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During the early days of company building, getting continuous feedback from the customers about the product and iterating on the received feedback is critical. This is what defines the product and business roadmap and pushes a start-up to that elusive ‘product market fit’. In this piece, we will talk about how to create effective customer feedback loops for the product teams.

Feedback from the customers is not even half as useful if the learnings and actionables don’t percolate to the product team. Additionally, it is also important to loop back to customers on their feedback/ issues after working on it. A ‘closed-loop process’ would be something like below and if done well, would turn into a virtuous cycle or a flywheel propelling the product forward.

Collecting the feedback

Any customer feedback loop has to start first with a tight feedback collection process. Most of the time customers give feedback to frontline teams like Customer success or customer support. In the early days of the company, there might not be specific teams for customer success/support and this might have been done by the sales/product teams directly. In both cases, collecting user feedback is a critical part of the frontline teams. Most of the time, user feedback can be bucketed into three channels:

a) Inbound feature request: This channel is the most obvious one and most companies should have a mechanism/structure around it in place from the early d Customer feedback can be a feature request, bug or something else. The channels for this feedback can be multiple, like Customer communication platforms (eg. intercom), email, helpdesk tickets, phone calls etc.

b) Proactive outreach: This is a mechanism that we strongly suggest founders to put in place from the early days. Best frontline teams do not wait for customers to give feedback but proactively reach out to them. The most efficient way to go about it is to do proactive outreach on the basis of product/feature usage. There are product analytics and customer health tools like Mixpanel, Gainsight, Totango  which can be helpful for this. Our portfolio company Hiver, for example, keeps track of product usage through Gainsight PX and reaches out to customers where the product usage dips or is not in line with their benchmarks. The channel for communication here is usually Phone/Email Outreach.

c) Churned customers: Product feedback from a churned customer (or a customer who has stopped using the product) is a very important piece of information. Product teams in some of the more successful companies give a lot of weightage to the feedback from churned customers as it helps them shape the product roadmap and stop future customer churn.

Funnelling the feedback to product teams

The second and arguably more important step after the collection of feedback is to funnel it to the product team. This is a critical step as this is where the interfacing of the front line and product team happens along with the sharing of feedback. Value derivation of the customer feedback (as issue resolution or feature roadmap for the product) correlates directly with how seamless/organised the feedback funnelling to product teams is. At the core of funnelling to product teams is:

a) Sharing the feedback with theproduct team: Most of the time, frontline teams like support and CS get a lot of actionable feedback which requires some action from product/development teams. A good practice is to use internal collaboration tools where feedback can be put in front of the product teams directly. Our portfolio companies for example use specific channels on tools like Slack (customer feedback/ feature request) for this. This is the fastest and most efficient way to get the attention of relevant folks and loop them in on the actionable.

b) Involving product teams with customers: In quite a few cases, Support/CS teams need help from product teams to deeply understand a customer feedback/request. It is best to involve the product team directly to speak with the customers in such cases. Product teams proactively engaging with the customers helps in a more aligned product roadmap and also helps in resolving customer issues and queries faster. We have seen that the best companies have both processes and culture to actively get the product teams in the Our portfolio company Hiver, for example, has quantitative targets for the frontline teams to arrange customer calls with product teams. Another portfolio company, TranZact, for example, has similar targets for everyone in the company to ensure that they speak with at least one customer directly every month.

c) Organizing and actioning on the feedback: This is a part which, if not organized well, can break things the most. Goes without saying that unless the teams organize the feedback well and take action on them, it will not result in effective growth. It is important for the frontline teams, product teams and the leadership to have a clear process on how to organize and action the collated feedback. Best practices that we have seen include using tools which ensure that the feedback is recorded well. It is also important to have a clear process on how to segregate the feedback, rank it for importance and make sure that it is on record for action. We have seen Trello boards used quite well for something like this.

