Welcome to the next lesson in our online JTBD course. You will learn how to identify the critical customer in your market. In this video, we will show you how Nest succeeded by targeting a different customer in the thermostat market than the incumbents.
Identifying the critical customer in your market is the key to avoiding customer mistakes that have ruined once great companies.
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Define Your Customers Transcript
In this lesson, you will learn why traditional customer definitions are flawed, and how these flaws in your customer definitions and personas can result in your competition stealing your customers and your market share.
The key to your company’s success is building, marketing, and selling products that satisfy customer needs better than competitors in your market. This brings us to the key question for this lesson.
Who Is Your Customer?
To describe customers, companies often create personas or fictional characters who represent a user or customer type. Customer personas are often based on characteristics, including demographics like age, gender, and income, geographics like region or zip code, and psychographic, behavioral or situational characteristics.
For example, in a consumer market, you might create two different personas. Paul is younger, urban with a master’s degree. Kate is older, rural and has a high school education. In business-to-business markets, you might create customer personas based on industry verticals, like medium-sized consumer packaged goods companies, or East Coast financial services companies.
While personas can be useful in certain contexts, the problem with personas is that characteristics do not cause people to buy products. Customers buy new products because they struggle to get a job done at a price they are willing to pay, regardless of their persona or their characteristics.
Let’s look at an example with Apple and Google Maps. Who are the customers to target in this market?
In this market, the underlying customer’s Job-to-be-done is to get to a destination on time. This is the reason people use Apple and Google Maps. We will define customer jobs in much more detail in the next lesson. But in short, your customers job-to-be-done is a goal they are trying to achieve, independent of your product or your solution.
So who are the customers to target in this market? Who struggles to get to a destination on time?
If we created two personas using traditional characteristics, these two personas would NEVER be in the same customer segment because they have VERY different characteristics. But could they both struggle to get to a destination on time in the same way?
The answer, of course, is yes.
In this case, they both struggle to get to destinations on time because they both make frequent and unfamiliar stops. In other words, these two very different customer personas actually have the same unmet customer needs in this market. We will explore unmet needs in much more detail in later lessons.
Is There a Better Way to Identify My Customer?
Since traditional personas based on characteristics can be limiting, we need a better way to answer the question, "Who is your customer?" The traditional dictionary definition of a customer is one that purchases a commodity or service. At first, this seems to make sense, since getting someone to purchase your product is how you generate revenue. But defining your customer as a purchaser is limiting because Jobs Theory shows that your customers are actually not BUYING your product, they are HIRING your product to get a job done. Let’s look at a medical market example to explain this in more detail.
Obtaining a blood sample is a medical job-to-be-done. Patients visit a trained phlebotomist who draws their blood with a syringe to obtain a blood sample. This market exists because patients need a blood sample to diagnosis their health. Patients are the ones who benefit from an accurate diagnosis from a blood sample. So patients are the Job Beneficiary and a Phlebotomist is the Job Executor who executes the job for the patient.
The critical customer in any market is the job beneficiary. This is the person who benefits from successful execution of the job, regardless of their influence on the purchase decision. This is an important concept to remember. Markets exist because of job beneficiaries, not job executors or product purchasers. In this market, the insurance company is the dictionary definition of a customer who pays.
They are the purchaser of the procedure to obtain a blood sample, but they are not the reason the market exists. Patients are. If a new innovation helps patients obtain a blood sample faster and more accurately, the insurance company is more likely to purchase it. This is exactly what is happening in this market.
A company called SeventhSense has created a device that enables a patient to painlessly obtain their own blood sample at the touch of a button. This happens in every market because markets evolve to remove job executors as customers. This is an important concept to remember. If you are targeting job executors in your market, you are at risk that your competition will launch an innovation that gets the job done for the beneficiary without the executor.
Identifying Customers in the Consumer Market
Let’s look at another example in a consumer market. In the market for thermostats, thermostat makers sold to professional contractors, who installed the thermostats in people’s homes. Thermostats sold for $30 to $60. Again, Jobs Theory shows that your customers are actually not BUYING your product, they are HIRING your product to get a job done.
And this is true for thermostats. Homeowners are hiring thermostats to achieve comfort in their home.This is the homeowners job-to-be-done. So the homeowner is the true customer in this market because they are the one who benefits from successfully achieving comfort in their home. They are the job beneficiary, the critical customer in the market. Contractors are the Job Executor. They help execute the job (in this case by installing a thermostat) on behalf of the job beneficiaries. Companies targeting executors as their customers are at risk because new solutions will evolve to get the job done for the beneficiary.
And this is exactly what happened in the thermostat market. A new company called Nest launched a thermostat targeted directly at the job beneficiary, the homeowner, rather than the contractor. Nest was priced at $249 against the competition's $30 pricing. Nest included a screw driver to eliminate the need for a homeowner to call a contractor.
The incumbent Thermostat makers initially dismissed Nest’s strategy and pricing. But nest grew fast and took market share from the industry leaders. They were acquired by Google for $3.2 billion dollars. Why did Nest succeed?
Because the job beneficiary, the homeowner, had unmet needs in the job of achieving comfort that they were willing to pay to satisfy. In a later lesson, we will show you how to to use quantitative surveys to identify unmet customer needs, underserved segments, your customers’ willingness to pay, and the true size of your market opportunity.
Identifying Customers in the Business Market
Let’s look at one final example in a business market. Companies need to enable secure data use for their employees, for example to access email and company data. This is a business-to-business job-to-be-done. One solution for companies is to install on-premise software like email servers and ERP and CRM systems.
IT Managers would manage these complex systems to execute the job of enabling secure data use for employees. But cloud SaaS software emerged to enable employees to securely use data on their own, without the need for IT managers. This is another example of markets evolving to remove job executors as customers. These examples show that the key customer in your market is the job beneficiary.
And remember your customer is a real person with real goals they need to achieve in their personal and professional lives. In other words, your customer has jobs they need to get done. To identify your customer, the job beneficiary, first identify the type of customer you are targeting if you are targeting consumers, you can define the job beneficiary by stages of life. For example, are they parents or retirees?
If they are parents do they have toddlers or teenagers? You can identify consumer job beneficiaries by activity as well. For example, are they travelers, homeowners, or car buyers. It is important to define your customer as a job beneficiary because the job they need to get done is the market you are in. We will show you how to define your market using your customer’s job in the next lesson.
if you are targeting business customers you can identify job beneficiaries by the functions they perform at the company. For example, are your business customers in finance, product, engineering or human resources. And you can identify business job beneficiaries by industry.
For example, aviation, telecom, or financial services. You can identify your customer by a cross-industry function, like VP of Operations and you can get specific to an industry, for example, Maintenance Directors in the aviation industry are responsible for ensuring the airworthiness of an aircraft.
In medical markets you can identify job beneficiaries, the patients, by health condition like diabetes, cardiovascular disease or cancer. And you can identify additional beneficiaries and executors by function like, surgeon, radiologist or administrator.
In markets where the purchaser is not the job beneficiary, you should define and identify the purchaser, like an insurance company in medical markets. It is critical to understand the job beneficiaries in your market and to know how many there are in your target geography. Their willingness to pay to get the job done is your market opportunity.
In later lessons, we will show you how to calculate the most important numbers: how much revenue and profit growth can you generate in your market by targeting your critical customer, the job beneficiary.
We hope you will share and like this video!
In the next lesson, we will answer the question, "What is a market?", and show you how to define your customer’s job-to-be-done to help you avoid lethal market mistakes that have ruined once-great companies.