When people step away from a career to start a new venture, perhaps the biggest shock is learning how hard it is to get things done. You no longer have the power to compel others to join your meeting, buy your products or answer your emails. Humbled and alone, you soon understand that relying on the kindness of others is the only way to survive. Veteran entrepreneurs understand one must tap into a complex social system of trading favors.

Trading favors is one of the most important survival strategies in human history. Favors were a form of currency long before the first coin was ever minted. If your ancestor was lucky on a hunt for meat, he shared with his fellow tribesmen, knowing they would remember his gift when they were lucky next time. Some scientists believe our brains grew larger in order to  to keep track of frequent, complex trading exchanges among people.

Even while they are inventing the most breakthrough technologies, entrepreneurs must go back to these social rules to give their companies a shot at a future. Other people hold the key to information or access that could mean life or death for a new venture. With little money in the bank and the clock ticking mercilessly, the favor of an introduction to a potential investor, customer, advisor or new hire can mean everything.

Unfortunately no one teaches these soft skills in business school, and few people openly talk about their strategies for getting the returned phone call or opened door. I have learned a few lessons along nearly a decade of small business trials and tribulations, and I offer these Five Rules for the Favor Economy:

First, you must give favors to eventually receive them in return. Do not even think about starting a business unless you have spent years assisting others. By building relationships and giving proactively, you will not only be in position to ask for help later, but you will learn much through the process.

Second, there is no better time to ask for a favor than when someone has asked one of you. Be sure that the other party knows what is on your “need list” when they come calling. For example, I provided helpful advice for a friend, and at the end of the conversation I asked if he knew any good leads in my industry. A few days later he happily made a very valuable introduction. An exchange of time, advice and contacts allows both sides to win right away.

Third, make it as easy as possible for people to lift that finger of help. For example, give them a sentence or two about your company that they can copy and paste into an email. This not only takes a little pain out of the process, but it shows your friend that you are all over the details.

Fourth, realize that favor trading can run years between exchanges, so be sure to keep old bonds strong with small touches over time. We all hate it when the person we have not spoken to in ten years suddenly sends an email or LinkedIn request with a desire for help.. I like to try to grab coffee with out-of-town contacts when I travel. One friend randomly calls contacts on his commute home each day to keep in touch.

Finally, I am not a big believer in returning favors with gifts. Recently a recruiter that I assisted went out of her way to find a wine store that could send me a gift certificate as a thank you. Fine wine is always nice to sip, but I would much rather have her volunteer to connect me with one of her many Chief Marketing Officer clients. Wine is consumed and forgotten; each favor as priceless and truly improves with time.

Despite thousands of years of human history, trading favors and carefully managing your contact list does not come easy to everyone. However no one can build a business without the non-financial help of others. As long as you remember to give, as much or more than you receive, chances are that enough doors will open for you to get a fair shot at success.

A little over a year ago we first saw the need for a fast, low-cost customer research tool that startups could use to learn before launching their big ideas. The leaders of the lean startup movement said the world needed more customer input earlier in the process, but they could not tell us where to go for a professional, quantitative solution. So we developed our own: The Minimum Viable Concept Test. In 2012 we tested over 70 new-to-the-world ideas, ranging from apps for business travelers to skin cream for teen girls. Dozens of our customers have since launched and are growing their businesses using insights gleaned from MVC Testing to improve their odds of success.

As a startup itself, the team here at the MVC Test is continually learning from each customer experience and partner discussion. You, dear reader, have helped us refine and improve our process and product, and we are proud to announce a big upgrade to our service, The MVC Test Builder.

Over the past year we have been looking for ways to make our testing process simpler for our customers. The biggest issue we see is that it can take a week or more for us to have an initial one-on-one discussion about the MVC Test with startup founders who discover our service. You had to send us an email, set up a conference call, then engage in multiple phone and email conversations to finalize and launch a test. We know that each minute of a startup’s time is invaluable, and we have seen how founders are willing to figure things out on their own to get the answers they need quickly.

So we decided to significantly streamline the process with a self-serve research tool that we call the MVC Test Builder. Now you can choose the test that is right for you, build your idea description, select your target audience, input additional questions, and send us a draft of your test for final pricing and feedback. We’ll reply with any questions or comments within 24 hours and launch your test as soon as you are ready. All communication will be centralized in your MVC Test account, where your final report will be uploaded as soon as it is available. In case you need help along the way, we’ve made it easy to draft your test with specific tips, FAQs, and walkthrough videos at each step of the process. And of course we are always up for a phone chat if you need further help or would like a personal discussion of your results.

Whether you are still considering an MVC Test for your idea, or are require additional research for a company you have tested with us in the past, the MVC Test Builder is a great tool for thinking through your research needs. Finally, if you or anyone you know would like to be one of the first to launch with the MVC Test Builder, we have a special bonus for you: Use the Discount Code “MAILER” to get $100 off any test now through February 2013. So head over to the Test Builder and put it through its paces.

