Finding your customer

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Finding your customer

• (Great technology is not enough)

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My focus for this presentation

• Joe told you The business plan is a result of a
  PLANNING PROCESS
• Some of the questions that are part of that
  process
• Who are your customers?
• Why will they buy your service or product?
• How much will they pay?
• Tonight, we will elaborate on why you need to
  answer those questions (and what happens if you
  dont.)

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Agenda

• Introduction why are you here?
• Deciding who gets the money
• Two strategies for success
• Three examples of product launches
• Lessons I hope weve learned
• The importance of the 30-second sell
• Your turn (again)

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Who gets the money?

• Investors predominant emotion fear that you
  will lose the money
• Primary goal determining if you have a chance of
  succeeding with your business
• The only real requirement CUSTOMERS
• Therefore
• Do you have any? Will you have any? Do you know
  you need them?
• How will you get them? How much is each one
  worth? How many do you need and how long will it
  take you to get them?

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Two success strategies
Innovator Focus on building brand
Cost leader Aggressively cut costs
How is your end-user dissatisfied?
Opportunity
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Two descriptors you want
unique
important
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Example 1 Regain

• Nutrition supplement for patients with renal
  failure

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Background

• Time 1993
• Was running clinical nutrition division of CA
  company
• 300MM company on track to go public
• very profitable business
• Saw impending market changes, wanted to explore
  new opportunity
• Potential re-positioning of corporation
• First in country to do this ? no model for
  success existed

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The market/customer need

• 200,000 dialysis patients, rapidly growing
  market, patients/caregivers easily located
• Patients generally fluid-restricted, clinically
  malnourished, need life-long nutrition
  supplementation
• All existing nutrition supplements were liquids ?
  obviously bad for fluid-restricted customers
• We had the technology to formulate a nutrition
  supplement that met customers specific needs
  without fluida food bar Regain

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Scientific support does it work?

• Ran clinical trial (even though it was not
  required for non- Rx products)
• Got results published in Annals of the National
  Kidney Foundation (peer-reviewed, prestigious)
• Bottom line solid scientific support ? product
  measurably improves patient health

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Our business planning

• Dialysis patients see doctor re dialysis
  regimens, and see dietitian re their nutritional
  requirements
• Our market research
• Renal dietitians would you recommend?
• Renal physicians would you recommend?
• Competitive analysis all competing products are
  liquids, ours is the only entrant with no fluids
• Market projections big business opportunity ?
  revenue forecast for corporation
• Product launch developed marketing materials,
  trained sales force, made product, went to market

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The results very disappointing

• Sales lt 10 of forecast

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Why?

• We surveyed the clinicians, but
• they dont buy it
• they dont eat it
• When we finally talked to the patients
• they didnt want it
• they couldnt afford it
• Retailers wont carry it

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What we did about it

• Learned about inside sales
• Learned about local patient publications
• Got Medicaid reimbursement 40 states
• Felt really bad
• Sold the business

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Example 2 NiteBite (1996)

• Timed-release Glucose Bar
• for the nutritional management of hypoglycemia

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New company, new product

• Time Summer, 1995
• Moved to Boston, launched new company with
  Harvard scientists
• Triaged their current projects, developed plan
• Develop/sell product in a field thats big enough
  to get noticed, small enough that we can handle
  it
• Selected diabetes as field, created NiteBite as
  first product (Spring, 1996)

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The market/customer need

• 10 million diagnosed diabetics chronic disease ?
  manageable but incurable
• Goal of management keep blood sugar from being
  too high or too low
• 4 million use insulin to lower their blood sugar
• All insulin-using diabetics are at risk of
  hypoglycemia blood sugar goes too low

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Medical background

• Hyperglycemia major cause of retinopathy,
  nephropathy, neuropathy
• Diabetes Complications Control Trial tight
  control dramatically reduces incidence of
  hyperglycemia
• But with tight control, the incidence of
  hypoglycemia (low blood glucose) triples
• Hypoglycemia must be treated immediately, leads
  to fainting, can lead to coma

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Hypoglycemia and diet

• Insulin users typically eat a night-time snack
• Very important prevent hypoglycemia without
  causing hyperglycemia
• Consequence constant anxiety trying to manage
  diets
• Greatest fear that I will die in my sleep.

