SaaS 102 #5 Find Your Best Seed Customers
When you create a company, you will always face a lot of doubts. There will be investors who think the market doesn’t have a future. There will be job applicants who think the company doesn’t have space to develop. There will be customers who think your product is not well-known enough.
To make your product grow quickly, you need to find the right customers early on. The right early customers can act as “seeds” that help your product spread and grow well into the future. In this article, I will call these important early customers “seed customers.”
Xiaomi is a Chinese technology company and today is one of the largest smartphone manufacturers in the world. Shortly after releasing MIUI, an operating system for their phones, Xiaomi found 100 phone enthusiasts to help them in the beta testing phase.
These test users changed their phones to the MIUI operating system and took a deep dive into the user experience. They gave a lot of criticism from different points of view, and gave feedback on how the system could be improved. This was all a part of how Xiaomi created its unique product ideology.
Later, Xiaomi created a short film, “100 Dream Sponsors,” to thank those 100 early seed customers.
Finding a group of early seed customers is extremely important when you’re at the difficult stage of having just started your business.
Seed customers can really help your product develop and drive it forward. After all, seeds are the most vital part of the plant, the part that contains the most energy and potential.
1. How to categorize customers
Diffusion of innovations
Diffusion of innovations is a theory that was first proposed by American academic Everett M. Rogers in his 1962 book of the same name, “Diffusion of Innovations”.
When something new is created, its creation and its distribution occur over a period of time. Early on, it will spread through specific channels and among a select audience before being gradually accepted by the masses.
Rogers divided the people who would eventually use an innovation into five groups: innovators, early adopters, early majority, late majority, and laggards.
1. Innovators (2.5%): Innovators are a group of people who love new ideas, innovations, and technology and who have the courage and vision to experiment with them early on. This group of people only makes up a small percentage of the eventual adopters, but they are willing to spend plenty of money and time to explore new ideas. This is despite the fact that they get involved with innovations in their early stages when they are not yet mature.
2. Early adopters (13.5%): This is the first group of people to spot industry trends and to put their insights into practice. They might not have the radical drive of creators, but they have a positive attitude toward new innovations. They make decisions based on their own judgment and are not usually influenced by others. They are also opinion leaders within their industries.
3. Early majority (34%): These are the observers who wait for the right moment to get involved. They watch the industry closely, but don’t try out new products casually. Opinion leaders will influence the early majority, who will only get involved once the product already has a substantial user base.
4. Late majority (34%): This group of people is even more conservative than the early majority. The number of people who make up the late majority is the same as the number of people who make up the early majority. The difference is that the late majority will wait until the product or innovation is mature in all aspects before adopting it. Late adopters will only select the most outstanding products in an industry.
5. Laggards (16%): A small group of stubbornly conservative people who are extremely resistant to change. Their judgments are usually rooted in past experience, and they usually form a negative opinion about innovation. This is also a group of people that entrepreneurs need to avoid. If creators of new products spent their time thinking about how to win over this group, there would be no scope for innovation.
2. The importance of seed customers
Crossing the chasm
Most people are followers. The right seed customers are the people who others will follow. They can help a product cross the chasm to mainstream adoption.
Product creators hope that the early majority and late majority will come and use their products automatically, without needing to be invited.
Early adopters and late adopters are influenced by other people in their decisions, which is why we don’t actually need to “invite” them ourselves.
If your product or innovation can get these groups of people on board, then you can quickly become the leader in your industry. That’s because early adopters and late adopters together count for up to 68% of consumers.
But your customers aren’t simply going to be blown across to you on a benevolent wind. Most of the people in the early majority and late majority will only accept a new product once a group of “early explorers” has already crossed the unknown frontier and tried it out on their behalf.
From Crossing the Chasm by Geoffrey Moore. Image credit: Words by Sorensen
“To be specific, the point of greatest peril in the development of a high-tech market lies in making the transition from an early market dominated by a few visionary customers to a mainstream market dominated by a large block of customers who are predominantly pragmatists in orientation. The gap between these two markets… is in fact so significant as to warrant being called a chasm, and crossing the chasm must be the primary focus of any long-term high-tech marketing plan. A successful crossing is how high-tech fortunes are made; failure in the attempt is how they are lost.” - from “Crossing the Chasm” by Geoffrey Moore.
In his book, “Crossing the Chasm”, Geoffrey Moore writes that for a product to succeed, it needs to cross the chasm between the early adopters and the early majority. Once the early adopters reach a certain number, a bridge will be built between the early adopters and early majority. This is the time when the early majority will feel comfortable enough to join the adoption curve.
Early adopters actively use and promote products and innovations within their circles. They spread awareness through word of mouth within small subsections of the market. The early adopters, then, are the seed customers that a young company needs to concentrate its resources on.
The right seed customers are the people who others will follow. They can help a product cross the chasm to mainstream adoption. If a product can bridge the gap between early adopters and the early majority, it can then cross the chasm, and once it’s done that, it can go on to change the market structure.
