 Namaskar, I'm Professor Devdeep Purukayastha from IT Bombay and I welcome you to my course, Business Fundamental for Entrepreneurs, Part 2, External Operations. I also welcome you to this industry-practition of you of how to discover your customers so you can launch new products to meet their needs, whether you are a startup or whether you are working for a large company and grow your business. So today's speaker is Dr. Nishant Tikkakar. Dr. Nishant Tikkakar has done extensive work in the domain of medical devices. At the Betic Lab in IT Bombay, he has also been an adjunct faculty at the Deer School of Entrepreneurship at IT Bombay. Prior to joining IT Bombay, he was in the United States and he did his engineering at VNIT and then his master's and PhD from the University of Utah. He has done extensive research and publications in the domains of medical sciences, medical devices. With that, I'm handing over to Dr. Nishant. Hello, Namaste and welcome to this video on what is called customer discovery in the entrepreneurship world. It is important that you understand and absorb this concept in your mind completely if you want to do well as an entrepreneur and as a startup. So, as you see in this image on the left, be it a startup, be it a small or a medium size company, be it a large business, large corporate, global corporate, all of them want to attract maximum number of customers to their business and to their products. Like a magnet, they want to have some kind of a magnetic capability in their products so that they absorb all kinds of customers, maximum number of customers, as well as the best paying customers, the premium customers. So, what we will do in this video is try to understand what are the techniques to attract those customers, try to understand what is it that majority of the customers want in their products that will help you develop your products in the best possible manner. Remember that developing a new product takes a lot of effort, a lot of time and also involves a lot of financial cost. It is important that you optimize your efforts, the time spent on developing a new product as well as minimize the cost in developing the new product. So, we will try to look into some of the techniques that can help you figure out ways to do that. As seen in this image, we know today the global population has exceeded 8 billion people and people all around the world are different from each other. Each individual is different, not just that there are regional differences, there are differences based on states, differences based on countries, differences based on parts of the world. There used to be a time when majority of the new products, the technology based novel products were developed in the western world and they were then exported out into other parts of the world such as India, Africa, South East Asia. But today the times have changed, we are in the 21st century, we live in an internet driven world, the world has become a lot more flatter. So, it is very much possible for you to be in a developing country or even in an under developed region such as India or Africa or South East Asia and develop novel products that can be attractive to people in developed parts of the world such as the United States or Europe. So, when you think of potential customers, you should think at a global level, consider all potential customers at the global level, they can be in any part of the world and make sure that you find ways to reach those customers. But before you do that, it is important to understand in particular what are their needs and desires, what is it that they want in the potential products. This will help you develop the best possible product to begin with and also quickly sell them and generate a lot of revenue. And this is important from the perspective of a startup because a startup has already incurred a lot of costs before they launch their first product and has very little time, very little gestation period to recover those costs. Now, based on your product, you should try to figure out the concept of TAM, SAM and SOM. TAM stands for Total Addressable Market, SAM stands for Serviceable Addressable Market and SOM stands for Serviceable Obtainable Market. So, let's speak briefly about this. Let's say you have a product that will be used on a daily basis. Let's say an exotic perfume that you want to launch in the market. Now, who are most likely going to be the customers for this new exotic perfume that is going to be very expensive? Chances are, these are in the higher income category around the world. Most people in the higher income category are either business owners or are highly educated. So that becomes your TAM. Across the world, you should try to determine what is the population or the number of people that satisfy this category of high income. That becomes your TAM. Once you have figured out the TAM, you should focus on a certain specific region. Let's say you choose to sell your products only in India. That becomes your SAM. You want to target high income people within India, the higher educated people, the business owners in India. And within this group, within the Indian group, you should try to figure out who would actually be willing to pay for your product. Chances are because it's a perfume style product, educated women would be willing to pay more than educated men. So that becomes your SAM. It is important that you understand these concepts before you begin your product development and start-up development. So that you can reduce the gestation time of the development of your product and do it at minimum possible cost. So, irrespective of who the target customer is, each customer has his or her own needs and desires. Now, if you try to figure out on an individual basis, it becomes an impossible task. But what can be done is you can try to figure out the needs and desires of multiple people and find out the common needs and common desires within that group. Obviously, a new product has to satisfy at least some of them, if not all of them, the needs and desires that the entire group has. Based on the needs and desires, you should try to develop your product and highlight the features of the product such that they address the needs and desires of the customers. Increasingly, not just that, what you have to offer is a wholesome user experience. A great example can be that of a smart glass. Smart glasses come with a lot of features. But if they do not offer a complete wholesome, enjoyable experience to the customer, they fail. This has happened in the past. This can happen in the future. Obviously, you don't want to be in that seat where your product has failed. So, as seen in this image, you have to make sure that you have the right product features that you can offer as a value proposition to the problems or the needs and desires of the customer. Always try to solve the problems faced by the customer, offer a solution, not the product. So, as seen in this image, if you try to fit these square pegs into these triangular crevices, do you think it will work? Certainly not. They will never fit. So, what is important to understand is the concept of the right product market fit. Sometimes, this may seem very obvious. Don't you want the product that you buy to satisfy your expectations? Yes, but there are hidden things in each individual personality that you should understand to develop the best possible product market fit. If that is not done, chances are your products can fail. A good example is that of Google Glass, beautiful product developed by the largest company, best possible technologically advanced company that did not work when it was launched. So, it is important that you understand your customer, understand their needs and desires and make sure that your product features and the value proposition that your product offers is in perfect alignment with the needs and desires of the target customer. Only then you should proceed to developing your product and not before that. So, to understand your customer, how do you go about understanding different customers? What you need to understand is the concept of customer persona. What makes a customer persona? The obvious characteristics are the physical characteristics, the age, the looks, the gender, the body type, body size, etc. However, the not so obvious