JUSTIFY MY LOVE: Customer insight for market validation
Published on 14 May 2020
Back home, when the entrepreneur pitched his business idea to friends and family, their response was lacklustre at best.
Fast-forward two years, Gecko was achieving a 472% week-on-week growth rate. Despite a Coronavirus curb, the start-up still enjoys a 100-200% sales increase each week.
GAME, MINDSET, MATCH
Having navigated the unknown challenges of Coronavirus, Businesses emerging from isolation may have a new challenge on their hands; ensuring their mindset is set for success.
Elize Hattin, SmartHub Business Manager says because we have all experienced the trials of Coronavirus and the disruption it brought to our personal and professional lives, adopting the right kind of mindset as a businessperson is vital moving forward.
"You might have had a great mindset six months ago and you've been through a rocky road…it's a really good reminder for us to reset our mindset and how we think?
"With the right mindset, businesses might also want to think about how to growth hack their business and getting sales and their customers back, with almost no money to invest up front," Elize says.
Sydney-based Entrepreneur Ben Kennedy used his time in the SmartHub's Turbo-traction program to validate his concept for a rental marketplace that allows people to earn cash by hiring out items gathering dust in their homes.
"I remember when I got back to Sydney from New Zealand I thought, "Oh. This is such a great idea," and I asked my friends what they thought, and they just sat there. Suddenly, I was thinking, "Oh…Maybe it's not such a great idea?", Ben reflects.
Rather than giving up on his idea, Ben realised he lacked the terminology to accurately convey what Gecko was. He says it took him 14 or 15 months to properly validate the business, which he did with the assistance of the SmartHub start-up community.
Since then, the entrepreneur has been " been going full at it," enjoying a growth rate of 472% week-on-week before the Coronavirus pandemic. While this figure now sits around the 100-200 mark, 100% growth month-on-month is phenomenal, in anyone's language.
ALIGN WITH YOUR PASSION
With the growing popularity of entrepreneurship and the status of being a businessowner, Ben says this can cause people to do things for the wrong reasons.
"You need to be in business for the right reasons. If you're just looking to be a millionaire or be rich, I just don't think small business or start-ups is sort of the thing that's going get you there.
"What's important is having a real passion for something. Knowing your own purpose and your own intentions. Bring it back to your own personal goals. Where do you want to be in 10 years’ time, and how do you want to get there?," Ben suggests.
As a young start-up, Ben also cautions against compromising your happiness for the sake of chasing the big bucks.
"A lot of my friends are really, really intelligent, but their passion may lie within hairdressing or shoe sales or something.
"For me personally, what's more important than getting rich and famous is actually being happy. If you're sad earning a million dollars a year versus being happy earning $50,000 a year, you are 100% winning being happy with that $50,000.
"When you are passionate about something for example hairdressing, you won't be earning $50,000 a year. Maybe when you first start, but then you'll open up a hair salon or a barber and grow from there. You'll work extra hours because you just absolutely love what you're doing. Then you'll have a store in Sydney, you'll have a store in Queensland, you'll have a store overseas then you'll be able to have a franchise of barber shops.
"If you're passionate in something, you should really just double down on it because you will work harder and go further than someone who is stuck in an industry that they actually do not care about," Ben encourages.
DJ DECKS AND SKI GEAR
From renting skis for a weekend in Thredbo to hiring DJ decks for a twenty-first birthday, Gecko not only helps people rent what they need and makes others money in the process, the business vision is to help the environment by changing consumers to sharers.
This is a passion Ben discovered, like many other entrepreneurs, working in an industry he was not passionate about.
I used to work as an auditor from a mid-tier firm in Sydney. When people ask what's the best part about work, and you say the culture, then the job is no good. It wasn't that the work was terrible, it wasn't the right fit for me.
"It's amazing how much that impacts your mindset and how much you want to do things. I'm 100 times more happy working on my own thing and while I'm earning less now, there's no price for happiness," Ben advocates.
Elize agrees, saying in the early days of starting a business, you work harder and earn less, but if you validate your market, business idea and market to reach your customer, over time you'll be earning more than the people who remained in employment.
For wanting to start a business and enter their industry of passion, Ben and Elize suggest starting a side-hustle is a great way to transition.
