How Investors Think About Your Customers
Investors don’t view customers as entrepreneurs do. The larger and more stable customer base your brand has, the stronger the competitive advantage an entrepreneur will have when pitching to investors.
During the 2016 Project Entrepreneur Summit in LA, Susan Stone, Founder & CEO of Sierra Wasatch Capital and Vanessa Green, co-founder and CEO of FINsix explained how investors think about customers.
A larger and more stable customer base will also serve as proof that a company has a great impact on its target market. When raising capital, think like an investor.
Your total addressable market. Who is your target customer? Why will they want to buy your product? Why did you choose this market? Entrepreneurs must start by asking themselves these questions and get as specific as they can with the answers.
Product market fit. Product market fit can mean different things depending on what is being sold. Is it a service or a product? Is it subscriptions? If an entrepreneur knows they have a good product but doesn’t feel that they have these answers, they must reassess the target market. It’s good to get this work done early on in the process. An entrepreneur will know they have achieved market fit when they have a repeatable pattern of customers buying the product.
Pricing strategy. At the heart of this tactic is listening to customers, knowing the base and making it easy for them to buy. For example, if an entrepreneur has a consumer product which people will want every month they should set up a subscription service because it makes it easy for consumers to gain access. Similarly, if a company can give volume discounts, they should. If the desire is cash up front, discounts should be provided for people who are paying up front. Pricing strategy can eliminate friction and encourage customer behavior.
Market feedback. It’s really important to listen to customers and react to their feedback. Customers should be able to give transparent details about their experiences with a product or service. Companies that implement feedback programs are in tune with their customers. They get their customers to be entrenched in their product and brand. The more specific an entrepreneur can get with an investor about how they will reach customers and their behavior, the more credibility an entrepreneur has, even if they haven’t made a sale yet.
Learn more from Susan Stone and Vanessa Green on episode 20 of our podcast, #theTools, “How Investors Think About Your Customers” and be sure to subscribe.