In the case of most products, the early adopters are the seed customers that are so essential to success.
3. Focus on serving your seed customers
As we’ve explored above, the value of each type of customer is not the same. The influence that seed customers have makes them almost “living advertisements” for new products and innovations. As seed customers are, in a way, unofficial product spokespersons, how you treat your seed customers will, in turn, influence how effectively they promote your product.
There are often two types of difficulties when interacting with seed customers in the early stages:
1. Misunderstanding the concept of seed customers and thinking that all early customers are seed customers.
2. Focusing on quantity rather than quality and not concentrating resources on building positive word of mouth within the industry.
You need to filter through your customers to find your real seed customers.
Seed customers are extremely important, so it’s only natural that once a product has been launched, the team behind the product will immediately look for their first batch of seed customers.
But how do you look for seed customers? Who do you look for? Many struggle with these questions. This means that they may end up with the following kind of scenario:
All team members are given a quota for the number of people they have to recruit into a messaging group. There’s no emphasis on what kind of person; the approach is just to recruit anybody and worry about whether they are suitable later. Very quickly, the team creates a group with a few hundred people in it, but most of the people in the group have no idea what’s going on.
At first the group is pretty active, but soon a lot of people stop contributing. In the end, only a few people try the product out, and even fewer people give constructive advice. Most of the people in the group have no motivation to try the product out. Of course they don’t have an interest in the product, because they’re not the kind of people who have a need for it.
According to the diffusion of innovations theory, early adopters only make up 13.5% of all users or customers. The greatest distinguishing feature of this group is that they make independent judgments and are willing to try out imperfect products.
They have an understanding of the pain points of the industry and actively look for solutions. This makes them more than happy to try out new products and provide feedback. If a product can resolve a pain point well, this group of people will become its first promoters.
Because of all this, people who create products should be able to filter out all the noise and confusion of the early market environment, to recognize who their seed customers are, and to focus their product on serving them. For example, when Facebook first started, it was only available to students at Harvard University. It later expanded from that base to other universities in the Boston area, to other Ivy League universities, and then worldwide and to the general public.
WeChat, a messaging app widely used in China, was only available to users of QQ, another messaging service, when it started out.
Well-targeted filtering can help a product find great seed customers. Who these seed customers are and how they are selected will influence what kind of a community builds around the product in the early days. It will also influence the direction the product moves in and how it develops.
Ren Zhengfei, the CEO of Huawei, once said in his new year address, “We are a group of ordinary people who have been consistently focusing on a single goal for 25 years. At first there was very little movement towards that goal. Then it seemed we were shooting up like water bursting from a fountain. The end result is the achievement you see today.”
If you focus your energy on one important area, you will reap great rewards from that area.
By focusing on seed customers in a small subsection of the market, positive word of mouth will spread and they will essentially advertise your product for you.
It’s very easy for an early company to make the mistake of spreading resources too thinly on chasing short-term numbers and short-term results. By doing that, it fails to concentrate its effort on ensuring that seed customers have a high-quality user experience.
That’s why, in the early stages of a product, it’s important to have the courage to say no to the demands of customers who are not your seed customers. Saying no to such customers is not a bad thing at all.
In the early stages, many companies only pursue customer numbers, and welcome anyone who knocks on the door. By doing this they spend resources chasing short-term data, and fail to concentrate on ensuring the quality of user experience for their seed customers.
So, my advice is not to only chase high customer numbers. First, focus your resources on providing a great user experience to a group of seed customers.
Customers in different markets have different relationship networks, and there is often not much communication between separate networks. If you spend resources providing average services to customers in different groups or networks, it won’t have much effect on promoting your new product. As soon as there’s another product of a similar type that focuses itself on one market and builds up word of mouth, it will be very hard for your product to establish itself in that same market.
Similar groups will have similar needs and shopping habits. Everyone likes products they’ve found through their own personal networks. Take aim at a high-end small submarket within the mainstream market, and focus your limited resources on taking this market. Once all the seed customers in this market think that your product is fantastic, word of mouth will start to spread very fast and it will gradually spread out into other networks.
Summary
The main principles I hope readers can take away from this article are:
1. You need to be able to differentiate between the following types of consumers: innovators, early adopters, early majority, late majority, and laggards.
2. For a product to succeed, it needs to cross the adoption chasm between the early adopters and the early majority.
3. Early adopters are the best seed customers. Most people just follow. If you can satisfy your early adopters, you can cross the chasm between the early adopters and the early majority.
4. The sooner you can find your seed customers and concentrate your resources on making sure they are satisfied, the sooner you can build up positive word of mouth and quickly expand your product user base.
I'm Teddy, Co-Founder & CEO of AfterShip, SaaS 102 is a series of articles where I share my experience in SaaS startups.
We are looking for great SaaS sales talent and welcome you to join us at careers.aftership.com.
(Article translated by Joseph O'Neill)