Do Things that Don’t Scale… with Your Customers
Paul Graham of Y Combinator has written an excellent post called Do Things that Don’t Scale. I think it’s one of the most important posts of the year. The gist of the post is:
Actually startups take off because the founders make them take off. There may be a handful that just grew by themselves, but usually it takes some sort of push to get them going. A good metaphor would be the cranks that car engines had before they got electric starters. Once the engine was going, it would keep going, but there was a separate and laborious process to get it going.
That’s a powerful idea for a few different reasons. First, Paul’s right – achieving success in a handful of areas, even if it requires serious effort, can have a transformative impact on a business (and not just startups). Second, it’s a really accessible recommendation because just about everyone I know is capable of doing things that don’t scale. Third, I’m a fan of contrarian ideas as a competitive differentiator in business and this is definitely a contrarian idea.
This is particularly true when it comes to building relationships with people who can help make your company successful. Of course you can build relationships with lots of different people. Examples include your employees, investors, and influencers. But in my mind, the relationships that you build with your customers are the most important. That’s why the first thing I thought of when reading Paul’s post is that we should do things that don’t scale with our customers.
A Framework for Non-Scalable Customer Activities
I like to use a simple framework to determine where my non-scalable customer efforts will yield the most benefit. This framework tries to answer two basic questions:
- Which customers should we spend time building relationships with?
- What activities should we spend time on with those customers?
I think it’s particularly beneficial to spend non-scalable time with four types of customers:
- Early customers
- Smart customers
- Engaged customers
- Deep-pocketed customers
I also think there are six areas in particular where it makes sense to do things that don’t scale with your customers:
- Recruit key accounts
- Onboard early customers
- Offer incredible support
- Learn from customers
- Offer customers value adds
- Spend social time with customers
With that in mind, let’s have a closer look at the types of customers and types of activities that can form the foundation of your non-scalable efforts.
Four types of customers to do non-scalable things with
The types of customers you choose to invest non-scalable time with is a critical decision. There are a number of factors such as how big your business is and the nature of your target market that can tell you which customers to spend time with. I usually start with four customer categories.
Early Customers – If a company doesn’t sign up and onboard its first customers, there is no company. Doing non-scalable things with early customers, whether it’s recruiting them or making sure they actually start using and deriving value from the product, is critical. In fact, it is hands down the most important thing a startup or new business can do.
Smart Customers – We can learn a lot from building non-scalable relationships with our smartest customers. We can learn a lot from these customers because they are usually the best source of information for the most important decisions a business has to make. They should have an undue influence on things like product development, pricing, and positioning to name just a few. One important note regarding smart customers – make sure that they aren’t so smart that they aren’t representative of your target market as a whole.
Engaged Customers – It also makes sense to invest in customers who are highly engaged with you. These customers want to help you do things like build better products, provide better support, and sign up additional customers. Spending time with these engaged customers so they will do things like drive referral leads to you is a great investment.
Big customers – This is usually a euphemism for customers that have deep pockets. Most sales and marketing organizations already understand the need to spend more time with these customers given the amount of revenue these “whales” (to use a casino industry term) can generate. A variation of the big customer is the fast growing customer. They may not be big yet, but we can predict future growth and invest in things that don’t scale as a result.
Six non-scalable customer activities
There are six non-scalable customer activities that you should invest in. These all take time and will make 77% of Harvard Business School professors squeamish, but you should try one or two of them and see if they pay off.
1. Recruiting early customers
Signing up customers for a new product or service is one of the most important things a company can do. It’s so important that we recommend throwing scalability to the wind. A lot of marketers and sales people now use the phrase “customer acquisition” to describe these efforts, but we think “recruiting” is a much better descriptor. That’s because you’re not just trying to acquire early customers; you’re actually trying to recruit and build meaningful, long-lasting relationships with them.
You’ve probably read a lot about using different online customer acquisition techniques such as email, Google AdWords, and landing pages. But the foundation of non-scalable customer acquisition should be spending one-on-one time with each customer. Make sure you use the phone, online collaboration tools, and in-person meetings to recruit early customers. You should also be willing to make small changes to your offering on the fly to win these customers. For example, offering a discount to an early prospect is a great non-scalable acquisition tactic that you can use.
Mark Leslie, a former entrepreneur and now a lecturer at Stanford, has done a lot of good work in this area and puts it this way:
The members of the sales team should be encouraged to focus instead on learning as much as they can about how customers will use the product so they can support engineering, product marketing, and marketing communications in perfecting both the offering itself and the go-to-market strategy and programs.
Remember that eventually you’ll need to be able to acquire customers in a scalable manner. Fortunately, there’s no shortage of techniques for doing this, even in markets that have traditionally presented sales and marketing with scalability challenges. For example, in the B2B technology sector, there’s been a lot of great work done on making inside sales a more scalable function.
2. Onboarding early customers
One of the most important, non-scalable things you can do is make sure that your early customers are able to start using your product or service with relative ease. Paul gives us a great example of this in the form of payments company Stripe:
Stripe is one of the most successful startups we’ve funded, and the problem they solved was an urgent one. If anyone could have sat back and waited for users, it was Stripe. But in fact they’re famous within YC for aggressive early user acquisition… At YC we use the term “Collison installation” for the technique they invented. More diffident founders ask “Will you try our beta?” and if the answer is yes, they say “Great, we’ll send you a link.” But the Collison brothers weren’t going to wait. When anyone agreed to try Stripe they’d say “Right then, give me your laptop” and set them up on the spot.
