A Great CEO?. Take special note of Difference Number 2: Confront the brutal facts.