How to Find Your Minimum Viable Customer
You can’t boil the ocean, but you can boil a cup of water
The concept of a Minimum Viable Product or ‘MVP’ is often discussed in startup circles — the idea that you need to start by creating a simple prototype that you can put into the hands of customers to test your hypothesis and iterate your product forward.
However, what is often overlooked is that one of the most important pieces of information you’re trying to gather with your MVP is the identity of your MVC or Minimum Viable Customer. Too often founders release their MVP into the wild, they start to get feedback from many different types of customers and those customers are telling them to go too many different directions. Founders try to please them all and diligently build all of their customers’ feature requests to proudly say they’ve listened to customer feedback. However, what they end up building is a Frankenstein product with no clear customer in mind. No one loves the product, let alone is willing to pay for it. Here’s how to avoid that.
1. Segment customers
During your initial interactions (sales, interviews, downloads) with potential customers, you should constantly be segmenting them. For example, if you are selling a B2B product you would want to be noting the types of businesses you’re talking to, the roles of the customers in those businesses, and the size of those businesses in terms of revenue and headcount. General data such as age, gender, role, and location are also good starting points.
While you’re doing that, also pay close attention to the importance of the problem you’re solving for them. Pay close attention to the nature of the problem, their willingness to pay for it to be solved, and their emotions around the problem. By doing this you’ll start to get a sense of the segments within your potential customer base.
Below is a simple starting point for Airbnb, but your goal should be to identify as many different segments as possible to start to get a sense of what problems you’re solving for which customers. As you go, gradually start to combine customer segments, but only after you’re sufficiently satisfied that the differences between them aren’t relevant.
2. Categorize & rank your customers’ problems
Now that you have some data on the different segments within your initial customer base, start to categorize their problems and look for trends. Are there some customers whose primary problem is generating more revenue? Some who are more focused on saving time? Some are more focused on their business's professional appearance? Begin to rank these problems based on how much money they’re currently spending to solve these problems, how much time their spending, the frustration in their voice, and other indicators of problem importance.
Going back to Airbnb, here is how they may have thought about evaluating the problem importance of “finding lodging at a reasonable price” for each of these customer segments. By looking at this you can tell people who are traveling for events in cities clearly have high problem importance that existing solutions (competitors) aren’t solving well.
3. Factor in solutions
Now that you have a sense of problem importance, begin to overlay the time it will take you to solve those problems in a simply x-y chart. If the problem isn’t important, people won’t pay you to solve it and if the problem takes too long to solve, you’ll risk running out of money.
Other Factors
By now you should have a good idea of who your MVC is and the refined MVP that you should build for them. Here are some other factors to consider when deciding on your MVC.
Competitive analysis
In deciding on your MVC you should be keenly aware of what alternative solutions are out there to solve this problem for them (competitors). A tried and true approach, for example, is to start in a market where there is a high-end expensive solution, but there are many latent customers who can’t pay that price and don’t need that level of complexity and thus make for great MVCs — often this is called Disruptive Innovation.
Sales cycle
A key factor in deciding on your MVC is the length of the sales cycle. A long sales cycle is a great way to kill an early-stage startup. Try to find MVCs who have a short sales and onboarding cycle wherever possible.
Personal experience, knowledge, and connections
Starting in a market where you already have personal experience, knowledge, and connections is also an important factor in deciding on your MVC.
Market size
If you’re seeking VC funding, do some analysis on the degree to which your MVC allows you to expand into other markets because you don’t want to be building your product for such a narrow customer segment that it will be extremely difficult to expand into larger markets if your initial market isn’t large enough — which it shouldn't be, considering you’re building for a MVC. Make sure to communicate that VCs shouldn’t mistake your focus for a lack of vision and possibly even include a slide about how you see the market expanding. Below is an example of how Carta thinks about building a solution for VCs first provided greater leverage into the asset ownership market.
Lastly, BE DISCIPLINED
Discipline is doing what you should do, not what you want to do. When you launch, almost instantly you’ll have this conversation with a very well-meaning person.
Them — “Your new product looks great, but have you thought about how much it would help {insert new customer type}?”
You — “Yes, we have but we want to be focused on the type customers we’re already serving right now.”
Them — “Aren’t you a startup? Don’t you need money? Don’t you want more customers? Why would you say no?”
This is where it gets tricky. Because it is so tempting to give in to this logic — it makes so much sense and when you look at most successful companies, they do serve many different people. Also, most people you interact with will have never worked at a startup with <5 people, so from their experience it seems crazy to not try and ‘get more customers’. However, here is why you shouldn’t.
- It is an extremely powerful tactic for startups to be able to tell customers that they are building a product just for them, and no one else. This is a huge advantage big competitors can never say. By trying to be all things to all people, you’re immediately giving this up.
- A personalized user experience will always beat a product that is built for a broader audience. By saying ‘yes’ to more types of customers, you can’t build as focused of a product experience.
- You have limited time and limited resources, although on the surface their needs may look very similar. Inevitably the deeper you dig to make a great product experience, the more you’ll see the need to divert resources towards features and integrations that aren’t needed by your core set of customers.
If you look at great companies, I think this is a hallmark that is often missed because most people don’t experience those companies when they are very small. For example:
Facebook, was originally only for Harvard, then for Ivy League universities, then universities broadly, etc.
Superhuman goes to great lengths to disqualify people from using their product. You must use a Mac, Chrome, have an iPhone, not use certain Gmail extensions, and send a certain number of emails per day. You must also get referred by an existing user. The bar to be their customer is really high. The reason for this is they know they can build a great user experience for those people, as soon as you’re outside of that bubble, they know you won’t have as good of an experience as someone in the bubble.
In summary
On the surface, it seems like customer’s needs are uniform, when in fact there are often many different segments within a given “customer”. If you try to build a product for all of them and boil the ocean, you're bound to fail. Take out your cup, dip it into the ocean and find that Minimum Viable Customer that you can delight beyond their wildest dreams — and go from there!
Note: I thought of this idea while reading Bruce Cleavland’s book Traversing the Traction Gap which discusses the idea of Market Engineering which is a great resource in thinking about which customer segment to focus on. He uses the term ‘MVC’ as well but refers to it as the Minimum Viable Category which is somewhat similar to a Minimum Viable Customer, but more for startups selling to enterprises.