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The answer NiteBite

• Patented formulation of nutrients that turn to
  glucose at different rates called it
  timed-release glucose
• Designed to lower incidence of hypoglycemia
  without causing hyperglycemia
• Tasty non-medical name, packaging
• Looks like energy bar rather than medicine

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Our business planning

• Involved clinicians, parents and patients in
  product formulation
• Held focus groups with prospective customers
  fears, concerns, price, distribution points,
  clinical contacts
• Went to support group meetings
• Picked ad agency ? knew diabetes ? instead of
  hypodermic needles, our first ad featured flying
  pigs

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The results very exciting

• Ran ads, got 500 calls/day
• Hired/trained inside sales force
• Penetrated all major pharmacy chains stocked in
  all major wholesalers without ever paying
  slotting fees (very difficult)
• The lesson understanding our customer helped us
  invent a better product

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Results, continued

• Impressive growth in sales
• Extraordinarily high reorder rate
• Got much publicity
• Got numerous offers to buy business, sold product
  to 1B pharmaceutical firm

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Example 3 Nutrifull
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Background

• Vitasoy USA is the largest provider of tofu in
  USA pioneered soymilk in USA
• I joined in March of 2003
• Company sold its products as soy
• Advertised in vegetarian magazines, yoga journals
• Sales were flat or declining, profits declining

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We knew the trade, not consumers

• We knew the store buyers, the wholesalers,
  brokers, etc.
• But we did not know the consumers
• Radical idea lets talk to our consumers

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Results our consumer interviews

• Theyre worried about their health
• My family has a history of diabetes.
• My mom has osteoporosis, and Im worried.
• My dad died of heart disease at age 43.
• They see a real connection between their diet and
  their health
• But no one will ignore the usual truths taste,
  convenience and value still matter

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The next step

• We asked them to finish this sentence I would
  actively look for and expect to pay more for
  a food or beverage which

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The answers

• Is a ready-to-use beverage that helps me with..
• Weight management
• Stress management
• Bone health
• Sleep
• Which one did they want first? Weight management

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Snapshot the weight loss market

• Adults 64.5 of American adults, or more than
  120 million people, are overweight or obese.
  USA Today,10/9/02
• Children So many children have become so heavy
  that pediatricians are facing an epidemic of Type
  2 diabetes and hypertension Time, 9/2/02
• OverallRecipes in Joy of Cooking that used to
  provide meals for six people now say they will
  feed only four. Time, 9/2/02
• Sales Consumers spend ... 33 billion per year
  trying to lose weight or to prevent weight
  gain. 1997 Presiding Panel on Weight Loss
• Corporate PepsiCo wants to become the most
  health-oriented corporation in America. WSJ,
  9/23/02

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Facts about weight loss

• Consumption of fat in the American diet has
  dropped from 42 of calories to 34 since the
  60s, yet obesity has sky-rocketed
• The culprit the shift toward eating refined
  carbohydrates
• Many snacks actually make you hungrier after 1-2
  hours than you were before you ate them
• blood sugar goes up quickly, falls quickly, falls
  below pre-snack level ? youre hungrier than
  before you ate snack
• bonus fat storage
• these foods have a high-glycemic index
• Low-glycemic index carbs cause blood sugar to
  rise slowly, fall slowly doesnt go below
  pre-snack level ? stay full longer

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What do these consumers say?

• I dont like how I look or feel. I am so sad, I
  just want to cryI feel so lost and alone.
• I am mad that food that passes my lips betrays
  me.
• I want to feel like a real woman, sexyI want to
  be healthyI am supposed to be a pillar of
  support for others, yet I have none of my own.

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Why do they want to lose weight?