Thank you so much for your business and partnership in 2012, and we wish you the best of luck with your launches in 2013 and beyond.

Bob

For many reasons, I’ve recently been spending a lot more time with startups that are building innovation for brand marketers. Since I spent 6 years as a brand guy at Procter & Gamble, then another 7 years as a leader as a global digital advertising agency, I seem to have picked up a few lessons about how to work with big brands. So I recently decided to share some tips with the wider world in a larger platform than this blog.

Today you can head over to iMedia Connection and read up on my “5 Secrets for Getting Big Brand Dollars from Big Brands”. Hopefully these tips will help marketing-related startups get deeper insights into their customers to bring forward win-win solutions. Read on...

Leading a startup is harder than any other career path on many levels. You must build everything from scratch, fight for every dollar in and out of the company, and go to sleep each night with the knowledge that you should have done even more that day. You suck up an incredible amount of rejection from prospective customers, partners and investors. The rejection is always “personal” because the business is your baby.

While rejection is part of the game, a handful of jerks make life even harder for the hopeful souls trying to get a startup off the ground. Last week I felt the sting of a jerk–and while the experience ruined my day, I discovered a better way to diffuse this stress going forward. You might find the story helpful whether you are in the startup trenches, or just got cut off on the exit ramp of the interstate.

I was recently reading the blog of a fairly well-known investor and noticed that he had added an open calendar app on his website inviting people to meet with him. This is an example of a new trend of “office hours” that progressive investors have recently embraced. I was planning to be in his city the following month and figured it would be a great opportunity to connect both as a startup (MVC Test) and fellow investor (CincyTech). The scheduling process requested that I pick a few times and add a one-sentence description of the reason to meet.

A few hours later I got a response from the investor: A snarky one-line assessment of my business and no word of whether or not he would meet with me. My blood boiled for several hours. I wrote and rejected several responses to his missive, deciding to try and put the incident behind me. But something still nagged at me–Rejection is fine and expected, but why add malice? In other words,

Why be a jerk?

Believe it or not, some people actually choose to be jerks in the business world. A recent Wired article on the management lessons of Steve Jobs shares the stories of executives who openly denigrate people’s work and call customers “idiots” over email. I personally stay away from anyone who frequently speaks negatively about other people behind their backs. This lack of self-esteem can be toxic in many ways–especially in the personal crucible that is a startup. And if they tell you about others behind their backs, chances are they will do the same to you.

Startup investors often have to defend themselves against charges of jerk-ness. Many who are criticized say that they are simply being direct, and that this directness is meant to help the companies that come to their doors. And as gateways to money and success, investors can be seen in a harsher light to entrepreneurs. There is always one fundamental difference in perspective: The company pitching in the conference room is taking their jobs personally, while investors must look at a business with absolute lack of passion and emotion.

For some investors, though, absolute power corrupts absolutely. Investors simply don’t have the same kinds of checks and balances that business owners have. If you are a jerk in most other business roles, people will choose not to work with you or for you. Your business results will sour and soon you’ll be looking for a new job. But investors get 10 years to show results, and their limited partners are only looking for a strong return on investment. Niceties don’t count.

I have a unique perspective as both a startup founder and investor. Over the past year as an Entrepreneur in Residence at CincyTech, a seed-stage VC firm, I have listed to over 100 founders pitch their ideas. For me, the role of listening to a pitch produces empathy. I feel for the founders pitching their hearts out, because I know that the odds are long, and the reality is that we can only invest in a fraction of those who walk in the door.

To reduce any negative feelings along the way, I try to go out of my way to explain our process, offer helpful perspective and tips, and always keep the door open for future conversations. No one taught me to behave this way, it just seems natural to try and be a good person.

In the midst of my anger over the jerky reply from the “open” investor I went online to learn more about him. From the first page of Google results I discovered that he recently tried and failed to launch his own startup, and was now struggling to find investors and startups to join his new fund. Then I read some negative industry buzz about his mixing of business and pleasure. On one hand I felt better reading this. It validated my experience of his jerkiness, and suggested that karma is, indeed, a bitch.

But then my anger melted away and I began to feel sorry for him, because he is likely suffering because of his personality issues. What could be worse than having a flaw that you don’t know exists, or that you don’t know how to correct. It is hard to be angry at a person that is self-destructive.

So as you struggle on toward startup success, feel sorry for the jerks that you will inevitably encounter. By forgiving and pitying them you might be able to better wade through the unproductive anger that ensues…and it just might make you a better person in the end.

You should learn more about the MVC Test here, and follow me on Twitter here.

+Bob Gilbreath

As a startup investor, advisor, board member, it sometime feels strange to tell people that I also have my own startup, the Minimum Viable Concept Test–which in turn is a service that helps other startups in customer development and product positioning. It’s a bit like the Seinfeld episode where Kramer sells a book about coffee table book–that sprouts legs and turns into a coffee table.

