This is a guest post written by Stuart Bale.
Stuart Bale is a software strategist with a wealth of experience in the industry, having worked in everything from code cutting to consulting. He has the advantage of being involved at all levels with a wide range of different software companies, from small start-ups to large multinationals. He now works for high-end clients who want to take their software business to the next level and realise their product’s true potential.
Does this scenario sound familiar?
A software start-up comes up with a great idea, spends weeks building it, then convinces friends and family that it is the best thing since sliced bread, they get a handful of customers (some of whom might even pay!) and then spends the next few years wondering why no one else wants it.
What went wrong? If you're just getting started how can you avoid making the same mistake and, if I’ve just described your situation, how can you move forward and convince the world you have the best software program in the world?
The secret lies in knowing your customer (or future customer), or what is sometimes referred to as customer intimacy.
Here's a simple four step approach to test how well you know your customer.
1 - What does the customer for my software product look like?
This is the foundation of a successful software strategy.
If you can't describe your customer, then you'll find it hard to build, market, sell and support a product for them.
Knowing your customer will focus your attention on all the relevant details. Don't go for broad descriptions, like "anyone with an email account", or "all New Zealanders". On the other hand, don't go too narrow, like "fisherman with two fishing lines and a wooden leg".
A good example might be "travelling salespeople with good internet connectivity on their mobile device" or "retail stores in shopping malls".
You should be prepared to come back and revise your customer description, and keep refining it over time.
2- How many customers can I potentially sell my software to?
Once you've worked out your market, it’s time to get some real numbers.
Find out how many there are, and where they are. A great starting point is your local statistics office, such as Statistics NZ. Uncover as much information as you can about your customer.
Is it likely your customer would belong to an association? Visit the association’s website, and sign up for any newsletters they might have.
If you can't find definite figures, then just extrapolate from other statistics. For example, if you can determine there are 500 malls in New Zealand, and from the last seven malls you personally visited, there are an average 50 retail stores per mall, then you could estimate that there are 25,000 retail stores in New Zealand malls.
What if you can't get any figures at all? Return to step 1 and make sure you really understand who your customers are!
3 – How do customers influence software pricing?
Pricing your product is sometimes much harder to determine. If you’re competing with another product, and you know how much customers pay for that, then you'll have a baseline to match against.
In most cases, people want to transfer what they pay for the same ‘process’ that they’re doing right now. For example, if they currently pay $100 to get the same result as what your product offers, then you're unlikely to be able to charge more than $100.
You'll also need to factor in the cost of change - how much it costs in time and effort to switch from what they are currently using to using your product.
Here’s a suggestion. Make a time to visit a prospective customer, describe what your product does, and ask them how much they would pay for it. After you’ve visited a dozen or more people, you'll start to get a good feel for how much value they see in your product, and that can help you price it accordingly.
4 - How do I market my software to my customers?
Marketing your software can potentially be very expensive, but it’s a critical part of a successful software strategy. If no one knows about your product, then they won't know that they need it.
Smart software developers build into their products ways for satisfied users to promote it to others (and there doesn't necessarily need to be a financial reward attached to this either).
Once you know your market, then you'll be able to really talk straight to your customers with informed comments on how your product provides real benefits to them.
Make sure you factor in marketing costs as part of your overall cost of sales and make sure you're getting good bang for buck for every dollar spent.
This four step strategy is not a one-off miracle cure to rocket your software product to instant and overnight stardom. A successful software business repeats and remembers these techniques over and over again. As soon as you lose sight of your customers, your business will start to falter.
And, by way of conclusion, it’s appropriate I mention that you should have an exit strategy. Have one before you begin otherwise you'll end up in the doldrums for a very long time!
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If you're keen to know more about how you can let the world know how good your software really is, follow me at www.stuartbale.com and subscribe to my blog!