Customer-Centric Roadmap Helps You Cross the Chasm
The success of a business depends on various factors, but perhaps the most crucial is having a solid business model. A good business model will allow you to identify areas of strength and weakness and make strategic decisions about how to improve or pivot the model to better meet customer needs and achieve financial success. One way to assess your business model is to understand the different strata of psychological reasons ‘why people buy’ your product. This can help you identify issues in product development and roadmapping as you grow your company.
Not all customers are created equal. And don’t speak to all the same way.
Many times, especially in startups, a product is based on the needs of the techie and early adopter. Ironically, the acquisition cost for these two early groups is often relatively low. The product might be designed specifically for them and easy to use for this particular customer. It might solve a painful need for small percentage of the population. Nothing is wrong with selling here, but once you cross the chasm, you might be looking at building a completely different product.
As you run into different customer segments, you might find groups of customers not interested or pushed back collectively and disproportionally much harder than you expected. Groupon’s experience highlights the potential pitfalls of crossing the chasm into the mass middle of your designed customer base. Groupon’s initial success was due to its business model of providing deals to customers for a limited time. They did really well in the beginning, but then suddenly, the acquisition cost was 80% of the cost of goods sold. Some kind of ridiculous metrics started to show up.
Groupon’s business model was designed for an astute business owner, but when other people tried it that were not as keenly aware of their own business model, it cost them their entire company. There are examples of businesses that went bankrupt because of Groupon and the lack of business acumen on the buyer side.
Understanding your customer segments and quantifying them can help you avoid such pitfalls. It is important to understand why your customers buy your product, even though you might not solve it right away.
In its early days, Netflix was primarily catering to the techie and early adopter segments, offering DVD rentals by mail and eliminating the need for physical video rental stores. As the company grew, it began to expand its offerings to include streaming services, which appealed to a wider range of customers. Today, Netflix has become a household name, with over 200 million subscribers worldwide.
One of the key reasons for Netflix’s success is its ability to adapt and pivot its business model in response to changing customer needs and preferences. By understanding the different customer segments at each stage of its growth, Netflix was able to develop a roadmap that addressed those needs and made strategic decisions that resulted in significant growth.
For instance, when Netflix first started offering streaming services, it did so in a limited capacity, with only a few titles available for streaming. However, as it gained more data on customer preferences, it was able to expand its library to include more popular titles, which attracted a broader audience. The company also invested in producing original content, which further expanded its offerings and solidified its position in the market.
In addition, Netflix has been successful in addressing the needs of different customer segments in terms of pricing. It offers tiered pricing options that cater to customers who only want to stream content, as well as those who want both streaming and DVD rentals. The company has also been able to adapt its pricing in response to competition, such as lowering prices to remain competitive with other streaming services.
Overall, Netflix’s success in understanding and catering to different customer segments at various stages of its business model is a testament to the importance of having a clear roadmap that takes into account customer needs and preferences. By doing so, companies can make strategic decisions that allow them to grow and succeed in a rapidly changing market.
In conclusion, assessing your business model is essential for success, and understanding the different strata of psychological reasons why people buy your product is crucial for identifying key areas of strength and weakness. Netflix and Groupon’s experience highlights the complexity of crossing the chasm into the mass middle of your customer base and the importance of understanding your customer segments according to why they buy. While not all customers are created equal, understanding why your customers buy your product can help you avoid potential pitfalls and improve your business model.