Then again, launching a startup to help other startups provides me with unique insights and perspective. One of the things I have learned through my testing is that video can be a powerful way to communicate an idea. As I wrote in this post a few months ago, the sight, sound and motion of video is tough to beat. In my MVC Testing, video continually leads to better customer understanding and feedback. It does not mean that simple descriptions in a one-page form are mistakes–as both are effective in drawing useful responses and both mimic how people learn about ideas in the real world. But video is a step closer toward creating actual in-market advertising.

I recently decided to practice what I’ve been preaching and commissioned the video below to describe the MVC Test:

I had a great time working with the gang at Elevator Insight, which has done similarly great work with several other companies in our portfolio. They have the process nailed down tightly and we got to this output in about a month.

I recommend that your business use video once you are a bit down in the path in customer development, and already have some early (preferably paying) customers. While the cost is reasonable enough to start with video, you can learn a lot by simpler communication forms–and leave yourself the flexibility to change the product and positioning frequently at the early stages.

Since a soft launch of this video last week, I’ve already gotten several positive comments and new leads. Stay tuned to this space in the next few months, as this is just one piece of an expansion of the MVC Test platform to make it even more useful to innovators around the world.

You should learn more about the MVC Test here, and follow me on Twitter here.

+Bob Gilbreath

Peter Schwartz – 1954-2012

Last Monday morning I got the call at 8 a.m. My friend and former business partner, Peter Schwartz, had passed away overnight. I’d just seen Peter at my office Friday afternoon and we’d made plans for lunch on Monday. I spent last week in a daze, working through the stages of grief as I trudged through assorted meetings with our portfolio companies and others in need of advice. The only thing that kept me from blowing everyone off and hiding under the covers all week was the belief that Peter would want me buggering on in the quest to make a dent in the world.

Chances are, dear reader, that you did not get to meet Peter; so the purpose of this post is to share the knowledge I gained from working with him. Peter spent his entire career as an entrepreneur, the height of which was his successful sale of a business where I was lucky enough to be his partner. There are five lessons that I learned in my seven years at his side, through many ups and downs, and the best way to honor Peter is to pass them on to you.

1. Passion Wins

I remember pitching alongside Peter for the digital agency business of Healthy Choice about five years ago. I was leading the pitch team and Peter’s role was to present the creative work we had developed. On his very first slide, though, Peter drifted from my carefully crafted script. He was clearly excited about the work, blowing past his allotted time and I worried that his passion had gotten the best of him.  I maneuvered my foot under the conference room table in preparation to provide a gentle reminder to get back on track.

I began to visualize weeks of preparation laid to waste as he continued to ramble on, stars in his eyes. And then I glanced over at our clients–the stone-faced looks had transformed. They smiled and nodded as Peter laid out his vision for  reaching Healthy Choice brand nirvana through our digital and creative strategy. They started to believe. And a few days later we found out that we won this crown jewel brand, which became an enormous driver of company profits and award-winning work.

You see, in a world of profits, losses, facts and figures, simple passion is too often lost and forgotten. But not for Peter. He came to every meeting with a smile and an idea. I don’t know where this reservoir of positivity came from, but it was infectious, and everyone around him benefitted. I grew to look for this passion in others and came to lean forward in situations where a passionate person was present. Simply put: Whether you are selling to a customer or painting a vision of the future to employees, if you can bring energy to the room you are half-way home.

2. Share the Wealth to Succeed

I have met a lot of entrepreneurs who have built a business without sharing equity with anyone else in the company. Some will string senior employees along for years with the promise of a small piece of the pie at some uncommitted time in the future. But that was never Peter’s way. Throughout his career he took the opposite tack and gave equity to leaders who he believed would help him get to the next level. I was one of the fortunate beneficiaries of this strategy in 2004, when I was asked to join Bridge Worldwide, the company Peter founded. Where another owner might hesitate to give up shares and votes, Peter chose to build a team of co-leaders who would challenge his thinking, treat the company like it was their own, and become force multipliers. Peter believed that by giving up 75% of his shares he could attract and retain a team that would help him build a business that would become 10x as valuable. And guess what? That’s exactly what happened at Bridge.

Of course not every employee should be on the cap table, but it doesn’t mean they can’t all have ownership-like incentives. At Bridge, Peter championed our decision to offer profit sharing for every employee. This was absolutely unheard of in the advertising agency world, and we took a risk each quarter in sharing our deepest financial details with all 350 employees. Something amazing happens when you trust your employees with the company’s financial progress and gains–people start to care about something bigger than themselves. They made better choices in, say, inventing a new solution to sell a client, or limiting travel spending without draconian checks & balances.