Looping back to customers

It wouldn’t be a feedback loop if you don’t go back to the source, the customers. What needs to happen is that you tell the customers about taking their feedback to the product team and keep them updated on how it is being worked upon.

This, while intuitively not the most important thing for a lot of back-end teams, is arguably the one that kicks the virtuous cycle in motion. It ensures that the customers are happy and tuned in to give more feedback, which shapes the organization’s product roadmap and growth path. Key things to keep in mind here are:

a) Frontline teams to be kept in the loop on actionable: The CS teams need clarity and have to be on the same page about what is being done about the customer request/feedback. This ensures that while they are empowered to close the loop with the customer, they don’t end up overcommitting/setting up unreasonable expectations with the customers. It is a good idea to keep the CS teams looped in the relevant Trello boards/Jira tickets (both are good products) so that they are on top of any updates on the product side.

b) Closing the loop back with the customers: CS teams should be closing the loop with the customers proactively and keep them posted on how the company is actingon their feedback.

In the cases, where the requested feature is put in the roadmap, to close the loop with customers, we have seen companies also giving the customer a peep at the internal product roadmaps. This helps reassure the customers and promotes transparency.

After the issue with the customer feedback is closed, it is even more important to close the loop. Best companies do it very proactively. In case a customer is fine even without using the feature that they had asked for, it is good to just inform them ‘Hey we worked on what you asked for and this feature is out, please go and check it out’. Customer education initiatives like webinars on new features or in-product nudges/guides are also very helpful for closing the loop properly.

A tight and continuous customer feedback loop is the foundation for the ‘Zero to One’ journey of a company. If a product is not getting feedback or not acting on the customer feedback, it is always going to be stagnant. A well laid-out customer feedback loop ensures that the organization collects proper feedback and that the product team doesn’t miss out on the feedback and actions on it. It also ensures that the customers feel that they are being heard.

A Minimum Viable Product (MVP) is one with just enough basic features to be shared with early adopters for their feedback. In the early days of a startup, getting proper guidance is essential in order to get the product right. With an MVP, you can ship a product with your core ideas, in order to refine it further based on early adopters’ feedback. It is much more cost-effective than building out the entire product and then making tweaks, and helps validate your ideas regarding your product. In this blog, we will discuss the strategy of launching an initial version of the product and getting customer feedback. Often, founders are conceiving and perfecting the product internally without testing what customers want. This blog will help you break that cycle and get customer feedback at the earliest.

We will break this phase into four steps:

1. Validate
2. Build
3. Launch
4. Measure

Step 1: Validate

It is important to first talk to potential customers even before building any version of your product. This initial set of customers you speak with can come from your own personal and professional network. The goal is to not spend months or years doing research but to identify a common pain point soon.

Speak to 20-30 customers and ask them questions like:

“What are the problems you are facing?”,
“How are you addressing them?”,
“Why is this solution still not working for you?”

Try to connect the dots on common problems that you are hearing. The key is to only listen and understand the problems that customers are facing without talking to them about your potential solution. Try to build a deep understanding of the problems your user is facing. We are only attacking the problem in this step.

Typical Team Composition: Given this is still early in the journey, your team should ideally comprise only the founders. You should drive all these conversations since that sets the foundation for the next step, building your product.

Step 2: Build

After you have spoken to initial customers and identified a common pain point, it is time to get to the drawing board. The goal here is to get the first version of the product out of the door to test out the initial hypothesis. While as a founder, you are always striving for excellence and want to over-architect the product, you will need to stay disciplined here. The aim is to not create the perfect product, but the minimum viable product to validate your hypothesis. 

This is just the first version of the product and it is bound to undergo several changes subsequently. Also, we are not suggesting that you ship any product, but ship a product from which you can learn. Formulate your hypothesis from Step 1 and build a product in the shortest time from which you can learn the maximum. Do not try to build to solve all the problems that you heard from your users but the top ones that matter to the user. Solve the most pressing issues where you can make a difference.

