Lesson: Customer Understanding with Steve Blank

Step #1 Customer Segments: Who are your customers? Why would they buy?

What we're really trying to do is find the right product market fit between what you're building and who wants to buy it? Again we call this relationship between value proposition and customer segment simply product market fit.

Today in customer segments, in this lecture we're really going to ask what job are we getting done for the customer, that is, what functional or social jobs are we going to get done? What emotional jobs, what problems or needs are we solving? What gains are we providing the customer? What pains? How does market type affect this? And at the end, what we're going to come up with is a deep understanding of the persona and archetype, who are they? Why would they buy? Why won't they buy? What do you need to say to them? And if you spend your energy out of the build doing customer development and customer discovery here, it will make your company incredibly efficient and actually figuring out how to market and sell to them. So remember, the goal is now to connect the value proposition with what you're going to know and learn outside the building about customers.

Now, remember, your goal here is to start with a series of hypotheses, that's all you have on day one. If you're a domain expert maybe you'll know a little more but it's okay because you're just kind of guessing here. You start with, "Well, here's what I think my customers are." But then you get out of the building and you start running experiments and you find out, "Oh, I was right." Or more often on your first guess is, "I was wrong."

And because we're going to do these experiments cheaply, inexpensively, and upfront, we're going to save all the enormous waste we would do if we waited until we launch the product and did an expensive market campaign. And then only then realizing that, "Oops, these weren't our customers." or "These were our customers but we built the wrong features." So let's dive down a level deeper and first focus on what's the jobs needed to be done. That is what's the customer segment trying to get done? And is it a problem or need?

Now this phrase, jobs to be done, was first popularized by Clayton Christensen who wrote a series of books, The Innovator's Dilemma and The Innovator's Solution, which should probably be on any entrepreneur's reading list. What Christensen said is look, what functional or social jobs are getting done? That is does the customer want to perform or complete a specific task or solve a problem, or trying to look good? Gain power of status or there are some emotional jobs? Do they want to look better or feel good, feel more secure? And what basic needs are you helping your customer satisfy? Is it entertainment? Is it dating? Is it something hardwired into the human psyche?

Now a simple way for you to start with your customer segment hypothesis is rank each job according to what you believe is its significance to the customer. And you get to guess on day one is it crucial or trivial, and take a guess about how frequently it occurs. And outline what specific context a job gets done. I call this the day in the life of the customer, that is you ultimately ought to be able to go up to a whiteboard and diagram for me or anybody else, here's what a customer does the moment they get up to when they go to work or when they're at school or something else, and here is the products they use and the car they drive and what they read, etcetera. And if you really don't have a deep understanding of that customer and where your product fits, you're really going to have a hard time understanding them.

Now just remember, on day one, all you are mostly doing is guessing but the whole objective of getting out of the building is trying to fill in this day in the life so actually when you say something about, "Here's how we have to go advertise to them or reach them or use Google AdWords to them." That you're just no saying, "It's because I think so." It's because you're, "I've spoken to a ton of these people and they'd love to buy our stuff but here's how we reach them or here's the key message we need to deliver."