Why Research Is the Key to Becoming a Customer-Focused Company

Harvard professor Clayton Christensen noted, back in 2011, that 95 percent of new products fail. And about 70 percent of the time companies try to change, they fail, according to McKinsey.

Yet at the same time, Amazon consistently launches successful products and continuously changes. As a result, Amazon’s stock price has returned over 120,000 percent to those who invested in the IPO.

What’s the difference between those companies that fail and Amazon? Look to Amazon’s first leadership principle: “Leaders start with the customer and work backwards. They work vigorously to earn and keep customer trust. Although leaders pay attention to competitors, they obsess over customers.”

When Amazon went public in 1997, Jeff Bezos reiterated this principle in his first letter to shareholders. To paraphrase, Bezos told Wall Street: Amazon obsesses over customers, not shareholders.

Amazon’s customer obsession has allowed them to be one step ahead of the customer and years ahead of the competition. This durable competitive advantage ultimately drove Amazon to become one of the world’s most valuable companies.

To emulate Amazon’s success, you must fall in love with solving customer problems, and not your ideas or shareholder interests. This means orienting your decisions around your customer.

Building Customer Focus

The process to build a customer focus begins with deeply understanding the customer, the competition and the market in which you want to operate.

Start by asking yourself: What is the biggest unsolved problem in your life today? How much would you pay to solve it? How many other people share your problem? How much would they pay to solve it? If at first you don’t find a scalable or profitable problem and solution pairing, iterate. Pick another problem in your life and repeat the process.

When you find a problem that others share and are willing to pay for a solution to, go deep on the sector. Let research illuminate the best solution to your problem. Here’s how to best approach that.

1. Preliminary Research

Use existing research to develop a preliminary understanding of your customer, the competition and the market. Ensure you know what you are talking about before talking to the customer.

Start by creating a list of credible resources and relevant facts that will serve as the foundation of knowledge for your conversations with customers in qualitative research. You must do your own research. Do not outsource this activity. The below questions can help guide this:

• What market are you targeting?
   
• How large is the overall market you’re targeting?
   
• Who are the customers in the market you’re targeting?
   
• What companies are operating in this market? Of these, who are the biggest players?
   
• How much purchasing power is in the market?
   
• What themes and conclusions did you come to while performing this research?

Stop researching when you reach data saturation — the point in the research process when no new information is discovered in data analysis. Saturation means that you can be reasonably assured that further data collection would yield similar results and serve to confirm emerging themes and conclusions.

2. Qualitative Research

Once you understand the customer, competition and market, it’s time to talk to the customer. These conversations will build a foundational understanding of your customer by talking to and observing them.

In qualitative research, you will begin developing a deep and intimate understanding of the customer whose problems you will solve. Before you talk to the customer, it is important to determine what you hope to learn:

• Is this customer discovery at very early stages of an idea, and you are trying to find out if there is a willingness to pay?
   
• Is this product testing?
   
• Is this customer discovery at a later stage in a startup life, and you want to understand who your new customers could be?

Once the conversation starts, explore their interests and thoughts rather than sell them your vision or ideas. At this point, they are not purely customers, but are your guiding posts to your solution. Ask open questions and document every word they say.

Again, stop this phase once you reach data saturation.

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3. Quantitative Research

Once you understand the customer qualitatively, it is time to perform quantitative research to validate your understanding. Quantitative research should produce statistically significant data that proves or disproves key assumptions about your customer, competition and market. This deeper understanding is critical in helping you craft a scalable value proposition.

Quantitative research also helps you identify demographic and psychographic variables that will determine how you design, message and market your solution. For example, you need to know all of the following variables to ensure you are crafting the right solution for your customer:

• Demographics: age, gender, relationship status, income, education, employment.
   
• Psychographics: ideals, personality, interests, opinions, values.

Unless you’re an expert statistician, hire experts. You can affordably find experts on Fiverr, UpWork, Catalant, PeoplePerHour, Craigslist and LinkedIn.

You can affordably host your survey on: Google Forms, SurveyMonkey, Qualtrics, Airtable and Typeform.

You can also outsource your research to relatively high-cost managed services: Ipsos, NielsenIQ, Kantar, Dunnhumby, IRI, Westat, Wood Mackinzie.

Once your quantitative research is complete, it is time to choose your customer.

4. Choose Your Customer

To isolate the specific customer whose problem you will solve, you must choose the customer whose needs will be your primary focus. Defining your customer allows you to become focused, which is necessary given constraints in every new venture. Focus also allows you to obsess over the customer that has the biggest need that you can solve.

Choose your customer using the data you produced in the primary qualitative and quantitative research. Ultimately, your customer:

• Has a problem you can solve.
   
• Is willing to pay for a solution to their problem.
   
• Can afford to pay for your solution.
   
• Is growing in numbers.
   
• Is willing to consider alternatives to existing solutions (in other words, would consider buying your solution assuming you make it correctly).

As you’re determining your customer, consider these factors:

• Buyer versus end user: Does your customer have a different economic buyer than the end user? For instance, educational startups will have an end user (the child) and an economic buyer (the parent).
   
• Company type and impact on buyer: It is important to know the type of company you are targeting and the people to whom you will be selling. If you’re selling business-to-business (B2B), for example, your end user may be in marketing. But you may have to sell through finance, technology, operations and many of the management and executive layers. You must anticipate the needs of your customer and make it easy for them to buy through these layers.

5. Build A Persona for Your Customer

Once you have narrowed in on a group of like-minded target customers, you must figure out how to represent them accurately. The simplest way is to choose the target customer who most embodies the characteristics of the group of customers you are seeking to serve and use them as the foundation for a customer persona.

A persona is a customer profile that lists details and attributes about them that are common among their target customer group. Even if you are a solo entrepreneur, you should still build a persona for your company. Building a persona of your customer allows you to easily remember and communicate what you have learned in your research.

Developing a customer persona is helpful because it:

• Provides a deep understanding of your customer, which significantly de-risks innovation investments.
   
• Empowers you to understand and consequently empathize with your customer.
   
• Aligns your team with your customer and ensures everyone is working toward the same goal. It’s a simple way to bolster a common understanding of who the target customer is.
   
• Provides a precise customer definition for you to refer back to when trying to make decisions.
   
• Allows you and your team to synthesize all your research findings.

Companies with teams should involve representatives from each department that interfaces with the customer in persona development.

6. Share What You Learned With Your Team

Once a persona is developed, everyone at the company should understand the customer persona. This alignment is beneficial to get everyone on the same page and is ultimately what ensures that everyone’s actions are made with the customer in mind.

If not, you may wind up with different team members having different impressions regarding who is the customer. If different team members think the customer is someone slightly different, then they will not deliver the right solution to your customer’s problems.

Related ReadingEffective Teams Don’t Keep Secrets

The Key to Success: Fall in Love With Solving Customer Problems

Every successful entrepreneur knows that, once the business is launched, the needs of the customer are far more important than the ideas of the entrepreneur and their team. Starting a business by focusing on proving your idea misses the point of business: to solve customer problems for profit.

Therefore, at the earliest stage of building a business, you must fall in love with solving your customer’s problems, not your ideas. And that comes from deeply understanding the customer through research.