A side-hustle means working on the business part-time while also working a paid job, until your business idea has been validated and you have confirmation you can make money from it.
Once you can demonstrate you will generate enough money through the venture to support yourself and others through pursuing that business, Elize says at this point you can make that leap between employment and business.
"That's how a lot of people get out of the corporate market and into jobs. However, with Coronavirus, for people with time on their hands, this might be the ideal time to test that idea that you've been sitting on for years, and to enter an industry and a business that might fill your bucket with passion and joy," Elize proposes.
Ben agrees the rare opportunity we currently have is perfect for testing whether a business idea is right not only for the market, but for you as a start-up.
"If you notice it's not something you really want to do in your free time," then it's probably not the path you want to go down," he admits.
Elize says there is a lot of mindset around validating too, saying one of the greatest challenges she sees for people starting a business or people already in business need to capture a new market, is knowing whether their idea is good enough.
Ben likens the way he looks at this validation process to an equation:
Point of differentiation X Market demand = VALIDATION
"Your point of differentiation is your sweet spot, your secret sauce, what you're doing differently.
"Market demand is whether people actually want to buy this?
"In terms of a practical sort of mindset to put this in perspective, something like Uber…if you had a different ride sharing company, there's clearly market demand and people definitely want this.
"But do you have a point of differentiation to Uber? A car ride sharing business is the exact same sort of thing, but then on the other side of the spectrum you have a scooter which is the same sort of concept but your point of differentiation is going to be it will be a lot cheaper.
"However, will your market demand actually want this? Probably not, because it won't be as safe and there's a lot of legalities that are involved. That's how to put it in perspective," Ben illustrates.
So how do we as start-ups and entrepreneurs know whether the market wants what we want to sell?
Ben says he learned this through both his SmartHub experience and speaking to everyday people as well as his actual target market.
Acknowledging Gecko has both a demand-side and supply-side to the business, Ben says he had to work with two different customer sets.
The first thing he needed to validate was the supply-side, as without this, he would not have the demand either.
"I put out a survey to over 100 people and found 64% of people said that they would hire out their items, which was not an amazing result.
" I asked what if you had a bond and security measures in place that could guarantee you either get your money back or your item back?" … that number jumped from 64% over to 89%.
Immediately seeing the value of security, Gecko implemented a robust five-step security system to the hiring process.
In terms of demand, Ben admits this was difficult to test and measure because he was unsure which industry to target; not knowing which would generate the highest revenue or have a high gross merchandise volume.
Additionally, Ben was not sure exactly what people wanted to rent.
"One thing we found in validation is that heaps of people have dresses at home, but there's so many dress-hire ventures out there now, the market's full of them.
"Then we went to renting gardening and tools and we actually did find a fair bit of demand. But we realised the gross merchandise volume and the revenue, just was not quite there. Our average sort of sale was around that $30 mark, which means that we're only getting 20% of that which is not ideal," Ben reflects.
Finally, Ben realised there was a huge demand for event equipment such as DJ decks and speakers. He says the gross merchandise volume for this category was so high because even second-hand, DJ decks are expensive.
"How much easier is it just to hire one out for a party or if you want to teach yourself how to use some decks? …that's how Gecko came about," he says.
To test which phrases work when speaking to your potential customers, Ben recommends using Facebook, Google and Instagram ads. He says one thing he was ensure about was the reasons why people were listing items to hire.
"The main thing that we realised is that people want to make money…that was the number one reason why people would list an item. The second reason was they wanted to save to go and travel or go to a music festival. Number three was helping the environment.
"That was really powerful for us because we actually overvalued how much the environment would make an impact on someone hiring an item or not because what they really cared about was making money," Ben acknowledges.
SLINGSHOTTING OUT OF THE PANDEMIC
How can business growth hack, or as Ben puts it, slingshot themselves out of Coronavirus? How can they generate 100 sales quickly without spending too much money?
Ben says the first step is understanding what problems already exist and what is currently being done to address them.
"What are people doing already as a substitute for what your product or service is going to make much easier.
"We found who wanted to hire items would go to Gumtree or Facebook marketplace and they'd say hire as opposed to selling.
"We also noticed when they did this, they would receive a tonne of irrelevant messages from people who think they were selling an item…it's a real annoyance or pain point for people. That was something we doubled down on and was a big part of how we made our first 100 sales," Ben recounts.
