Monday, June 17, 2013

Burro Amarrado: A Smart Way to Start a Business

Unless you speak Spanish, you are probably wondering what Burro Amarrado means. It’s Spanish for a donkey that is tied up, in other words, a Moored Donkey. I first heard this strange expression when I was 14 years old, growing up in Colombia. It happened to be the first lesson I ever learned when it came to being an entrepreneur. My mother, a self-made entrepreneur, bought 500 dozen-panty hose to sell in Bogota. She knew that there was a lot of demand for panty hose (statistics) and that there was a lot of money to be made. She had the quantitative research but failed to do the qualitative research. She had no idea what customer experience she needed to offer in order to make the sale. She did not understand what kind of experience the potential customer was looking for that would sway their decision to buy from her instead of the next woman. Good thing I was young and had the energy, because it took a while to get all 500 dozen sold. I went shop to shop in Bogota offering the product. Needless to say, we lost a lot of money. In the process I did learn what exactly it was that the pantyhose customers in Bogota valued. The reason they prefer a certain color instead of another was simply because of the way that color made them feel. Mystery solved, it’s a psychological reason.

I’m happy to share with you that since my days of selling pantyhose, I have been able to learn a lot more about what it is that customers value. The reason you would go out and buy a washing machine instead of a washboard is simple, the washing machine is faster and much easier to wash your clothes with. In this scenario, the product/service, (the washing machine) is giving you a way to do things better. You use an alarm clock because unless you just magically wake up everyday at the right time, how else would you wake up? In this case, the product/service, (the alarm clock) is doing something that otherwise couldn’t be done without it.  Thus, we can infer that customers place value on products/services for at least these two main reasons.
            1-makes life easier
            2-without said product/service the end result would not come to fruition

We buy products or use services with the intent to delegate tasks in order to simplify our lives. Not all tasks can be delegated though. Sometimes when I’m in the zone, for example as I write this, it would be nice to delegate my need to use the restroom. That can’t be done, well not yet at least but fingers crossed!

Providing these benefits is not enough to survive in the marketplace. Ask 90% of the tech startups that fail in their first year. Not all of these companies fail because they don’t understand the customer but for a high percentage that is the reason. How can these startups give themselves more of a fighting chance? They need to understand the customers’ psychological needs. Take SUVs for example; despite the fact that gas prices are continuously on the rise, people keep buying these gas-guzzlers. People feel safer in SUVs. Their psychological need to be protected is met by buying a more secure feeling SUV, no matter the price of gas.

Entrepreneurs must first understand what kind of experience the customer is looking for, how a product/service is going to make them feel, before they can properly design the product/service. We tend to buy products/services because of the way they make us feel, the Experience of the product/service. When customers look back and measure how much value a product/service has, the yardstick is how it made them feel and the easier they will remember your product/service. Remember what poet Maya Angelou once observed, “People forget what you said, they forget what you did, but they never forget how you made them feel.” Understanding the customer experience leads to the creation of products/services that provide the right experiences, which become the lasso to securely moor the donkey.

The importance of understanding the customer experience is not limited to startups. Apple is a great example. They focus on designing the best products that will give each customer the best experience when using their products. The iPhone only changes slightly with each new version. It’s because the first iPhone was designed so well that throughout the years they have only needed to tweak the design very minimally. Larger, thinner, more apps, etc. They have 1 iPhone design. It only varies when it comes to certain aspects, storage, color, and things like that. On the other hand, Samsung has at least 9 different types of phones. They don’t seem to be sure about what experience they want to see and so they experiment with every feasible form, factor and price point trying to discover what the customer wants. The risk that Samsung takes is in the implementation stage where Apple takes its risk in the development stage. When Apple launches a new product, it’s because they have the Burro Amarrado.  

The question then becomes, how do we first understand what experience the customer wants? Followed by, what steps do we need to take?

1 comment:

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