What Does Customer Insight Mean?

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Famed tech investor Paul Graham asks startup founders one question: “What do you understand about your business that other companies in it just don’t get?”

If you don’t have an answer to that question, start looking for one. Great startups are built off of insight about customers. As Paul Graham indicates, their competitive edge comes from knowing something about customers that others just don’t understand.

But the trick is that your understanding of consumer behavior only matters if no one else knows it. If it’s too obvious an insight, competitors will pop up and do the exact same thing. Your product won’t be more effective or useful than other ones on the market.

Here are some examples of brilliant customer insights and how they’ve skyrocketed companies to success—and some tips on how to find your own.

A Better Definition of Customer Insight

PayPal founder and early Facebook investor Peter Thiel takes this idea a step further. He argues that “there is always a secret at the core of every business,” which is something you believe about your customers and your business that very few people agree with you on.

Uber believed that customers wanted to be able to order a reliable ride at the push of a button, and now it has over 80% of the ride-hailing market. GrubHub saw that customers wanted a one-stop shop for all kinds of food delivery, and now it delivers around 250,000 orders per day. They saw a niche where no one else noticed one.

But there’s no point to being radical if you’re not also right. The founders of ChubbyBrain initially wanted to make a Yelp-like site for private companies and startups, but never asked their customer base if that was what they wanted or needed. Once they built the site, it became a low-traffic hub for bashing former employers instead of a startup resource. Even though they thought their idea was revolutionary, it just wasn’t relevant.

If you don’t ground your unexpected insights in practical, everyday customer solutions, you’re just a person with a crazy idea.

Airbnb’s secret about airbeds

To Thiel, business secrets aren’t complex scientific discoveries, like string theory. Rather, the most powerful secrets are in plain sight for everyone, and, after-the-fact, seem completely obvious. These are the secrets that have been at the core of the biggest, billion-dollar startups.

(Airbnb’s homepage circa 2007)

Before 2007, no one would have predicted that a huge company would be built on the idea of renting out an air mattress in your apartment. But Airbnb had a customer insight—a secret in plain sight—that everyone else overlooked.

  • Travelers had no choice but to pay high prices for hotel rooms. There was demand for lower cost accommodations that wasn’t being met.
  • Property renters and owners weren’t able to reliably rent out extra space in their homes to generate extra income.

With those realizations, Airbnb matched them up with a marketplace and magic happened. No one else had the same insight, so there were no competitors. Once they had cornered the market, they could expand rapidly—and they did, reaching 1,000,000 overnight stays two years after launching.

A non-obvious customer insight about milkshakes

A fast-food restaurant wanted to sell more milkshakes, but all of the traditional moves failed. They tried all of the obvious changes: flavors, texture and more. Nothing they did resulted in more sales.

They realized that they didn’t know enough about the customer, and they went back to the drawing board. By spending the day at the restaurant taking meticulous notes and interviewing customers, they discovered a unique insight.

(Milkshake image)

It wasn’t about the milkshake, per se. 40% of milkshake orders came at breakfast time, but customers didn’t have a stronger craving for the milkshake than they did for a bagel or donut. They ordered their milkshakes at breakfast for a completely different reason.

Customers “faced a long, boring commute and needed something to keep that extra hand busy to make the commute more interesting,” Harvard Business School professor Clayton Christensen recounts. “They wanted to consume something now that would stave off hunger until noon. And they faced constraints: They were in a hurry, they were wearing work clothes, and they had (at most) one free hand.”

The reason for ordering milkshakes wasn’t obvious, but it made sense as soon as they learned what customers actually wanted. From there, the restaurant made the morning milkshake thicker and chunkier to last longer for the commute, and sales went through the roof.

How to Gather Insights that No One Else Has

If you follow best practices, you’ll build a generic product, same as everyone else who is following those best practices. Peter Thiel warns that if you’re copying companies like Facebook, Uber, and Airbnb, you’re not learning from them.

But there’s a difference between copying their model and copying their methods. Think of Bill Gates’ famous quote, “Your unhappy customers are your greatest source of learning.” While you can’t provide customers the same solution that Bill Gates did, you can learn from them to relieve another one of their pain points.

Talking to your customer is instrumental to creating a product that helps them. If you can build a relationship with your customers, you can build a product based specifically on what you know your customers want. As you create, get feedback and iterate over time, you’ll learn more and more specific customer insights—and eventually one that no one else has.

The key, to startup guru Steve Blank, is to “get out of the building” and get in front of customers. Don’t sell. Ask questions and listen. Make this a habit, and over time, you’ll have aggregated a ton of data points to guide your understanding of the customer.

Talking to users is incredibly basic, but it’s fundamental for an entrepreneur in any stage—whether you’re first conceptualizing your product or honing it for an audience. Here are three ways to make talking to customers a habit for your organization.

Support and Sales feedback from your own staff

Every support and sales interaction is a chance to learn about your customer. That’s why successful entrepreneurs like Hiten Shah still do support and sales themselves in their startups.

Some founders have taken this to an extreme to make sure that they’re always learning from customers:

  • All-hands support where everyone on the team has regularly-recurring support duty.
  • CEOs giving out their phone number and saying, “Call me anytime.”
  • CEO office hours where anyone can call and talk directly to the CEO.
  • Comprehensive software (like Zendesk) for in-app chatting, cross-platform support, and a call system.

on-site surveys to get customer insight

Not every customer will want to jump on a 30-minute call with you, but they’re more than willing to leave quick bits of specific feedback if you make it easy for them. It’s easy to integrate surveys so they don’t seem intrusive and seamlessly combine with the user experience.

Constantly run these surveys so that you have data on every aspect of the customer lifecycle:

  • Entrance survey on your website asking, “How did you find us?” It helps you get a better understanding of your customer base as a whole, and whose problems your product might solve.
  • Net promoter score to gauge customer satisfaction asking, “What’s the likelihood you would recommend this product to a friend or colleague?” It’s easy—for you and for the customer—and it’s a good benchmark to see whether your company has a high-quality reputation.
  • Exit survey on your website asking, “Why are you leaving?” This gives you the most direct feedback on why potential customers aren’t converting to your product.

analytics to help quantify user behavior

You need quantitative data to go with the qualitative feedback. You get the qualitative side through phone calls, surveys and support and sales interactions. You get the quantitative side by tracking how users actually behave on your site.

Mobile analytics company Amplitude suggests the following types of analysis to figure out what’s working in your app.

  • Understand your retention curve: Find out when users drop off in the customer lifecycle. That will help you understand where in time your product’s promise is going unfulfilled. Using acquisition cohorts, which group users based on when they signed up, you can see if your new initiatives to fulfill the promise of the product are working.
  • Discover what features users actually use: Some of your features drive engagement with your app and others aren’t being used, bulk up the interface, and make your product harder to use. Use analytics to learn the difference between the two to hone in on your core value proposition.
  • Figure out which behaviors correlate with users sticking around: You can use behavioral cohorts, which organize users into groups to see what in-app behaviors drive retention. From there, you can focus your onboarding process on making sure users are taking advantage of those features from the outset.

Carve Out Your Niche By Thinking Critically

If you think like every other business, you’ll be like every other business.

But having unique customer insights isn’t about feeling special, it’s about carving out a niche for yourself. You can’t carve out a niche by following a formula, otherwise everyone would be doing it. The only way to make your product unique is to keep thinking about what your customers need.

No matter what stage of development you’re in, whether you’re formulating your product or updating it, customer insights should drive your path forward. If you constantly think critically about what your customer wants and iterate based on that, you’ll corner the market eventually—but like Airbnb, it might take a few years of hard work.