Validating an Idea: The Buyer and User Personas
Quick announcement: I write these posts with the early startup journey in mind. I want to give away as much information as possible to help you succeed. I’m freely putting out a lot of what I wished I had known when I started. I appreciate all the feedback. It’s been fun. It’s also clear that many want more. So, we are launching two programs: The Hypergrowth Flywheel and the Let’s Build Intensive.
The Hypergrowth Flywheel is a high-touch advisory and coaching with me for companies that have crossed that $1m to $2m threshold and looking to grow into double-digit millions and beyond. It’s a 6-month program covering everything from executing for high growth to exiting. It’s for the CEO and their team - you can’t grow beyond your team. This program has very limited spots given the much more hands on approach. If you’re interested, please join the list. We have a full money-back guarantee if you decide at any time it’s not for you.
The Let’s Build Intensive is a 6-month cohort for earlier-stage companies with a launched product. It’s cohort-based, with direct, context-specific feedback from me and the HVL team, periodic in-person sessions, and a growth and company-building curriculum. Again, limited spots. If you’re interested, please join the list. Just like Hypergrowth, full money back if not ideal for you.
Welcome to this week’s post. The first post focused on validating the problem you wish to solve. Today focuses on understanding and validating the buyer and user of your solution.
A Tale of Two Personas
Understanding who would be paying for your solution is a critical step in the validation process. However, the buyer may not always be the user, as is the case for many B2B solutions. In many cases, the buyer will have the final decision on willingness and ability to pay; hence you need to understand their motivations and decision-making process. No matter how much a potential user likes your product, it won’t matter if the buyer doesn’t want to pay. However, the user usually significantly influences the choice of which solution to purchase. For example, the accounting team significantly influences which employee management solution to implement, even if the ultimate decision rests with the information technology or HR leader.
Understanding whether you have a single buyer and user persona and the motivations of each persona when they are different is critical to your company’s success. There are sometimes ways around this dilemma, such as the land and expand strategy, where you appeal to a subset of an organization, small enough to have the same user and buyer, and hope you gain momentum across the whole organization. However, it is best to understand both personas in your validation process. Appealing to one persona without the other can scuttle your chances.
Ability and Willingness to Pay
As a first step, you need to understand how able and willing buyers are to pay. Understanding the ability to pay is crucial in discerning the buyer. Talk to the problem owners. Do they combine the buyer and user roles? Where do they stand in their organization? Are they in a decision-making role? You need to validate whether the person who would most benefit from your product has the ability and decision-making power to pay for it. In an ideal situation, you want the person with the problem to be the buyer. If you’re dealing with a user who does not have the ability to pay, you need to make sure you can reach the buyer with a compelling offer that solves their problem from a buyer's standpoint.
Once you’ve established the ability to pay, you should score your buyer persona on their willingness-to-pay (WTP). WTP is the maximum price at or below which a customer is willing to buy your product. WTP can also be a range. Unfortunately, many founders shy away from the pricing conversation during the validation process. This is a huge mistake since pricing is core to so many things, from gauging actual pain levels to possible go-to-market strategies. WTP within one market niche can differ from another within the same market segment. Hence, WTP is not just a pricing exercise but a market validation tool.
There are several ways you can measure willingness to pay from simple question and answer surveys to a series of questions. You can start simple and ask, "Would you be willing to pay for a solution to this problem?” Don’t stop there, though. Whether they say yes or no, try to dig into why they gave that answer. It also helps to offer a scale. A range will get you more accurate answers. Ask on a scale of 1-to-5 how likely they would be to pay for a solution. You can also ask about different prices – “Would you be willing to pay $10 for this? What about $50?” Ask questions such as what price is just too much? If you ask if they’re willing to pay and they say yes, don’t automatically give them a high score. That question is a start, but it won’t give you the most accurate answers. Be brutal and objective in your scoring. Whenever possible, pick a segment with high WTP. The Profitwell folks have a good article for further knowledge on measuring willingness to pay.
Sophistication of the Buyer
The next attribute of the buyer that you should score is buyer sophistication. This is more qualitative than quantitative but can still be assigned a score based on certain criteria. Sophistication deals with the buyers ability to accurately evaluate a solution’s value and make purchases accordingly. For example, if you're selling a technical product used by engineers but the ultimate buyer is non-technical, you need to score the buyer lower on buyer sophistication.
Several years ago, I had an idea targeted towards civic clubs. During validation, it became clear that there would be some third-party technology integration needs and a technology learning curve. Unfortunately, many of these clubs made buying decisions with a committee without a guarantee of a clear technical buyer. It became clear the buying cycle was going to be long and painful and I passed on going further. Even though I had personal connection to some of the clubs, it was clear that the price point, buyer persona, and sophistication would be a challenge.
Buyer sophistication is context specific. Some questions to ask to gauge sophistication are whether the buyer is technical enough to make a judgment on technical products, history of buying similar solutions, and how similar solutions were implemented and the disruptions experienced if any. The level of sophistication required can also be different for a consumer product versus enterprise product even if the use case is similar.
Innovation Adoption Level
The last facet of validating your buyer is their innovation adoption level. You need to understand how willing they are to accept new solutions. In your conversations, try and discern whether an individual is used to paying for new innovations. Have they taken risks on new innovations? Ask them about new technologies in their space. Do they know of any? What tools are they excited about?
On one end of the spectrum, there are early adopters. They make up about 13% of customers. These are those who are not just willing to adopt a new solution – they’re excited to do so. These people would get the highest possible score. While you can’t build a business just based on early adopters, if your approach is novel, you want to know there are enough of them to seed your idea and grow from there. The adoption score may be less important if your idea is not quite novel or cutting edge, needing a learning curve and early adopter mentality.
On the other, there are the people who are the last to adopt any new solution, even when the rest of the market is far ahead of them. These get the lowest score.
If the buyer is resistant to new solutions and change, getting them to care about your product enough to be willing to pay may be more challenging. Some people have high adoption scores in one area but not another.
For example (and yes, I’m generalizing), real estate agents tend to have notoriously low innovation adoption scores in terms of their workflow tools, even if they may be interested in new toys in other areas of their lives. Can you pivot to a different buyer within the real estate space with a higher score? Do brokers have a higher score? Do real estate teams?
In short, validating your ideal buyer and user gets you one step closer to having a validated solution. Don’t skip it.
In the next newsletter, we’ll explore how pricing factors into product validation. If you missed part one (validating the problem), take a look here:
Share your thoughts with me here, on Twitter, or on Instagram.