The Investor pitch and the customer pitch – what’s the difference?

sales pitch

A common confusion I find amongst entrepreneurs is about the audience for their pitch. Many create a generic pitch which they then try to use for business plan competitions, investors, partners, customers and anyone else who may be interested in their company.

The article Why your investor pitch is ruining your sales pitch by April Dunford on HackerMoon.com does an excellent job of explicating the important differences between the two pitches a startup needs: the customer pitch and the investor pitch.

….. some founders start seeing their pitch contest pitch as “THE pitch” — a general-purpose sales story for any audience. But customers are very, very different and they are looking for very, very different things. In a customer pitch the starting point positioning is different, the value they are looking for is different, and the call to action is different.

Here’s the three major differences she lists. Read her article for important detail on each one.

1/ The Set-up: Positioning is completely different for Customers vs Investors

2/ Why you: Investors and customers look for different kinds of “proof”

3/ The Ask: Selling your company vs selling a solution

April Dunford and I agree that there are a lot of problems with pitch contests – and I’ll post about that at a later date – but one of them is that “they reward a particular kind of pitch that doesn’t work in any other circumstances.” As she states: Customers hate your pitch contest pitch.

The core reason for this problem, however, is never made explicit: the first rule of any presentation or any communication for that matter is: who is the audience? The second is what is your goal in communicating with this audience? Once you apply these two rules it becomes painfully obvious that investors and customers are two radically different audiences – though both may give you money and your “ask” is also radically different.

So once you have completed your business plan competition pitch, pitch it out! Start over again tabula rasa with your customer pitch. And the same rule applies to both: practice, practice, practice! And learn from your feedback. Unlike investors, who hate to say “no,” on the off chance your venture may actually be successful and they will want in at a later date, customers have no problem saying “no”! They are a much tougher audience! What might have worked in your B-school contest will probably not work with real customers.

The bottom line is start talking to customers before your start developing your pitches! Nothing impresses an investor more than a venture that has real customers, customer engagement, and real growth in the customer base. And if you are too early stage for those accomplishments there is still no substitute for primary market research – talking to real customers instead of relying on analyst reports and other secondary research sources.

Working backwards – the core of Apple’s strategy – should also be yours

backwards

I mentor a lot of very early stage companies. Virtually all have a vision, a team, and a product in some early state of development. But what almost all lack is a target customer. So often I see “solutions in search of a problem.”

In the Forbes article Corporate Mission Statements Don’t Really Matter, Unless You Want To Be A Great Leader by Len Sherman there’s a powerful quote from Steve Jobs:

One of the things I’ve always found is that you have to start with the customer experience and work backwards to the technology. You can’t start with the technology and try to figure out where to try to sell it. I made this mistake probably more than anybody else in this room and I have the scar tissue to prove it. We have tried to come up with a strategy and a vision for Apple that starts with what incredible benefits to give to the customer and working with the customer, not starting with the engineers and figuring out what awesome technology we have, and how we can market it.

Why do so many startups ignore this strategy? I believe because most of them are founded by technologists/engineers. They are builders and there is nothing wrong with that. But architects don’t design buildings without clients; engineers should not build products without customers.

Early in my career in technology I noticed that many of the best products were designed to solve a problem the engineer/inventor had. Dan Bricklin, inventor of VisiCalc, the first electronic spreadsheet, got tired of tediously recalculating business models in his Harvard Business School classes with a calculator, pencil, paper and eraser and invented a better way – the electronic spreadsheet, which enabled users to ask “What If?” quickly, easily, and accurately. Steve Wozniak wanted a computer of his own, but couldn’t afford one. So he designed the Apple I around the cheapest chip he could find, the 6502 and built his own. It was Steve Jobs who had the vision that there were lots of people who wanted to own their own computer.

Today entrepreneurship is all the rage from universities to co-working spaces to incubators/accelerators. Everyone, it seems, wants to be an entrepreneur! How cool to have “CEO” after your name! Unfortunately the lure of fame and fortune is attracting too many camp followers and wannabes. And too few people who want to solve a customer’s problem or create a new opportunity for people.

So here’s my advice for engineers and others who are itching to do a startup: think about your own life, your problems, your hassles, those of your friends. Look first for a problem that can be solved by applying technology, rather than creating technology and then searching for a customer. Technology is an enabler, but people don’t buy technology. They buy what it enables: something that makes their life easier, better, more entertaining: benefits. The classic example I use is borrowed from Reis and Trout, authors of several seminal marketing books. People don’t buy drills for the thrill of owning one or the whirring sound they make – they buy drills to make holes. Drills are a means to an end – the hole. The product of the product. That’s the customer benefit.

Try thinking more like an anthropologist than an engineer. Get out of your comfort zone of going to startup networking events and try spending time with workers – whether they be truck drivers or artisans you’ll be exposed to a new set of customer experiences. And often it’s the outsider, not the insider, who revolutionizes an industry. I doubt Travis Kalanick, founder of Uber, ever drove a cab. But he probably rode in plenty and discovered lots of problems with the cab riding experience.

Once you find that tribe that is struggling with a common problem, then you can go back to the lab and take what you know about engineering and build a solution. That begins the iterative loop between your solution and the customer’s problem.  The more you understand the benefits you can provide the customer the easier it will be to create a product or service to deliver those benefits. You won’t hit the bull’s eye with your first try, but if you are in touch with the customer you’ll hit the target at least and then can work with them to get to the bull’s eye.

So while it seems counter-intuitive, working backwards from the customer experience to the technology is the way to insure you develop a product that customers find useful, and finding it useful, will be willing to pay your for it.

If the business of business is creating customers, per Peter Drucker, the way to create a customer is to start with understanding the customer experience. And if that customer is yourself – that’s perfectly fine!