What is Customer Research?
This episode might reference ProfitWell and ProfitWell Recur, which following the acquisition by Paddle is now Paddle Studios. Some information may be out of date.
Originally published: May 9th, 2018
Customer research has ebbed and flowed throughout the years, so how important is it today? As the data suggests, it's more important than ever to do customer research in order to build the right valuable features and avoid building the wrong product.
On this episode of the ProfitWell Report, Adam Blake, CMO at ThriveHive asks us to look at the current state of customer research and whether it still matters. To answer Adam’s question, we looked at just over 3,000 subscription companies and over 1.2 million different subscription consumers
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What is Customer Research?
Customer research is exploratory research a company or industry conducts in order to identify customer segments and opportunity, as well as consumer behavior and needs. Customer research can be as broad or specific as you wish, focusing on a big demographic or a small customer segment.
Not Enough Customer Research
To not bury the lede - yes, customer research matters more than ever, but no one seems to care, which is sad.
If you ask any luminary of Silicon Valley for the one lesson that matters, most will espouse the importance of focusing on the customer. Paul Graham, Gail Goodman, Steve Blank, Mary Meeker - all of them advocate for the customer.
Yet, no one’s really following their sage advice. Executives indicate that 7 out of 10 of their organizations are speaking to less than 10 prospects or customers in a non-sales research capacity per month and note this doesn’t get better with a company’s size.
Not Enough Testing
Subscription and SaaS executives love to tell me they don’t do customer research but by God, they love to A/B and multivariate test their way to success. Hill climbing problems aside, in reality, we’re not doing tests either. Nearly half of us are not even conducting 1 test per month and this includes marketing tests and other product experimentation tests.
Put simply, we love to retweet articles about customer research, we love to give advice to people about customer research - but we’re not doing customer research - and that makes me die a little bit inside, because this lack of customer research is forcing us to build the wrong product.
We're Building the Wrong Product
We asked just over 2,500 product leaders to plot the last N features they built on a value matrix - which cross references how much companies care about a particular feature compared to other features with how much they’re willing to pay for features. In turn, this shows us what types of features we’re putting out - be it core features, add-ons, or just plain trash.
This is what your product leaders indicated they’re building for the last five thousand features they built. A lot of differentiable and valuable features.
We then went out and asked 1.2 million different customers about their actual willingness to pay and their actual preference for features using our statistical models, and this is what they indicated you’re actually building.
Essentially your product teams are extremely confident they’re building value when in reality they aren’t and they don’t even know they’re doing this, because you’re not talking to your customers.
As CAC increases, the relative value of features declines, and growing a business just becomes that much harder, we’re in a world where we’ve literally been given the answer to success - understanding our customer - not always agreeing, but at least understanding, and for the most part we’ve turned our noses up at the notion of actually talking to the people that are ultimately paying us. That’s a scary thought.
Want to learn more? Check out our recent episode on Finding your NPS Benchmarks and subscribe to the show to get new episodes.
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You've got the questions,
and we have the data.
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This is the ProfitWell Report.
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Hey, Patrick. Adam
here from ThriveHive.
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So my question is, does customer
research matter anymore?
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Does anybody care?
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This is a great question
because customer research has
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ebbed and flowed
throughout the years.
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So to answer Adam's question,
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we looked at just over three
thousand subscription companies
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and over one point two
million different subscription
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consumers, and
here's what we found.
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To not bury the lead, yes,
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customer research
matters more than ever,
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but none of us seem
to care, which is sad.
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And if you ask any luminary
of Silicon Valley for the one
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00:00:39,370 --> 00:00:40,490
lesson that matters,
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00:00:40,490 --> 00:00:44,025
most will spout the importance
of focusing on the customer.
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Paul Graham, Steve
Blank, Gail Goodman,
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all of them advocate for
focusing on that customer.
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Yet, no one's really
following their sage advice.
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Executives indicate that
seven out of ten of their
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00:00:55,790 --> 00:00:58,750
organizations are speaking
to less than ten prospects or
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customers in a non sales
research capacity per month.
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And note, this doesn't really
get better with a company size.
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Subscription and SaaS
executives love to tell me then
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that they don't do Nearly
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00:01:12,723 --> 00:01:13,823
half
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Nearly half of us aren't even
running one test per month and
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this includes marketing tests.
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Put simply, we love to retweet
articles about customer research.
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00:01:26,840 --> 00:01:29,640
We love to give advice to
people about customer research,
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but we're not doing customer
research and that makes me die
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a little bit inside because
this lack of customer research
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is forcing us to build
the wrong product.
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00:01:38,005 --> 00:01:40,805
We asked just over twenty five
hundred product leaders to plot
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the last n features they
built on a value matrix,
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which cross references how
much companies care about a
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particular feature compared to
other features with how much
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they're willing to
pay for features.
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00:01:51,305 --> 00:01:54,345
In turn, this shows us what type of
features you're actually building.
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00:01:54,345 --> 00:01:57,785
Core features, add ons,
or just plain trash.
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This is what your
product leaders indicated they're
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00:02:00,265 --> 00:02:03,130
building for the last five
thousand features they built.
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00:02:03,130 --> 00:02:06,010
A lot of differentiable
and valuable features.
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00:02:06,010 --> 00:02:09,370
Yet, we then went out and asked
one point two million different
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00:02:09,370 --> 00:02:11,765
customers about how their
actual willingness to pay and
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00:02:11,765 --> 00:02:14,645
their actual preferences for
features looked like using our
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00:02:14,645 --> 00:02:15,845
statistical models,
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00:02:15,845 --> 00:02:19,265
and this is what they indicated
you're actually building.
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00:02:19,560 --> 00:02:23,080
Essentially, your product teams
are extremely confident they're
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00:02:23,080 --> 00:02:26,520
building value when in reality
they aren't and they don't even
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00:02:26,520 --> 00:02:29,985
know they're doing this because
you're not talking to their customers.
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00:02:29,985 --> 00:02:31,105
As CAC increases,
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the relative value of features
declines and growing a business
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00:02:33,985 --> 00:02:35,750
just becomes that much harder.
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00:02:35,750 --> 00:02:38,710
We're in a world where we've
literally been given the answer
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to success, understanding
your customer,
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not always agreeing with them,
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but at least understanding them.
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And for the most part,
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00:02:45,305 --> 00:02:47,785
we've turned up our noses at
the very notion of actually
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talking to the people who
are ultimately paying us.
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And that's a scary thought.
Well, that's all for now.
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If you have a question,
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shoot me an email or video
to PC at profitable dot com.
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And let's also thank Adam from
Thrive High for sparking this
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research by clicking the button below
to give him a nice little shout out.
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We'll see you next week.