3. Always Be Pivoting

Many people assume that our company was another “digital startup,” but Peter actually founded the agency that would become Bridge Worldwide in 1979. Over the years he shifted the agency as new opportunities presented themselves. Early on the company was known for owning a $5,000 machine that could project slide shows at big corporate meetings. This was a long time before briefcase-sized projectors and PowerPoint! Bridge shifted away from events to technology marketing services and then again to healthcare collateral. But in the mid-1990s Peter saw the potential of the Internet, and ended up creating Procter & Gamble’s very first website in 1995 (for its professional dental care group).

The digital business expanded and Peter refocused again to take advantage. Together we learned to continually evolve with our clients–shifting from the low-cost local web shop to a world-class leader in mobile/social/local. While other digital agencies came and went, we grew revenues over 20% a year for eight straight years and held on to a majority of our clients. Of course the work we did for these clients changed dramatically over that time as we led our clients to move forward along with their customers in this new space.

My kids learned in school recently that sharks must keep swimming in order to breathe or they will die; business is the same way. There is never a current market or customer base to rely on in today’s economy. We must continue to discover new ways to generate revenue and pivot before we have to.

4. Do Whatever it Takes to Win

It’s funny but I don’t really remember what Peter did in college or what piece of the agency business he was best at. The truth is that Peter was a business chameleon–able to shift to whatever the company needed of him. On any given day you might find Peter in the office at reviewing project budgets, grabbing the pen and whiteboard in a strategy session, reconnecting with a client CIO, or writing up creative ideas for a new business pitch.

Peter knew he was master of none of these tasks, but he never hesitated to dig into whatever was needed of him. A true entrepreneur knows that the buck stops with him, and that by grabbing the marker or helping to build the presentation every once in a while he sets an example for others.

5. Re-Invest in What’s Next

After we successfully sold Bridge Worldwide to WPP at the end of 2010, Peter decided to leave the company and “retire.” He could have spent the rest of his life playing tennis, hoisting beers on the beach, or picking out luxury cars. Instead, Peter jumped right into investing in other entrepreneurs–putting money into our seed-stage companies at CincyTech. And most recently, Peter was launching a new startup with a small team. It’s goal: To save local journalism.

We now know that one of the keys to creating a startup community in a city near you is to convince successful founders to recycle their dollars and lessons into other startups–including new companies of their own. Peter introduced me to CincyTech and served as my investment mentor; and he was later one of my first customers for the Minimum Viable Concept Test.  Though he is no longer with us, his legacy lives on in local companies that will, in turn, sprout millionaires and seed the next generation of innovative businesses here in Cincinnati.

Bonus Lesson: Peter Believed in You

When speaking with friends this week, the most meaningful memories we all shared were the times when Peter pumped us up. Whether it was providing advice to someone thinking about marriage or a founder pitching him a startup concept–no matter how half-baked the idea–Peter took the time to encourage you. His quirky smile, encouragingly nodding head, and enthusiastic advice were a fresh bit of positivity when we all feel the pressure of the harsh world around us.

Perhaps that is my most important lesson for aspiring entrepreneurs: Find a friend and mentor who believes in you. You’ll meet lots of other folks willing to bring you a dose of cold, hard reality–but everyone needs a pal who can pick them up when they are down and will lend enough energy to get back on the startup horse. On your journey to become an entrepreneurial hero, you’ll need the help of a someone like Peter who can provide that magical spark to light hope into your darkest days.

I was lucky to have Peter as that pal for me, and I will miss him more than words can say.

You should learn more about the MVC Test here, and follow me on Twitter here.

+Bob Gilbreath

Here’s a situation you may have experienced: You’ve decided to run some online consumer research for your new product idea. You feel confident because you chose to test with a research company that a lot of big companies have used. The data comes in and looks great–over 50% of people say that they would “Definitely” use your product. However the results from one question are odd: On “What do you like about this product?”, where people had to fill in a blank, a large number of people wrote in things like “ajfk”, “n/a”, and “IDK”. Many others gave one-word responses such as “easy”, “good” and “free”. Oh well, you think, at least the charts and graphs look good. Time to open the champagne, right?

Maybe not.

Despite the misunderstood words of Steve Jobs, market research is experiencing a bit of a resurgence recently with the growth of low-cost online research options that make it easy to launch tests and analyze results. SurveyMonkey was recently valued at $1 billion, and Qualtrics turned down a $500 million buyout offer. Two of the biggest players in today’s economy, Google and Amazon, are playing in the research game now. Google Consumer Surveys offers feedback for as cheap at 10-cents per response, and Amazon’s Mechanical Turk business can do the job for as little as 2-cents. At that price, there’s no need to nag friends and family to fill out your surveys! Suddenly market research that used to costs thousands of dollars and take weeks to complete is available for pennies in comparison.

I count myself as one of the “new turks” of market research. I could never have launched the Minimum Viable Concept Test without a low-cost, self-serve market research partner, which allowed me to provide customers with actionable feedback on their ideas in a couple of days for as low as $999.

