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Pound Takes » Blog Archive » The advantage of 1,000 customers
Ideas on Engineering Breakthrough Applications

The advantage of 1,000 customers

In this post, I make the case for paying little attention to anything else but landing your first 1,000 customers in a new venture. It may seem limiting, but it’s the right first step.

At Pound, when we’re helping a business launch a new web app, social network or other website-type of product, you’ll see and hear a mention of the first 1,000 customers in just about every meeting. The reason is, we centralize all plans around landing the first 1,000 customers—because that’s how we define early success in our projects.

We stay aware of a ton of things when designing and building websites, like user experience, branding and scalability. But, all of these efforts are measured through the lens of the first 1,000 customers. Will this matter to the first 1,000? Will the first 1,000 use this? Will the first 1,000 pay for this upgrade?

This can really confuse our clients and other firms we might be working with. But, anyone who’s ever planned a large project knows that the only way to eat an elephant, is one bite at a time. And, any student of strategy knows that it’s all about what you decide NOT to do that provides an advantage. Giving your startup team permission to focus exclusively and obsessively on the first 1,000 customers allocates your efforts and resources towards a meaningful and tangible goal. One that, if met, will appease all your major stakeholders: investors, staff and customers.

I can hear the cries now, “But our business doesn’t work until we reach a million users” or “We’re focused on deals that will bring thousands of users at once,” or, my favorite, “We have lots of different types of customers, and we have to please them all.”

All of these points are valid, but none dismiss the importance of first 1,000 customer strategy. If you’re looking for partner or licensing deals, I hope you are using the common thread of product positioning. Otherwise, you’ll accumulate constituencies with competing priorities, be buried by “me too” feature requests and peak as an average product at best. Secondly, if you have a network business, like ebay, for example, that only works with a large member base far in excess of 1,000, then you better either be finding a way to make your business work with a smaller subset (like Etsy did) or be raising lots and lots of capital to buy time.

So, why is the number 1,000? Well, the truth is it’s not always 1,000, actually. It varies by business, but for many of our clients, that number seems to be 1,000. For free and low cost memberships, 1,000 members seems to be a number that is obtainable within the first 3 to 6 months without a mega-advertising budget. If you have a $500+ price point, your target may be more like 100 customers, initially.

The number itself is just a target that should represent the following:

    1. just enough to prove there is a market for your idea
    2. enough to prove you are able to accumulate sales/customers
    3. able to give you considerable feedback on your ideas and changes to the product

Those first two are great in keeping your investors at bay, and keeping moral of the team very high. But, it’s the last one that is the hidden gem and the reason this is priority one. When you reach 1,000 customers, you have a considerable group of early adopters that have admitted they have a problem you can help solve. This is where the network effects of word of mouth and real time customer feedback come in.

This critical mass of targeted users can ‘vote’ for new pricing and product changes through referrals, up-ticks in use and customer support calls. In the pre-1,000 days, much of your marketing and product design is done in the dark and feels more like just seeing what sticks. Post-1,000 decisions are based on data and A/B tests that can be run quickly, often completed within a week.

At post-1,000, customers start using your products and services in ways you never thought possible: combining them with other products or in markets you were unaware of as targets. People start noticing what you are up to and niche media may become aware of you. In other words, things start getting interesting.

The second thousand customers will either come with increasing speed, or your numbers will flatten out. Either is a good thing, because you are getting a trusted source of advice for what is and is not working about your product and the markets that you choose to target.

If the latter happens, this user base will accelerate the development of your new product, which is quite an asset to have. This is the perfect point to start over or change your business model (give it away, charge a subscription, license it, etc), because you have a customer base, but not a huge one.

In summary, the source of feedback you’ll receive from your post-1,000 audience will leverage your future product bets and improve the likelihood that you’ll breakthrough to critical mass, all while satisfying your investors, partners and staff.

This is the first part of an entire series a launch strategy that focuses all resources for a new product or business exclusively on landing the first 1,000 customers.

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  1. by Pound Takes » Blog Archive » Launch Strategy: The First 1,000 Customers July 1st, 2009 at 4:06 am

    [...] 1: The advantage of the first 1,000 customers Part 2: Who are your first 1,000 customers? Part 3: How to get 1,000 customers Part 4: Common [...]

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