Watch what customer does, not says

The course I’m teaching at the University of Washington this spring is about growing startups to full-fledged successful businesses.

My lecture preparation has proven that the same model for startups can help mature businesses speed up their growth trajectory, too.

The text I chose for this course is Eric Ries’ New York Times bestseller “The Lean Startup.” The book’s premise is that continuous innovation — based on lean manufacturing principles — accelerates growth.

Continuous innovation refers to both new development and re-development. In this article I’ll share some of the key points you can apply to better meet customer requirements and increase sales.

The most important lesson from the text is, that “if you cannot fail, you cannot learn.” And that experimentation with a product (or any marketing function) can teach you a lot about how to improve that product (or service, or promotion) in a very short time cycle.

The process involves observing customer behavior. The key point is to observe how customers respond to changes (or new versions) and optimize based on empirical data versus traditional marketing research. Ries calls this approach “validated learning.” I call it genius, and it’s faster and more accurate than focus groups or surveys.

Essentially, you do not rely on what customers think or say they want, you observe their actual behavior.

You can effectively apply this experimentation process to accelerate growth for your business, regardless of your life cycle stage.

You start with an assumption such as a product improvement, tweak on a promotional offer or a service enhancement; and then test your assumption, by adding a specific product feature you believe will be valued by your customers.

A common example is A/B testing to optimize conversion rates on a website landing page. Google can divide website traffic generated from an AdWords campaign to two different landing pages (50 percent to a control page and 50 percent to a test page) to determine which page produces the best conversion. The test page has a significant variation from the control (original page), a different image or headline.

This type of experimentation (A/B testing) works just was well off-line as it does online.

For one of our retail client’s, we had them baseline their sales as a result of a flyer they had at their cash registers.

Using the exact same language (that was on plain white paper), we changed the flier to red and made it in the shape of a large tag for a red tag sale.

We tested the updated flier over the same number of register rings. The updated flier generated a sales increase of 28 percent.

You can experiment over the phone by changing the way you explain a service or change the language of an offer. You can also do A/B testing with packaging, sales presentations, advertising headlines, price points, etc.

And don’t worry if a test fails, because you learned something, you learned what not to do. Keep experimenting until you hone in on what stimulates the customer behavior you are trying to achieve — more sales.

Continue experimenting on the same project to fully optimize the product (or whatever you are testing).

And as you do so, be sure to only test one variable at a time. If you change several elements of a test, you will not know which element caused the change in behavior.

You can experiment with just about anything in order to observe customer behavior.

Whether you are developing a new product or attempting to optimize existing products, services or promotion — continuous innovation can give you a competitive advantage and accelerate the growth of your business.

Andrew Ballard is president of Marketing Solutions, an agency specializing in growth strategies. For more information, call 425-337-1100 or go to www.mktg-solutions.com.

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