Typical Team Composition: Your team has now grown beyond the founders. Ideally, you should have hired a couple of developers (Full stack engineers preferably to help build the first version of the product quickly).  

Step 3: Launch

Now that you have built the first version of the product, you need to cross the hurdle of launching and getting it live in front of potential customers. Refer to our blogs on ICP for more details on whom to target first. (Part 1) (Part 2)

This is the phase where you learn how the customer is interacting with the product:

“Do they see value in it?”,
“Are they happy with the design?”,
“Are they responding in the way we intended?”

This will help you derive valuable feedback. Your main takeaway here should be to get the product out of the door.

Typical Team Composition: At this stage, you may want to add a sales/ customer outreach representative. If it’s B2B sales, you are likely driving most of it and a mid-junior level resource is probably supporting you. For B2C sales, you need to spend inordinate amounts of your time on performance marketing. Again, you could use a consultant or an in-house resource to support you.

Step 4: Measure

Once you have launched the product and seen customers using the product, you should now speak to the users and unearth what truly matters to them. You will be surprised by the feedback you get from the customers. Features you thought would delay the product launch may not even matter to the user. On the other hand, features you had planned to delay rolling out may be what they are seeking right away. Do not skip this step, since it helps in aligning the team internally on what to prioritise.

Collect all feedback by asking the same questions. You need to be extremely methodical in your user interviews. Ask open-ended questions so that you get more answers from the user. Ensure the questions you ask will help you in building the next version of the product. We will dive deeper into this topic in a separate piece.

Typical Team Composition: You are now expanding your team by adding people on the engineering side and sales/marketing functions. Do not hire ahead of the curve till you hit PMF since you are still in discovery mode.  

Conclusion 

Your chosen methodology may require tweaks or multiple consultations with your early adopters, however, this framework will help you set a foundation for getting the most answers accurately. Conducting this activity early on ensures that once your product is out for public consumption, it fulfils the needs of a majority of your customers and reduces the scope for major red flags coming up, which is always a great sign in the early days.

Additionally, be prepared to pivot, if you receive sufficient feedback to do so. It is a very normal part of this process and is much better to sooner than later.

In case you are a tech-driven business and are building something that excites you, feel free to reach out to our Investment Team here.

In the first part of this two-part series, we defined the ‘Ideal Customer Profile’ (ICP) and how you can go about defining it. In case you missed that, you can check it out here. In the second part, we shall look at refining your ICP to be able to use it for optimising your target audience.

After you have iterated and zeroed in on an initial ICP, it is time to work on other key aspects of the go-to-market (GTM) strategy. We suggest doing the following:

1) Positioning statement: A good way to start on the GTM is to come up with a clear and concise positioning statement. This positioning statement should be able to articulate your value proposition for an ideal customer. A typical format for this would be like below 

 For (Target Customer) that (Needs/Cares about), (Company/Product/Service) is a (Category/Solution) that (Benefit). Unlike competitors,(Company/Product/Service) is (Unique Differentiator) 

           Examples of positioning statements:

• • Avis: For business people who rent cars, Avis is the company that will provide the best service because the employees own the company.
    
  • Amazon: For consumers who want to purchase a wide range of products online with quick delivery, Amazon provides a one-stop online shopping site. Amazon sets itself apart from other online retailers with its customer obsession, passion for innovation, and commitment to operational excellence.

Another very good way to think about this is to have an analogy positioning. This is when you tether your values with another successful/iconic brand and make the value proposition very easy to understand.

 For eg. Superhuman: Tesla for e-mails

2) Building user/buyer personas and creating personalized messaging:While B2C messaging is often personalised, It is very easy to forget sometimes that even B2B customers are humans, and the messaging needs to connect with them on a personal level to make a buying decision. This is where building personas (user/buyer) becomes important. What you want to be able to do is identify more things about your customers beyond the segmentation of ICP. You are looking for subtle but important things like ‘What key value are they really looking for?’, ‘What emotional trigger really makes them take a decision?’, ‘Do they have any cognitive biases?’, etc.