• Im afraid of catching diabetes.
• I have severe leg pain, swelling and high blood
  pressureI know it is basically to save my
  life.
• I am 21 and have never even gone on a date. I
  am not ugly and I have no tragic flaws in my
  personality, so it has to be the fact that Im
  big.
• I looked in the mirror and actually saw what I
  look like. I dont like the way I look. I want
  to do something about it.

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Why do they want ... (2)

• I have to do this for so many reasons that I
  would get banned from the group if I listed them
  all. In a nutshell, my weight problem has
  tainted pretty much every aspect of my life -
  personal, public, work, home, friends, family,
  marriage - you name it and either directly or
  indirectly, its been a problem.
• I am to the point of facing serious health
  problemsMy familys medical history is bad and
  consistent. Besides all of that, Im simply
  tired of it being a CONSTANT issue.

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Our end user

• Wants to lose/manage weight (as part of a healthy
  lifestyle) WITHOUT
• dieting ( ? deprivation, failure)
• exercise (? pain, embarrassment, failure)
• inconvenience
• hunger
• bad-tasting foods

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But theyve been scammed

• Soap that dissolves your fat in the shower
• Inserts for your shoes
• Acupressure rings
• Exercise in a bottle
• Many, many more.

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Their fundamental questions

• Will this one work for me?(Can I succeed with
  this one?)
• How?
• Why should I believe you?
• Does it taste good?
• Is it expensive?
• Where can I get it?

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Introducing Nutrifull
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Weight Management and Nutrifull

• In order to lose weight, you must burn more
  calories than you eat
• In order to burn more calories, you must increase
  your bodys energy expenditure
• Its easier to eat fewer calories if youre not
  hungry
• Therefore, we formulated a beverage with
• Green tea extract to increase Resting Energy
  Expenditure
• Fiber (8 gm) and protein (10 gm) to keep you full
  longer
• Benefits Burn more calories, feel full longer

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The science behind Nutrifull

• Green tea extract has been clinically
  demonstrated to increase 24-hour energy
  expenditure and fat oxidation in humans
  American Journal of Clinical Nutrition1999
• Dietary fiber has been clinically demonstrated to
  promote satiety (the sense of feeling full
  longer) Nutrition Review, 2001
• High protein intake has been clinically
  demonstrated to preserve lean muscle mass during
  weight loss, and to sustain weight loss
  International Journal of Obesity, 2004

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Consumers asked for more

• More nutrients (appropriate to a meal)
• One full serving of fruit juice
• 50 of the RDV of calcium
• 35 of the RDV of 23 vitamins minerals
• 10 gm of protein, 8 gm of fiber, 200 calories
• No artificial sweeteners
• Convenience 10 oz, resealable plastic bottles
• Flavors Mixed berry, mango peach, strawberry

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Pricing and positioning

• Consumers told us, If you set the price too low
  for this product, I wont believe your claims,
  and wont buy the product. ? 2.49 - 2.99 per
  serving
• Consumers also told us, call it a fresh weight
  management meal, rather than a delicious soy
  beverage.

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A great breakfast or lunch

• Dietitians tell us that many overweight people
  dont eat breakfast, but they should
• Doughnuts mid-morning ? huge lunch
• Too many total calories during the day? weight
  gain
• Consumers tell us they dont have time for
  breakfast, but could manage to consume a
  convenient, filling, healthy beverage
• Therefore primary application will probably be
  for breakfast secondary application for lunch.

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Overview Nutrifull Test Market

• Test Market was conducted over 3 months to
  identify household penetration, repeat buying
  trends and evaluate everyday pricing.
• 33 stores participated in test Wegmans (10),
  Wakefern ShopRite (10), Stop Shop (5), Roche
  Brothers (3) and Whole Foods (5).
• Everyday Price Points of 2.99 and 2.49 were
  measured over the 3 month test period.
• Direct Mail and in-store demos were utilized to
  support test market performance.
• No trade promotion activity took place during the
  test market.