characteristics of a customer can be their geographical region, their historical background, their cultural background, their religious beliefs, their social circumstances. Even less obvious characteristics are their income, their designation, the company that they work with. All of these constitute customer persona. But if you dig even deeper, what you should try to find out is what are their personal values, what are their personal likes, what are their disc likes, are they facing any certain kind of challenges. Only when you find out all this information of a large number of potential customers, you will be able to define the customer persona. So, what we see here are the different pillars of segmentation. Typically, a customer persona can be segmented into the demographic characteristics relating to the obvious age, gender, physical characteristics, their educational achievements, their income, their designations, the company they work for. Or the geographical characteristics depending on their location, city, whether they are urban customers or rural customers, whether they are in a specific state or region of the world, the local culture, the overall climate can influence their choices. All of these play a role in deciding what product should a customer spend their hard and money on. The not so obvious characteristics are under the two pillars of psychographic and behavioral. Psychographic constitute lifestyle, interest, attitudes. Note that even two brothers with the same background and that grew in the same home may have different interests, different lifestyles, different attitudes, certainly different opinions. And then of course, further you should try to understand their deep values, their behavioral characteristics such as what stage of life they are in, what are the benefits they seek from this point as they go forward in their lives. Only when you get all this information, are you ready to start building your product. Once you collect all this data, first key thing is to collect all the data in an objective fashion, in an unbiased manner, in an open transparent manner, so that even the customers are aware that you are developing a new product, and you have the right data. Once you collect the data, you can then work on the data and segment the potential customers in different categories as seen in this image on the left. So, let's say take an example here of how you can segment potential customers. This is a graph of income versus age. We have categorized customers into three different categories, students, retirees, and working executives. As seen, students and retirees, chances are they will have less income, which is why they are lower on the y-axis. While working executives will obviously have a lot more income, which is why they are higher on the y-axis. However, students tend to be younger, so they are on the left of the x-axis or age. Retirees tend to be older, they are on the right of the axis, entitled age. Executives fall in the middle. With this kind of segmentation, you can identify which is the group that you want to target, depending on your product. Once that is done, now let's say you are developing a product that will likely be utilized by young working executives. Now, within that age group, as seen in this image on the left, you will find all kinds of people. They will look different, they will appear different, they will dress different, they may have different attitudes. So, how do you determine who is most likely the working executive that will pay for your product? Chances are he or she looks something like this. He dresses up well, he looks better educated, he looks very decent, and appears formal in his attire and behavior. That is the way to define your potential paying customer. Irrespective of the product you choose to work on, you should work on identifying such a customer down to the individual level. So, let's look at what are the methods that you can adopt to do this kind of customer discovery. What I have done here is I have listed various methods that are popularly used. These are typically called market research methods. There are companies that do this and they have become multi-million billion dollar companies. Some examples are Ipsos or Reuters and so on and so forth. They use different techniques to understand their customer. Most likely when you have a large customer base to choose from or to pick from or to identify potential paying customers from, the best way to start is usually conducting a survey. This can be an online survey using Google Form or it can be an offline survey where you do conduct the survey in person in pen and paper form. From there you can start in identifying the right customers. Make sure that the questions asked in the survey are objective. They are not biased. They should not carry any of your personal bias and they are close-ended, meaning they should yield meaningful answers to the questions that you are trying to address. Once these surveys are done, you can do other things. You can observe potential customers in real-life scenarios. Let's say you are trying to pick out what is the best color for packaging. You go in a grocery store or in a large store and you spend time observing the choice of packaging that customers like. It can be based on color. It can be based on size or shape or certain symbols. This is again unbiased, open-ended observation that you have to do yourself. The other few methods are focus groups where you bring potential customers together in a closed environment like an enclosed room and you make them discuss what is expected in the potential product that you are developing. That is called a focus group discussion. You are away from the discussion. You are just listening to it and you are taking your own notes and observing what customers want. Competitive analysis refers to other products that can be potential customers that are either already in the market or can be quickly in the market. There you try to study what the competing products offer to the customers and then bring out some uniqueness to your own product that will help you beat the competing products in the market. Personal interviews obviously means that you personally interview customers one on one with the right questions, try to understand their deep values, their deep expectations from your products. And field trials means you make a certain, it's like making a pilot number of products, running a pilot program, and you launch them in the smaller market and then gather data on what customer feedback is so that you get true meaningful data of how your product will perform in the market, okay? Once you do all these customer discovery methods and collect the data, you will be able to better define your product functionality, the how it is supposed to function, the aesthetic aspects of your product to make sure that it is attractive right from day one in the market as well as the price point that the customer is willing to pay for your product. And not just that, if you know the price point, you can even back calculate the cost within which you should produce your product to make handsome profit. So if we compare these methodologies, what we find is that the surveys and observations yield qualitative as well as quantitative results depending on the kind of questions you ask or the observations that you make. Other more involved, more intense customer discovery methods yield mostly qualitative results. And you have to figure out ways to determine the key points in a quantitative manner based on the customer feedback. The surveys and observations tend to be low cost, tend to take shorter to medium time for the most part. Other methodologies take longer because they are more intense, they are more involved but yield better results, yield deeper results and help you understand the customer completely in a wholesome manner. So depending on the product you are about to launch, you should adopt certain methodologies. If not all, certainly some of these to understand your customers before you launch the product or even make the product. So let's take a small break. We will let you reflect on some of the questions that we have posed here. We want you to answer them in true or false and we will come back to further explain how to make your products and how to address customers. Thank you.