Identifying and enhancing your customer’s human behavioral traits and fleshing them out as personas such as a ‘Sales Stuart’ who is looking for the best price or ‘Developer Dave’ hunting for optimum productivity can help you sharpen the messaging and channels strategy. Continue iterating on these personas as and when you collect more information and data.
 

Validating and reiterating the ICP
 
As the business progresses and you add customers, you should continue periodically validating and reiterating the ICP. This can be done by:

1. Looking through your customer segment mix
2. Looking through metrics/indicators/evidence of value derivation by different segments
3. Reiterating the ICP

 
A few ways to measure the value derivation would be:

1. Usage/Engagement metrics:How are different segments using/adopting the product
2. Customer retention/churn data:Segment-wise customer churn or retention data. This directly translates to the Lifetime value of the customer
3. Customer Satisfaction (CSAT)/Net Promoter Score (NPS) data:Segmented NPS/CSAT data gives a lot of insights into the ICP segments.
4. Sales data: Insights on segment-wise Sales cycles and conversions also give indications on the ICP.

Another way of visualizing this would be to break up personas through usage patterns – engagement and retention metrics:

The ideal customer group should be doing much better compared to other segments and should have average metrics on most of the above KPIs. If that is not the case, it is time to reiterate the ICP.

Aligning Efforts towards ICP

Once you have clarity on the ICP, it is important that you make maximum efforts towards that segment. The following questions help in that direction:

1. What percentage of your customer base (by numbers and revenue) is your ICP?
2. What are some things that you have done/ are going to do to strengthen the value proposition towards your ICP?
3. How are you planning to align your Sales and Marketing efforts towards the core customer group? 

Firing your customer

Firing your customer is perhaps as important as, if not more important than defining your core customer. The following questions will help you understand how focused your organization is. It is important that you let go of the customers who are far away from your ICP segment.

1. Which customers have you fired in the last months and why?
2. Which customers (Non-ICP) are you firing in the next 6 months?

Conclusion

Thus, clearly defining your ICP and being regular with this exercise can do wonders for the efficiency of your business by helping you reach the right consumers with the right messaging. The important point to note here is that this exercise is not a one-time effort and does require constant updating to maximise your business’ output.

This article talks about the importance of defining an Ideal customer profile in the initial days (when you have none or very few customers) and provides a framework for doing so.

Founders are often tempted to capture as much value (or revenue) as possible from different types of customers. To do this, they often wastefully spend their energies and resources on capturing multiple types/avatars of customers and therefore lose sight of the company’s core value proposition and focus. As a founder, you must identify and focus your energies on the customers who are going to be most successful for you- the ‘Ideal Customers’

First of all, it is important to expand on the term ‘Ideal Customer Profile (ICP)’. An ICP is not the customer that gives the most revenue, it is also not only the customer with the easiest sale potential. An ideal customer is one who is deriving the maximum value from your offering and whom you can serve best (compared to alternatives). This translates to:

1. Easier Sale and lower cost of acquisition
2. Better retention and higher Lifetime Value
3. Customer Advocacy and referrals

You should also not confuse ICP with customer/buyer personas (‘marketing Michelle’ or ‘HR Harvey’). A buyer/user persona comes after you have defined a broader ICP and is used to create messaging that helps you connect best with different personas in that ICP group. An ICP defines Who to sell to, while a persona defines How to convey the value proposition of your offering to this customer.

Your ICP is a clear, common, objective definition of who the ideal buyers and users of your product are. A well-defined ICP lays the groundwork for your positioning, messaging, pricing, GTM, and even product roadmap. Once you have clarity and validation of your ICP, everything else ties into it. An important point to note is that the ICP definition is not stationary, it keeps on evolving along with the organization. As you keep on acquiring and learning about more and more customers, the ICP definition will keep changing and becoming sharper.

