How much will they pay?

You need to understand the value your service or product will deliver to user(s). Value creation is more than just money; understanding what value you deliver enables you to confidently justify as high a price as possible.

To probe for the value of your product or service you must be able to tell a story that enables your interviewee to picture him or herself using and enjoying it. If you have drawings or images that can help someone relate to your story that’s even better. The story should be about them, “Imagine yourself walking in this mall [sitting on this beach] …” “Imagine having this AI assistant that reads all your emails and only keeps the ones its knows will interest you …” Conducting your interviews near where the product or service will be used helps you tell a better story.

Ask to interview people that seem to fit the profile of your primary user persona. At this point in your investigations, tell people you want to interview that you are the CEO of a company that is testing an idea for a new product or service that doesn’t yet exist, and you want to interview potential customers yourself to determine if it is worth pursuing. Ask the person if they have just a few moments for you to describe the idea and answer just 5 short questions. Tell your story. Take notes as they speak to capture and remember what they say. If they want to tell you more than what you ask for, that is great; listen and write it down as that is also valuable.

The 5 questions to ask

1. How did the story about the product or service make you feel?

2. Would this be something you would be ‘excited’ to buy (or “use” in the case of a non-profit).

3. What do you do today to get a similar result and feeling?

4. How much does that cost in terms of total time and money to do that?

5. What other benefits would you gain by using our product or service from what you do now?

How to probe for alternative choices

Armed with how interviewees answered, “What do you do today to get a similar feeling or result?” you want to investigate the on-line forums that discuss these alternatives. Do NOT participate as you do not want to tip competitors off to what you plan to do. You want to note what good things and bad things are being discussed. You also want to note if anyone is suggesting improvements or hacks to how to achieve the desired results. And now investigate how much each step of alternate solutions cost. Some interviewees may have mentioned prices but verify as best you can with on-line sources or through your contacts.

Create a table with 4 columns. The first column is for the list of steps used to achieve an alternative result. The second column lists the cost of taking that step. The third column lists what frustration is associated with that step. And the fourth column is for listing any happiness generated by doing that step.

Make and fill out a similar 4 column table for any other alternative that was mentioned more than once.

Finally, make and fill out a similar table for your using your envisioned product or service, being honest about potential frustrations with its use as it is possible all the people you briefly interviewed may have overlooked some downsides that you suspect might arise.

At this point note that if there are two or more alternative ways that potential customers achieve a similar outcome that you plan to deliver that you have discovered two new personas. One persona prefers to get a result one way, with its associated costs and frustration, while the other persona prefers an alternate set of steps, costs and frustrations. If you can differentiate the product or service you would offer to each, you could conceivably charge two different prices. Or, if that is not practical, then serve both personas with one product or service offering by setting a price that will be viewed as compelling by the persona using the least costly but possibly more frustrating alternative.

Summarize the potential net value you plan to deliver

Add up all the costs associated with the least costly alternative.

List all the frustrations associated with the least frustrating alternative (this is not necessarily the least expensive alternative). Which of these frustrations will be completely eliminated with your solution? Are there any happinesses that your solution adds compared to both alternatives? If you thought of a beautiful delivery personalization as you did sprint 5, then that also should be added here.

In general, a consumer product that creates more happiness with fewer frustrations is viewed as a luxury. It can sell for 2 or 3 times or more than a product with more frustrations. For the purposes of estimating your revenues, assume 3 times. In selling to business and government, you can charge the same as the least costly alternative. The reduction in frustrations and the increased happiness you deliver results in a vastly increased likelihood of becoming the dominant vendor for that product or service. You can double the normal “win percentage” in estimating how much business you could capture.

Next steps

At this point, you have all you need to make an evidence based estimate of how many target persona customers you will interact with in your first year and how much you can initially charge them. Does multiplying these two numbers together get you enough revenue to get you excited? If so, then you can skip to sprint 18. We do strongly suggest that you also do sprints 7 to 17. They focus on developing the skills of a great startup leader and these skills will make you a much better decision-maker, a more charismatic person, and someone others trust and want to work with. Acquiring these skills also greatly increase your chances of success and also your chances of staying the leader during the challenging times all startups encounter.