Ask HN: Favorite hack for determining a market?
11 comments
I attended a great founders' talk (can't find a recording at the moment). The speaker said they used this method:
1. Identify your target customer first (not the product or the market!)
2. Interview your target customers. Take notes. Find the unfulfilled need.
3. Pitch your solution to those customers and have them sign a Letter Of Intent.
The really powerful piece here is the LOI. It stated "I, Company A, intend to purchase Product Z for $XX,000. This is a non-binding commitment and may be terminated at any time."
Even though the LOI was explicitly non-binding and had no legal weight, they found that the cultural weight of physically signing a piece of paper was enough to scare off non-customers and validate true intent to purchase. Once they had 10 signed LOIs they built the product. All the signed LOIs ultimately converted into paid customers (which is rather amazing).
1. Identify your target customer first (not the product or the market!)
2. Interview your target customers. Take notes. Find the unfulfilled need.
3. Pitch your solution to those customers and have them sign a Letter Of Intent.
The really powerful piece here is the LOI. It stated "I, Company A, intend to purchase Product Z for $XX,000. This is a non-binding commitment and may be terminated at any time."
Even though the LOI was explicitly non-binding and had no legal weight, they found that the cultural weight of physically signing a piece of paper was enough to scare off non-customers and validate true intent to purchase. Once they had 10 signed LOIs they built the product. All the signed LOIs ultimately converted into paid customers (which is rather amazing).
No such thing. Hacks are for rigid systems with complex rules.
Understanding human needs requires work.
Understanding human needs requires work.
What is your current favorite hack for figuring out if people are willing to pay for something before you create an idea?
Talk to people.
If that sounds too glib, and you really want something of a "hack", I'll offer up what Steve Blank calls "the million dollar question." If your domain isn't enterprise software, you can probably find a way to riff on this and adapt it to your needs.
“I ask them, “If the product were free, how many would you actually deploy or use?” The goal is to take pricing away as an issue and see whether the product itself gets customers excited. If it does, I follow up with: “OK, it’s not free. In fact, imagine I charged you $1 million. Would you buy it?” While this may sound like a facetious dialog, I use it all the time. Why? Because more than half the time customers will say something like, “Steve, you’re out of your mind. This product isn’t worth more than $250,000.” I’ve just gotten customers to tell me how much they are willing to pay. Wow.”
Talk to people.
If that sounds too glib, and you really want something of a "hack", I'll offer up what Steve Blank calls "the million dollar question." If your domain isn't enterprise software, you can probably find a way to riff on this and adapt it to your needs.
“I ask them, “If the product were free, how many would you actually deploy or use?” The goal is to take pricing away as an issue and see whether the product itself gets customers excited. If it does, I follow up with: “OK, it’s not free. In fact, imagine I charged you $1 million. Would you buy it?” While this may sound like a facetious dialog, I use it all the time. Why? Because more than half the time customers will say something like, “Steve, you’re out of your mind. This product isn’t worth more than $250,000.” I’ve just gotten customers to tell me how much they are willing to pay. Wow.”
>"If the product were free..."
Whenever I talk with the team about our product, some questions are:
- "Would you work at a company that doesn't use Git?".
- "Would you work at a company that uses Windows?".
The team's answer is "No". I myself almost quit on my first day because I was under the impression I would be using Windows, and none of the team can stand it. It's a bad example because Windows is a huge hit, but the point is that the product's absense or presence must trigger a strong reaction.
Our case is about internal tooling. We're optimizing for "If I worked elsewhere, I would want to keep accessing the internal tools we have here, or I would push to get access at my new workplace if it were a SaaS."
The extreme version of this questioning is: "Would you steal it?", and the underlying theme is "What would you do in order to use this?". Like the teenager Sean in https://www.youtube.com/watch?v=i8GaFuo4svQ .
Whenever I talk with the team about our product, some questions are:
- "Would you work at a company that doesn't use Git?".
- "Would you work at a company that uses Windows?".
The team's answer is "No". I myself almost quit on my first day because I was under the impression I would be using Windows, and none of the team can stand it. It's a bad example because Windows is a huge hit, but the point is that the product's absense or presence must trigger a strong reaction.
Our case is about internal tooling. We're optimizing for "If I worked elsewhere, I would want to keep accessing the internal tools we have here, or I would push to get access at my new workplace if it were a SaaS."
The extreme version of this questioning is: "Would you steal it?", and the underlying theme is "What would you do in order to use this?". Like the teenager Sean in https://www.youtube.com/watch?v=i8GaFuo4svQ .
The Mom Test (eg, talk to people but ask the right questions):
https://www.youtube.com/watch?v=Hla1jzhan78
https://www.youtube.com/watch?v=Hla1jzhan78
This is great book, I have the kindle version.
The folloing piece by Elad Gil discusses the topic in detail
https://firstround.com/review/future-founders-heres-how-to-s...
https://firstround.com/review/future-founders-heres-how-to-s...
Ask for money up front. It proves people will pay. There is no proxy for willingness to pay, not even a contract.
It not only validates that there is a paying market, it validates that you have what it takes to ask for money. A lot of people don’t. That’s why proxies for paying are attractive.
It not only validates that there is a paying market, it validates that you have what it takes to ask for money. A lot of people don’t. That’s why proxies for paying are attractive.
Offer it for free and see how many people say they WOULD pay.
Walk around your neighborhood and see what's on the ground floor. Boarded up windows? Luxury car dealerships? Coffee shops?
Look at the buildings. What kinds of utilities are hooked up? Coax? Fiber? DSL? What kind of antennae are installed? What is their HVAC setup?
Who's coming and going? What are they dressed like? What are they doing?
Just pay attention and go with the flow. There are all kinds of opportunities around if you know how to look.
Look at the buildings. What kinds of utilities are hooked up? Coax? Fiber? DSL? What kind of antennae are installed? What is their HVAC setup?
Who's coming and going? What are they dressed like? What are they doing?
Just pay attention and go with the flow. There are all kinds of opportunities around if you know how to look.
Sell product that does not exists.
If someone buys - depends on activity - there is a market.
Refund, apologize and start building the product.
If someone buys - depends on activity - there is a market.
Refund, apologize and start building the product.
What is your current favorite hack for figuring out if people are willing to pay for something before you create an idea?