But after spending my career conducting research with over a hundred suppliers and seeing the answers of hundreds of thousands of research subjects, I’ve learned that there is still an art and science to practicing market research. And just because Google is getting in the business doesn’t mean its output is high quality. Google also created a free blogging platform, after all, but that doesn’t mean everyone who opens a Blogger account can write worth a crap.

You might not have realized that the rise of online research has also spurred a rise in online research cheaters. You see, all of those new research tests that are enabled by low prices need actual people to fill them out–and a lot of those new survey-takers are only in it for the money, gift cards, or “chances to win” that are promised for a few minutes of their time. In fact, over at YouTube you can find hundreds of videos teaching you how to fill out surveys with as little work and thought as possible.

I know from testing several different research panel providers that this is a big problem. I have tested with most of the biggest players in the market, and I’ve found that many of them provide dangerously poor responses. I use the word “dangerously” to describe two scary situations for a business leader: At best, poor research quality will waste your limited budget and delay your project if you are forced to start over. At worse, you may act on the data you receive–confident that the customer has spoken–and find that the real world doesn’t match up to the results you received. Your career and life savings might be at risk because you trusted a large company to deliver quality feedback.

So, you might be wondering, how can I tell if a market research panel is of high quality? It’s actually pretty simple: Include some open-ended questions in your survey and see how well they are answered. “Open-ended” is another word for “fill-in-the-blank” questions (or, if you’re a market research nerd like me, “verbatims”). This is where people cannot just pick a multiple-choice answer, and instead have to actually type something in. If you get a lot of “junk” answers like “;lkj” and “n/a” or even those one-word responses such as “good” and “like” then you need to go back to your survey company and demand that they either re-run the study with a better panel or, better yet, give you a refund and take your business elsewhere. You may not know that most research companies outsource their panels to other suppliers and only pick based on low prices. Google’s new service doesn’t include open-ends yet, so I’d stay away despite their claims of accuracy and discount codes.

Open-ended questions not only help you gauge the quality of the research, but they are often the most helpful responses you can get. After all, the reason you conduct research is not to “get good numbers”, but rather to understand what’s going on in people’s heads–and there is no better way to learn this than reading reactions in their own words. Even when I worked at Procter & Gamble and did research with 1,000 customers in a high-quality panel, the first thing I would do when research reports came in was to read through every single open-ended response. In the MVC Test, we provide clients with this raw output, and code the comments by hand so that we can see what people said most and least-often.

I’m proud to say that I have had tremendous, positive results in working with my panel supplier, Ask Your Target Market (AYTM). I first came to AYTM for its good prices and terrific self-serve solution, but from my first test I was blown away by the quality of its panel responses. Here’s one example of such high-quality responses we saw when we ran a test for Roadtrippers, which I described in a previous blog post:

If I were to use it, I like that it picks the top options only. I know personally when I research stuff I only even consider the 4-5 star ratings. Having everything they offer, and for free, is a great thing to consider if I take a long trip.”

This is a lot more helpful than “IDK.”

Over the past year I’ve gotten to know Lev Mazin, CEO of AYTM. He has taken me through the tools he uses to make sure that his panel is high quality. There are gotcha questions to catch cheaters, and clients can either “thank” good respondents or “flag” the few bad actors that slip through. You see, Lev knows that market research is meaningless (and his business is doomed) if his clients ever doubt the reliability of the surveys they conduct with him. That’s great, because I, too, must stand behind these results for my business to succeed!

I do believe that the future will be brighter thanks to cheaper, faster and easier ways for us to bring customer feedback into our innovation processes. But if success was that easy, fast and cheap, then everyone would be successful. As Jason Anderson recently wrote: “Information is free. Insight is expensive. Action is priceless.”

You should learn more about the MVC Test here, and follow me on Twitter here.

+Bob Gilbreath

In the process of writing this blog post, I logged into my WordPress account ($100/year), downloaded the visual above on iStockPhoto ($3/image), checked the comments flagged as spam by Akismet ($5/month), and made sure that Outbrain was promoting my post on its network ($.15/click). Blogging is supposed to be “free marketing,” but that’s OK. You see, I am happy to pay for these services, now that I have learned my lesson that “free” is a curse.

A few months into launching my new research tool, the Minimum Viable Concept Test, I decided that it would be a good idea to provide some free tests to potential clients who were in a position to become repeat customers. Since our type of research was completely new to them, I figured that a free sample of the entire product would impress them and win ongoing business. After all, every one of my other, paying clients loved the output–so how could a no-risk trial version not close a sale later?

Well, every one of these free tests produced useful results that the clients greatly appreciated–but none of them converted into paying clients. This was a mistake that cost me significant time and money out-of-pocket, both of which are exceedingly precious in a startup.