The Gecko founder also attributes the business' success with insight from their first customers.
It was Ben's friends who became his first customers, when they needed to hire event equipment.
"We actually tested the idea without even building a product first to see how this would all work. We realised people don't want to go drive or pick up items, so we put in a delivery system and started getting scalable.
"Finding out everything you need to know from these customers, is important because they wanted this yesterday. Finding those customers that love what you're doing. They give you their ideas and then you make them feel valued as well," Ben says.
1. Find your customers at the point where they are ready to make a purchase
2. Intercept that customer and bring them to you by delivering things quicker, or easier or making it more secure, or doing something that is better than the solution that they're currently engaging with
3. Give customers the best possible experience that you can, and go the extra mile,
4. Use your loyal customers and ask yourself "Where am I going to find people just like them?"
5. Become resourceful to deliver an exceptional customer experience
100 LIKES VS. 5 LOVES
Would you rather have 100 people that like your product or would you rather have five people that love your product?
Ben says the most important thing is having five customers who really love what you are doing. He believes this helps shape the future direction of your business.
"There's going to be other people like that are out there. You just need to just keep hitting those types of people, and then they'll love the product, they'll tell their friends and then you start getting referrals," he explains.
Central to this is creating customer personas that your marketing messages will speak to and resonate with.
Gecko's customer persona is young, so social media is an effective communication avenue.
"Louis is one of our biggest lenders and he's earned about $2,000 - $3,000 just by using Gecko. We have all his details just by chatting, his goals, ambitions and we put it all into a lender record. For every message and social media post we create, we ask "Would Louis Love-React this or Like-React?"
"We also have Jennifer, who's a little more mature…she's made $3,000 as well because she used to work in events and has a tonne of items stored at home. We created this avatar character persona for Jennifer as someone we're targeting in that sort of sector," Ben illustrates.
Elize and Ben agree businesses require no more than five avatars and should only create marketing their avatars will love and interact with.
"Use images they're going to love, use words that they will relate to and try to create interaction with them. We like people that are like us, so those people will refer more of their avatars to us, we can transact more and we can get to first 100 sales without having spent a heap on marketing.
"You should always have a percentage of your content as exploration content where you're just putting it online to see what your market will respond to and how they will respond to the content," Elize advises.
STARTING A START-UP
Stuck in a job or industry that doesn't fill your life with joy? Why not start validating or pivoting your business into an industry you could be, or are passionate about?
Use this opportunity or your spare time to test whether you can start a side business you could eventually transition to full-time.
If you are currently in business and want or need to innovate and pivot, brainstorm some ideas and use this time to validate whether the market really wants what you want to sell.
As part of this process, test and experiment to find the messaging and phrases people in your market will relate to.
Do online searches to see what people are searching for and talk to real customers.
Keep a document of what they love, their goals, their frustrations and fears. Try to understand everything from their age, where they are living, what they spend their time doing, to their psychology. Get a deep understanding of them, their pain points and what your venture does quicker, easier, more cost effectively than current alternatives to address these problems.
Using this intel, consider building the smallest, cheapest and simplest prototype of what you want to test and put it in front of people to see if they will engage with it.
Most importantly, align yourself and your passion with the industry that you want to move into and have the right mindset.
Ben Kennedy is the founder of online rental marketplace Gecko, helping people make extra cash by hiring items gathering dust in their homes and garages. Check out some of the weird and wonderful things available at www.gecko.rent
Ben is also Turbo-traction lab Alumni; a hands-on program designed to build a modern business in 80 days, delivered with a ‘lab’ mindset.
An initiative of the Australian Government, in conjunction with Capital[b] Pty Ltd and Rockhampton Regional Council, Turbo-Traction Lab is a program delivered by the SmartHub.
The SmartHub encourages entrepreneurs and business owners to adopt technology and modern based business practice to make the entire business journey more profitable, more enjoyable, more effective and more efficient.
Being part of the SmartHub gives local business owners opportunities to meet with and learn from mentors, to help them learn the discipline required to succeed in business.
If you’d like to learn more about becoming part of the SmartHub, contact us via the following channels:
Phone: 07 4936 8444