Steve Blank writing about Customer Education

(written by Lawrence Krubner, however indented passages are often quotes)

I just got done reading Steven Gary Blank’s book, The Four Steps To The Epiphany. This is one of the best books that exists for startups.

For me, the biggest insight that I take away from this is his emphasis on customer education. He says this is especially important when you are in a new market. Traditional marketing activities like “branding” and “positioning” are a waste of time if you are in a new market. If you try to position yourself as “The Best Makers of Moolapsum!” and none of your customers know what Moolapsum is, then what have you gained? It is better to focus on educating your customers. You invent a new market through education.

He specifies that every startup can be slotted into one of these 4 types:

1.) targeting an existing market

2.) targeting a completely new market

3.) resegmenting a market by price (low cost)

4.) regementing a market by niche

This is from page page 124:

In the Customer Development model, the phrase “customer creation” represents the essential marketing activities necessary to help customers learn about a product and create a desire to buy it. In most startups this job falls under the general rubric of marketing communication. I call these activities Customer Creation rather than marketing communication to make the points that (1) in a startup these events are occurring for the first time; (2) they are not about the marketing department, they are about customers; (3) they are creation events, not follow-on activities; and (4) the types of appropriate marketing programs differ widely, depending on Market Type.

Why is this distinction important? The traditional marketing communications strategy has six elements:

1.) an internal and external PR audit to understand customer perceptions

2.) development of a unique company and product positioning

3.) enlistment of key industry influencers and recommenders

4.) recruitment of enthusiastic beta customers ready to sing the praises of the product

5.) product launch at first customer ship

6.) ramped-up demand creation spending (advertising, public relations, trade shows, etc.)

However, the implicit assumption is that all startups are in existing markets. And these 6 steps work in every existing market. However, in at least 2 of the 4 types of startups these traditional rules don’t work. Unfortunately, in lieu of developing a strategy that fits their own particular circumstances, most startup marketers tend to fall back on timeworn marketing phrases and programs, typically those they used at their last company. This is a mistake. Launching a new product and company should not be confused with executing a laundry list of marketing tactics. What every startup needs is a thoughtful Customer Creation strategy and plan tailored to their Market Type. My emphasis on Customer Creation rather than marketing communications execution is meant to make clear that the people involved need to be strategists rather than tacticians.

And from page 128:

Now that we understand a bit about Market Type, it seems hard to believe that with monotonous regularity startups with no revenue still announce new products using the same positioning and product launch strategy as a billion-dollar, 75 year old company announcing its 43rd follow on product. This disconnect contributes to the high burn rate and less than dazzling market penetration of more than a few startups. In a forgiving economy, heaps of funding will hide these problems, but when money is scarce, getting it right the first time matters. And that means matching your positioning, launch, and demand creation strategies to what type of startup you are.

And from page 130:

Although customer creation, as a set of specific activities, is one step in the Customer Development model, implicit in the entire model is the idea that Customer Creation does not happen in one day, or one week, or even one month. Rather, Customer Creation is a continuous and ongoing process that starts the day the company is founded. The whole premise of this book is that a startup needs to learn and discover as early as possible. That having been said, one of the most egregious mistakes a starup can make is beginning some of the expensive Customer Creations activites (advertising, heavyPR, etc.) too early. A key tenet of the Customer Development philosophy is that there should be no serious spending in marketing until the company has a proven and repeatable sales road map. It’s in this sense that Customer Creation is a discrete step that follows Customer Discovery and Customer Validation.

And from page 138:

If entering a new market, the year one objective has nothing to do with market share. This idea alone is worth the price of the book. There is no way a new company can get meaningful orders from a market that doesn’t exist. Therefore, spending money on a massive launch to garner customers and market share is ludicrous.

For me, this might have been the most important thing I read in the book, from page 143:

If you are creating a new market, company positioning cannot be about how different your company is, since by definition in a new market there are no other companies to compare it to. Therefore, in a new market company positioning is about communicating a vision and passion of what could be. It answers the questions, “What is wrong with the world that you want to make right? What is it that your company is trying to change?” When Palm created the first personal digital assisstant, the company positioning was about communicating a vision of how having a PDA was going to make life easier for consumers. As another example, PhotosToYou’s passionate positioning should have been that was allowing consumers “to make hassle-free photo prints from your digital camera.” That was a vision that a digital camera customer could understand and connect with. Instead, PhotosToYou described itself as “the best online photofinisher.” While technically correcct, the message assumed that potential customers understood what an online photofinisher was. When the market does not yet exist, customers need to first understand what problem your company is solving.