Defining your customer base is tricky before you have completely defined your product/service. For this reason, it’s important your early conversations are full of questions and observations, rather than pitches for your idea.
There are a few things I think we did wrong in the beginning, so hopefully I can save you the trouble by sharing our learnings.
Definitely startups in Kenya may think about this in other ways than in the US or Europe, but I think most of these insights are fairly universal.
Your time is valuable (even if your product isn’t finished)!
Startups always think the hardest thing about getting their first customer is convincing someone to buy your service or product. But I think the hardest thing for startup founders to make their first sale is actually convincing themselves that their product or service has value.
I remember the early days in Nakuru – we didn’t have a developer team in Kenya, and had a very bare-bones MVP. In order to match clients to job seekers, we would go to our trusty Excel document, and Ctl + F specific skills until we found the right job seekers for the job. To us, it seemed ridiculous to charge for this service – two recent grads in an office, huddled over their computers, manually sorting through CVs and candidate profiles to find a match.
At the time, we didn’t realize that even just using our time to find these job seekers was value – even if we weren’t using the fancy software we pitched clients on. The method was a bit different about how we matched people, but the results were somehow the same.
That is value, and you can’t just give value away for free.
Don’t just pitch – learn about your potential customer
Instead of having a conversation with our potential customers to learn more about their current hiring challenges, we just tried to push our product. We walked around Nakuru, scouting potential customers – from the small hotels on the outskirts of the muddy central market – passing out business cards, and assuming we would eventually get lucky and get clients.
Our pitch was – “You can find people through SMS! You don’t need to just rely on your friends anymore!”
We thought this was great, but is this a service everyone needed? Probably not. The super small shops mostly hire family members, as do companies operating in very informal sectors. Their entire basis of operations is informal, therefore their recruiting is as well.
Had we sat down to have a discussion about what their company looks like, how many staff, how often do they hire, what is typical salary expectation, do they have any challenges with their current way of doing things…we may have learned sooner who would be a good target client and who wouldn’t.
(As a PS – the best sales technique in general is to ask tons of questions and get the prospective client to open up…who knew? :))
This all is not to say that we don’t think a more formalized hiring process is beneficial to these small, informal shops. I believe they would be able to grow more effectively if they were able to hire higher quality people.
However, they are certainly not our earliest adopters, and since they have such a low ability/desire to pay – the sales required to get them on board simply wouldn’t make sense in terms of unit economics.
Which brings me to my next point – Segmentation.
Segment, then sell
In our minds, all of the small businesses in Nakuru (and Kenya…and the world!!) were our customers. Every storefront in Nakuru, every vegetable stand, every individual person who ever needed a plumber to come fix their pipes at home…
Probably what would have made segmenting easier for us would have also been to understand that our customers would need to pay. Then, in our conversations with potential clients, we could not only ask – “Do you need this service?” But also – “Would you be willing to pay for this service?” Then, we could have assessed how many people were willing to pay, how much, and how much it would cost us to get them as customers and to keep them.
(1) Assess who is a great early customer:
Low Willingness to Pay + Slow Adopter = Bad fit
Low Willingness to Pay + Fast Adopter = Good evangelist, bad customer
High Willingness to Pay + Slow Adopter = Bad fit (too high cost of acquisition in time/money)
High Willingness to Pay + Fast Adopter = Great early customer
(2) Gather all the great early customers and compare market opportunity sizes → Focus on the biggest opportunity!
…Easier said than done, and assessing market size for both current and potential is not a straight shot. But it’s a good place to start. If you want to learn more about advanced customer segmenting, check out this awesome post about how to quantify your customer segments.
You learn something new everyday!
Of course, during our slow testing period, we were learning a lot. I don’t regret all the days avoiding the sun, and asking mechanics to sign up via paper forms that Christine and I would later input manually. And it was good that this process helped us understand how culture, and time, and language, and meetings work in Kenya.
But! Perhaps we could have come to a conclusion about our customer needs + core target market + value proposition a bit faster had we understood this initial sales process (for a pre product-market fit startup idea).
Side-point about defining value as revenue-based or user growth based
Maybe in the US & Europe where markets are flush with capital and there are startups exiting all over the place, there is less value placed on the startup’s ability to actually make money from clients. More value is then placed on the ability to grow and scale the userbase/network virally for revenue streams down the line in advertising or data etc.
Probably until the digital advertising space in Kenya is more mature, the value for Kenyan/African startups will be focused more heavily on revenue stream than userbase.
And! Until the general population embraces their “digital life” more, there isn’t a big enough customer base to make a B2C platform viral in most industries. Yes, Facebook, Twitter, and MPESA have spread like wildfire, but that’s about it. (And let’s not call MPESA a startup people, please.)
Just my two cents – I’m sure there are a lot of opinions about this out there – and go ahead and comment with yours!
So now, whenever we think about rolling out a new product, or feature, we think about who is going to pay, and who will be the most valuable client. I know that if I pay a sales guy $10 to get a client that only gives us $20 over their entire lifespan with us, that is less valuable that a client I pay $1 to acquire and has a lifetime value of $1,000.
This isn’t to say that I don’t value growing our network virally and getting the smaller, harder to reach guys on board. But they shouldn’t necessarily be your first customers.
We also ask tons of questions in every sales meeting we have, and make sure to convey the value we bring clearly and confidently.
Total addressable market is not just a slide you throw into your investor deck! It should be something that is always in the back of your head whenever you make any significant product/service decisions or developments AND when you are figuring out who your first customers should be.
These are my thoughts on getting your first customers and how to think about the whole process. I hope they are helpful! Please let me know via the comment section below if this has been helpful and if you have any questions.
This was our latest post in Founder Fridays, where we dig into the story of Duma Works and try to tease out some valuable insights to share. If you loved this, you can also read our last post on fundraising in Kenya.
Enjoy, and see you Friday kutwa! 😉