This experience–and seeing the struggles of other startups in my portfolio–have convinced me that free is a curse. Despite decades of free sampling at the heart of marketing, and an entire startup economy that seems determined to make “free” work, I beg you to reconsider offering your valuable products, services and time for free–or at least treat this strategy with the same care as nuclear material. Here’s why free is a curse:

• Free doesn’t weed out the disinterested. There are lots of potential customers for your product or service, but not all of them are ready and willing to pay. Unfortunately, when you offer something for free it’s too easy for them to say “yes”–so you end up attracting customers that never had an interest or intention of buying. Forcing a prospect to put some money on the table is the best way to make sure that you have a real, live lead.
• Free warps the value equation. No matter what your pricing sheet says, when the client pays nothing, they can’t help but expect to keep paying nothing. They are happy, of course: The service worked out well, in part because it was free.  But, when you come back with a purchase order for the next one, the client feels worse. “Value” equals “Benefit” divided by “Cost” and you just slapped a big number on the Cost line. Pulling out the wallet now feels painful.
• Non-cash value exchange is too hard. I’ve tried to offer some free tests to partners who promise to add commensurate value in non-monetary ways. It could be barter system in which you get their products or services for free, or some promise to feature my business in their marketing efforts. It always sounds good in theory but is very tough to execute. In bartering, each side has to do too much negotiating to determine what is a fair trade. And marketing support from the other side is nearly impossible to work, since the other guy needs to focus on marketing his own business first and foremost.
• Quality of service can suffer. I don’t think I’ve fallen victim to this one, but there is a natural temptation to put less effort into the customer who isn’t paying you a dime. When two emails hit your inbox at the same time–one from a paying client and one from a free trial-er–which one do you answer first? The paying client’s message, of course. This can add up over time, further weakening your odds of turning the free account into a paid customer. Even worse, the free client is can spread poor word-of-mouth about your business whether he or she has paid or not.

Of course there are exceptions to every rule. If it costs your business nothing to maintain a free account and you have paying upgrade options, then a free trial might make sense. MailChimp and DropBox are two examples where this seems to be working well. If you go down this path, I would severely limit the options and/or set an expiration date for the free trial.

But I’d still err on the side of getting customers to pay something–anything–to break the seal on their wallets and establish a real account. Instead of free, why not offer an initial price break or discount code? This helps grease the wheels while still establishing the ongoing price in customers’ minds. I have also had success with throwing in something of added value on top of the usually priced package. This feels like a discount, but offers you the chance to introduce an even better output. Be careful even with these tactics, though, as customers can still expect to see the price break or added value on a going basis.

Better yet, try sharing a free sample that costs you nothing. For the MVC Test, I will often share examples of reports that I have run on other companies (with their permission, of course). These reports clearly show value and help customers see what it could do for them, yet cost nothing to provide. You can do this with content, too,  in the form of white papers, blog posts, Quora answers, and public speaking.

It actually feels good to offer free work to a prospect to get the ball moving, and this can be a very easy sell. Meanwhile, it is painful to hold firm to a price when a potential customer is staring you in the face. But “easy” has never been the path to success. Let the “no” sink in and reassess whether your product/service is priced and positioned in the right way. Sometimes it just takes time for your prospect to realize how much they really need you, and they will come calling back later.

You should learn more about the MVC Test here, and follow me on Twitter here.

+Bob Gilbreath

This August’s Wired cover story asks “Do You Really Want To Be Like Steve Jobs?” Now that nearly a year has passed since the legendary innovator left us, it seems many leaders are beginning to doubt the Jobs path to success. One of the most frequent Jobs lessons I hear is “He didn’t believe in market research.” This broad claim distorts the reality of Apple’s success and weakens entrepreneurs’ chances. The purpose of this post is to bring some clarity to Jobs’ words and show how market research should and shouldn’t be used.

I was compelled to write this post after seeing a stream of comments erupt at a LinkedIn group on New Product Development. A post titled “Three Reasons Why Steve Jobs Didn’t Need Market Research” solicited passionate responses from this group of innovators who come from both the startup and corporate worlds. Clearly those of us who work to launch new products and assist others in the process are struggling with “the Steve Jobs market research quote.”

Every few weeks I come across an objection to market research when I speak with startup founders about my Minimum Viable Concept Test. Some first-time founders feel that research flies in the face of what they hear from startup luminaries. Market research is sometimes derided in Silicon Valley circles as a sign of weakness. Founders are encouraged to be determined, passionate go-getters who “keep shipping code.” They feel pressure to be constant cheerleaders with investors, partners, friends and family. All news most be good news and momentum may never ebb. Market research can feel like a brake on progress, and, deeper-down, some founders fear that “bad results” from testing with customers will threaten their progress and promises.