Defining the ICP

A good way to define your ICP in the very early days is to look at the broad market that you are trying to solve for and look for a common subset where you believe you are best positioned to serve that customer group. Look at the overall landscape of customers and competitors. You are looking for a large opportunity which primarily can be because of:

1. A gap in the market– There is a gap in the market and a large customer segment is underserved.
2. Better product/experience– There is an opportunity to serve the customers in a much better way compared to the current alternatives. A low NPS/Retention for the current alternatives points in this direction.
3. Opening of the market– There is a latent need in the market or the customer behaviour is changing rapidly for a new offering to come in and disrupt.

You should then speak with your best customers (or do surveys with prospects if the product/service is yet to be launched) and list down their attributes.

For B2C Businesses

For a consumer-focused(B2C) business, the following attributes are a good start

1. 1. Demography
      • Age group
      •  Gender
      •  Religion, Race and Ethnicity
      •  Occupation
      •  Income
      •  Relationship/Family status
      •  Geography

1. Psychographic and behavioural traits
   • Values
   •  Interests
   •  Hobbies
   •  Aspirations and Fears
   •  Social media behaviour
   •  Buying behaviour

A few iterations using customer surveys/research will lead you to your ICP.

For B2B Businesses

For B2B businesses, the following attributes are a good start

1. 1. Target Company
      • Industry
      • Customer base/Business model- For example ‘B2B company serving SMBs and mid-market customers’
      • Size- Very Small/Small Medium/Mid Market/Enterprise Businesses
      • Geography
      • Maturity/other differentiators- For example, ‘fast-growing startups’ or ‘more than 20 people development team’

1. Target customer profile
   • Profile- Ex Sales Development Representative/VP Marketing/Engineering Manager
   • Key goals of the customer
   • What is the core problem?

Put your target group into different segments and think through your value proposition from the perspective of the following parameters. The attractiveness of your solution (compared to the alternatives) for a segment will drive you towards your ICP:

1. Problem intensity– The problem you are solving can be severe and (or) frequent. Pain point intensity usually is different in different kinds of companies. It relates strongly to the industry, size, and maturity of the company.
2. Awareness and urgency– How aware is the customer of the pain point? Is it a need (urgent) or good to have?
3. Ability to pay– Does this customer segment have the ability to pay the right value for your solution? This usually relates to the size and industry of the company.
4. Ability to sell and serve efficiently– How efficiently can you acquire customers of one segment? How equipped are you to serve them? Geography and size of the company are the most important variables for this parameter.
5. Competition/Advantage over the competition– Are there any other solutions for this customer segment? Is your solution much better than the current competition? Is there a gap/underserved market segment that you can go for? Usually, this parameter relates strongly to size and geography. It is probably the most critical parameter which gives direction to a possible whitespace or possibility of disrupting incumbents.

A few iterations using customer surveys/research will lead you to your ICP. Articulate it very clearly. Try to be as specific as possible and use more nouns/verbs than adjectives.

Example: Hull.io ICP definition- “Post Series-A (scaling) SaaS startups with more than $5 million in annual revenue, who use Salesforce & Redshift.”

After nailing the ICP statement, to plan and sharpen your go-to-market (GTM) strategy, we suggest that you put together the following as well:

1. Success metric for the customer– What is the metric that the customer is likely to look at to validate that your solution is proving to be successful? (eg. it can be the lowering of churn or increasing of NPS)
2.  Success metric for you– What is the metric that you would track to validate that your customer is deriving value from your solution? (eg. it can be the number of emails sent or tickets closed)
3. Value Metric– What is the metric/unit that the customer is likely to measure that correlates with the perceived value? (eg. it can be the number of users or GBs of data storage)
4.  Time to value– How much time does it take for the customer to start realising the value of your solution?

This way, you can approach the problem of defining your ICP, depending on the kind of customer profile and end goals you are targeting.

In part 2, we will talk about steps taken, post defining your ICP.