Stripe was willing to make an investment to ensure that its first customers could start using the product right away. For Stripe, the benefits were threefold. First, Stripe was reducing the costs associated with setting up the product so that the customer didn’t have to incur them. Second, with early adopters actually using the product, Stripe could learn what customers liked and didn’t like about the product. Third, Stripe could use these early customers as proof points to help drive sign ups of additional customers.
In the long run, onboarding customers should become a scalable process. Some of the world’s fastest growing companies can attribute much of their growth to the design their sign up and onboarding process. Companies like Dropbox have done a great job of removing most of the friction and costs associated with starting to use their product and they’ve seen fantastic growth as a result.
3. Offer incredible support
You also want to make sure that you offer incredible support to the four customer types we identified. The problem is that promising and delivering world class support are two really different things. Delivering incredible support requires you to do things that don’t scale. For example, a technology company may need to have top engineers spend time resolving customer support issues. Some companies also assign top executives to important customers to make sure that they are receiving the support they require.
In fact, one of my favorite stories in this area involves an email I sent to the CEO of AT&T, Randall Stephenson, after we experienced delays in getting our business internet set up. After a week of trying to work through normal AT&T support channels, I sent an email to Randall asking for help. He personally replied and assigned a member of his executive team to own the ticket. The issue was resolved to our satisfaction within 24 hours.
4. Learn from customers
There’s a lot to learn from customers, particularly the smart ones. Customer input into things like product development decisions almost always benefits a business. The problem is that gathering high quality input isn’t a scalable activity. First, the only real way to learn from your customers in a meaningful way is to spend a lot of time talking to them and observing them in their environment. Second, if you want to learn what’s really important to your customers, you have to make sure that the smartest people at your company are involved in these conversations. Eric Ries, one of the godfathers of the lean startup movement, describes how he conducts customer discovery to make better product decisions:
There are huge advantages to having a small number of customers. Most importantly, you can get to know those few customers in a way that people with zillions of customers can’t. You can talk to them on the phone. You can provide personalized support. You can find out what it would take for them to adopt your product, and then follow up a week later and see if they did. Same with finding out what it would take to get them to recommend your product to a friend. You can even meet the friend.
There are a handful of techniques you can use to make your customer discovery efforts more scalable. For example, using new collaboration tools like Google Hangouts is a great way to learn from customers. At the end of the day though, you’ll need to invest time in having real conversations with your customers to make sure you’re gathering the insights you need. Our post on lean market research offers a lot of tips on how to gather valuable insights from your customers.
5. Offer customers “value adds”
Most marketers and sales people think that customers buy the products that a company sells. In point of fact, many customers are buying a relationship with you. One way to build great relationships with your customers is to offer them something really valuable for free. This isn’t your core product or service – it’s an offer that complements it. I call these things value adds. It’s a phrase commonly used in the media and advertising business. For some time now, media companies have delivered products like free research to important clients on top of the advertising that the customer is purchasing.
At my last startup, a business media company, we invested a lot of time and effort in delivering research to our most important advertisers. We would create market-specific research reports on topics like the State of the CRM Market and present the findings to executives at key accounts. We not only invested in conducting the research itself, but also in crazy, non-scalable things like getting on planes to present the research in-person.
We never did much selling in these meetings. The idea was to build rapport with the customer by showing them how smart we were, how well we knew their target buyer, and that we were willing to do just about anything to create value for our customers (including deliver a lot of really insightful research for free). And it worked. In fact, it worked to well that many of our customers asked if they could start *buying* our research from us.
6. Spend social time with customers
Investing time in creating deep, meaningful relationships with customers is another example of a non-scalable activity. A lot of old school sales people are really good at this. Their fundamental belief is that customers do business with people they respect, trust, and enjoy spending time with. For these sales people, it’s less about the product and more about the social bond that the sales person establishes with the customer.
The problem is that creating these social bonds takes time and is really dependent on the individual efforts of particular sales people. In other words, it doesn’t scale all that well. One of the best sales people I know is TOPO’s very own Dan Stalker. He’s really good at building these types of relationships. In Dan’s words:
Basically, I try to find something, anything, that I can connect with the other person at a human level, as if it were someone I was friends with or a relative that you only see once or twice a year. This is not a “selling my product or service to a potential buyer” conversation. It’s strictly human-to-human, with the intent to be casual friends (which is one notch better than good acquaintances). After all, I’m not selling to their company or business, I’m selling to the individual.
This is the fun part of the job; it’s getting to know people and sharing a little of myself and learning a bit about their background or interests. If you don’t take time to do this, it’s just all work (for both parties). Some might call it “breaking the ice” while others might think it’s phoney and insincere. That’s where I think I’m a little different. I actually enjoy and embrace this part of meeting. I take it to heart. And I think that makes my care more about what I’m eventually selling, as I now have a vested interest in the potential buyer. Sounds corny, but it has always served me well.
The way Dan builds relationships doesn’t work for every type of business and every type of customer. For example, it’s much more effective in B2B markets than consumer ones. Even in B2B markets, this is often a tactic that is best suited to classic enterprise selling where average deal size can sometimes subsidize an individual sales rep’s efforts to build a strong social relationship.
That’s how we look at doing things that don’t scale here at TOPO. Please let us know what you think in the comments below.
About the author: Scott Albro is the CEO and founder of TOPO. TOPO is a research, advisory, and consulting firm that believes in a really simple, but powerful idea – that all revenue can be distilled down to a series of conversions. By connecting everything we do back to this core idea, we help sales and marketing organizations exceed their revenue targets. You can connect with Scott on Twitter.