I fear that the rising generation of innovators is following “rules” laid down by investors who have never actually built a business–or they have only seen market research used in big corporations, where studies cost many thousands of dollars and output is just as likely to be a bureaucratic barrier to progress. As someone who has used market research to build successful business at both big companies and startups, I’d like to offer entrepreneurs a nuanced guide…

What Jobs Really Thought About Research

Before moving on, we should analyze Jobs’ actual words about market research. Here are the three relevant quotes that I found in Walter Issacson’s official Jobs biography:

• At a 1982 planning retreat, someone on the Mac team, “thought they should do some market research to see what customers wanted. ‘No,’ [Jobs] replied, ‘because customers don’t know what they want until we’ve shown them.’”
• “On the day he unveiled the Macintosh, a reporter from Popular Science asked Jobs what type of market research he had done. Jobs responded by scoffing, ‘Did Alexander Graham Bell do any market research before he invented the phone?’”
• Jobs: “Some people say, ‘Give customers what they want.’ But that’s not my approach. Our job is to figure out what they’re going to want before they do. I think Henry Ford once said, ‘If I’d asked customers what they wanted, they would have told me, “A faster horse!”‘ People don’t know what they want until you show it to them. That’s why I never rely on market research. Our task is to read things that are not yet on the page.”

I wholeheartedly agree in these quotes. One should never conduct a research study that asks people what they want–yet it is a mistake that big and small companies make every day. I learned about the right way to research within the first few months of my time working in the new products team at Procter & Gamble, a company legendary for creating billion-dollar categories ranging from disposable diapers to Swiffer and Febreze. Broadly speaking, there are two types of research that work–and they are completely consistent with Jobs’ words and success.

Market Research that Jobs Agreed With

First, you must spend time understanding and gaining insights into consumers’ existing habits, beliefs, routines and unmet needs. We would never ask people, “What should we develop to make your life easier?” Instead, we spent time with people in their homes and watched them at the store, then we dug through data about what they are buying and using. Your job at the early stage of innovation is to get into the shoes of your customer, understand her life, and look for insights that give you ideas on products that you could create that would surprise and delight her.

And this is exactly what Jobs was so good at. He saw early on that people were interested in using computers, but were frustrated at their complexity. He saw that people loved music, but couldn’t stand loading a few dozen songs at a time onto the early MP3 players. Jobs deeply understood how people engaged with technology. And while he often used himself as the “focus group of one,” he kept the desires of billions of people in mind, rather than just following the whims of a single billionaire. Compare that to Bill Gates, who infamously pushed forward an Internet-enabled watch because he wanted one and thought everyone else would, too.

The second role of market research comes in evaluating the ideas that come out of customer understanding and insights. At Procter & Gamble, we wrote up descriptions of our ideas and shared them with people in one-one-one conversations and in national quantitative surveys in order to gauge their interest and willingness to buy. This is basis of the Minimum Viable Concept Test for startups. In big and small companies alike, it is invaluable to get direct customer feedback. While it’s tough to get customers to tell you what they want, they do a great job of reacting to ideas that you show them. After all, reacting to new ideas is something they do every day when they turn on the TV, chat with friends or enter a store. Customer feedback on ideas helps you refine your product, model the business potential, and sometimes prevent you from a costly failure.

Again, this is exactly what Steve Jobs agreed with and is what the Apple team does every day. As stated in the Jobs quotes above, you’ve got to “show them” what you have come up with and use their reactions to guide you. Apple has a massive team of user experience people who use customer input and testing to improve their products.

When Jobs pointedly rejected “market research” I believe he was really making a point that the way most big consumer electronics companies used research was dead wrong. And I fully agree that most of the dozens of Fortune 100 companies I have worked with are more likely to mis-use the research that they conduct. Based on my experience, here are four big lessons in the right way to conduct market research:

Focus on People, Not Numbers

Nearly every kind of consumer research generates numbers–things like the percentage of likes/dislikes, or how many people say they would download an app or buy a product. I share a lot of numbers in my Minimum Viable Concept Tests, and the companies I work with are often staffed by numbers-oriented people. Sometimes they look solely at the number output and yearn for a score that predicts their odds of success. This is tempting but it is the wrong way to think.

Instead, research number results should help uncover insights and suggest ways of improving an idea. I actually first look at customers’ written comments before analyzing the quantitative responses in research. I find that the words people use when we ask questions such as “What do you like or dislike?” are infinitely more valuable than number scores and graphs. In these words we can get a true sense for what they think and feel–and remember, getting inside customers’ hearts and minds is what really led to Jobs’ success. If anything, the numbers should show you where you need to spend more time understanding customers and adjusting your product to fit them.

Never Conduct Research to “Validate”

I cannot help visibly cringing whenever a client of mine says they want to conduct market research to “validate our idea.” What people usually mean when they use the “v-word” is: “We know we have a winner, but someone (investor, boss, partner) wants to see some third-party proof.” I’ve even seen people try to purposely engineer research so that the test results come back positive–and believe me, you can always set up research to tell a story that you want told (just ask any political operative).

Research should only be done to test your hypotheses and improve your product. Otherwise you are setting yourself up for disappointment and failure. Winning innovators are confident in their ideas and abilities, yet are open to new data and eager for the voice of the customer to help guide their development.

Research Must Drive Action, Not Delay Decisions

Anyone who works in innovation at a big company has come to dread the phrase, “Let’s get some more research…” It has become the classic tactic to delay progress and postpone hard decisions until a later date. Instead, research should be a driver of decisions and progress. If an investor or superior ever forces you to conduct research before moving forward, you should get sign-off on what steps will come out of the research. In other words: “If the research shows that X hypothesis is correct, you (manager/investor) agree to move forward with (launch/investment).” This forces the big decisions you need and prevents research from being the scapegoat.

Startups often suffer from a different type of delay; they tend to believe that the only useful way to learn is to “just launch it.” As I wrote in detail in this post, too many startups buy into a warped interpretation of The Lean Startup Method and don’t get real customer feedback until they launch and get TechCrunch coverage. Unfortunately, by waiting for launch they delay learning, and often they find it harder to shift course. Earlier customer feedback, say through deep one-on-one conversations or an MVC Test, can significantly improve the product before it hits the market.

Conclusion

Wired’s article on Steve Jobs ends with a compelling summary by Robert Sutton, a professor of management and engineering at Stanford who wrote the 2007 best-seller The No Asshole Rule. According to Sutton:

Jobs has become a Rorschach test, a screen onto which entrepreneurs and executives can project a justification of their own lives: choices they would have made anyway, difficult traits they already possess. Everyone has their own private Steve Jobs. It usually tells you a lot about them–and a little about Jobs.”

In other words, if you don’t believe in market research it’s probably an internalized bias and you are just using Steve Jobs success to justify this belief. I run across a fair number of people who similarly feel that customer input and understanding is a waste of time, and prefer to move forward with determination that hard work and “just shipping” will pay off. I choose to keep investing in and working with leaders who are confident, yet eager to learn and improve. This is a personal bias that has helped me and others succeed in innovation in the past. If that’s you, look me up.

Oh, and let me ask a final favor:

+Bob Gilbreath

As many of you know, about a year ago I embarked on a new mission: To help entrepreneurs improve their odds of success. I joined CincyTech, a public+private seed-stage investment group; and soon after I developed the Minimum Viable Concept Test to meet startups’ need for quick, cost-effective customer feedback along with consulting help in interpreting results and planning next steps.

So far in 2012 we have MVC tested over 50 startup ideas with companies from Cincinnati to Sydney and New York to New Delhi.  Quantitative customer research for startups is still new, but the many founders who learn about the process are eager to put their ideas to the test. Now, I have an opportunity to teach these skills at the largest annual gathering of global digital innovators: the SXSW interactive event in Spring ’13.

But I need 120 seconds of your help to get there…

This year there were 3200 proposals submitted, which is a new record. It’s a tough gig to get, but public voting accounts for 30% of the decision-making process.  That’s why I would greatly appreciate your help with the following:

• Click this link to head over to my proposal
• You may have to register (to prevent vote fraud), which will take 60 seconds or less
• Click the thumbs up to vote for my panel
• If you have an extra 60 seconds, please leave a short comment of support, perhaps how you have heard me speak in the past, or how you used MVC Test results and lessons to improve your startup.  Comments really help get the attention of key decision-makers!
• Click the sharing links with as many social media accounts as you feel comfortable
• That’s it…120 seconds and you’re back to whatever

Please act now–voting ends on Friday, August 31st at midnight.

Thank you, dear friends, for your past support and the time to vote for my panel.  Together we have a chance to nudge forward the odds of startup success.

And in case you’re wondering what you’re voting for…here’s a description of my proposed session:

Learn Before Launch with a Minimum Viable Concept

“The most important hypothesis for startups to test is whether or not people will actually use, like and share a new product or service. Most entrepreneurs test this by launching a Minimum Viable Product as soon as possible. But the MVP can still take significant time and money to develop, and the early adopters who trickle in don’t always represent the needs of a larger mass market. But startups can learn even earlier and cheaper by developing a Minimum Viable Concept and testing it with potential users. In this session, award-winning entrepreneur, author and investor, Bob Gilbreath, will teach founders this methodology adapted from the world’s most innovative companies. By testing a Minimum Viable Concept you’ll bring early consumer feedback into the development process to improve your odds of success. Learn how to avoid the traps of traditional market research, pivot before you have to, and better convince investors of market potential.”

Questions Answered in this Presentation:

• I think I’ve got a great idea, but I’m not sure whether the vast market of potential users will like it. How can I learn before I launch?
• Everyone says that startup founders should interview prospective customers to gain insight before launch, but what are the right questions to ask?
• Investors tell me that they are not sure if people really want or need my startup idea. How can I find the data I need to convince them?
• I have multiple features and functions that I could offer in my new product. Is there a research tool I can use to help drive these decisions and set priorities?
• There are multiple target audiences that I could focus on for my new startup idea. Is there a good way for me to narrow that choice?

Thanks again and I hope to see you @SXSWi 2013

+Bob Gilbreath