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One test market stores set
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Results Nutrifull Test Market

• Penetration of category buyers reached nearly 2
  without the benefit of price reductions or trade
  advertising.
• Households making repeat purchases exceeded 46.
  
• Over 68 of unit sales were made to repeat
  customers.
• There was no significant differences in overall
  Nutrifull household penetration and repeat
  customers at 2.99 versus 2.49 retails.
• Overall consumer feedback received at Vitasoy was
  very positive.

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Consumer comments

• Wow! This really works!
• I didnt think it would keep me full until
  lunch, but it really did.
• I had one for breakfast and for lunch. I wasnt
  hungry all day.
• This tastes really good. I like that its
  all-natural.
• I definitely eat less.
• My whole family has got to try this!

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Conclusions

• Lessons and questions

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Lessons I hope weve learned

• Know your customers intimately what are they
  really buying?
• Products which are for everyone arent for
  anyone ? positioning is imperative
• Face it no one needs your product or service
• They might need its benefits (but only under
  certain circumstances...)

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Our viewmarket segmentation
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Changing peoples buying habits

• For consumers to change their buying habits
  requires considerable motivation
• Powerful motivators include
• Pain
• Fear
• Greed
• Vanity
• Virtue is a tough sell

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Successful marketing made simple

• Find out what your customers want
• Knock yourself out to provide it to them

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Focus imperative in a new business

• Pick 1-3 well-defined market segments that you
  can dominate
• Succeed in them and get to critical mass
• Corny but true There is no hocus-pocus that
  takes the place of focus.

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A different way of looking at this

• Instead of promoting your product, its
  finding your customer.
• Customers hire products to do a job
• You should design your products to do a specific
  job for a specific kind of customer
• Then go find them.
• If youve done this right, the selling will be
  easy

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Ways to do that

• TALK with your prospective customers -- theres
  only so much you can glean from reports
• interviews, focus groups, mall intercepts
• telephone calls, consumer hotlines, user groups
• KNOW them how do they view their problem?
• What are they buying now to solve the problem?
• What do they read? To whom do they go for
  advice?
• Understand whats behind what theyre asking for
  (Henry Ford quote)

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You do have competition

• If customers arent spending money now to solve
  the problem you are addressing, its not a
  problem
• Whatever they are buying now is your competition
• How is your solution BETTER in the eyes of your
  customer? Customers buy VALUE
• What you value may not be what your customer
  values (technical elegance vs. ease-of-use)
• Competitive threats sometimes come from out of
  the blue (SlimFast and Atkins)

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More lessons

• Even if they need your product/service, if they
  dont want it, you cant sell it
• In fact, in the early stages, it doesnt matter
  who needs itthe only thing that matters is who
  wants it
• If you cant find your customers, you cant sell
  your product
• If you cant communicate your product benefits
  within seconds, you cant sell it

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The 30-second sell

• If you cant tell your story to a customer in 30
  seconds or less, youre in trouble
• You need focus to create brochures, collateral
  material
• Your idea may not have real benefits to your
  customers (or you may not understand them)
• If you cant summarize your story for a venture
  capitalist in 30 seconds or less, youre unlikely
  to raise any money
• Remember customers buy BENEFITS. Tell us the
  benefit of your idea/product/service.

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Questions you should ask

• Whats broke that my product fixes?
• Who cares? That is, who is trying to fix that
  problem? How many of them are there?
• Do they have any money?
• How do I find them?
• How are they solving the problem now?
• Why is my solution compellingly better than what
  theyve been doing?

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Final questions

• Where do my customers go for help/advice re this
  problem? How will I reach them?
• Who will be my first customer? Paint a picture
  of the typical customer
• What evidence do I have that they willbe willing
  to pay for my product?
• How much will they pay?
• Where will they buy my product?
• Who is responsible for sales?

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Crafting the 30-second sell

• Any volunteers?
• Tell us about your business idea ? lets try to
  create a quick pitch

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Your turn

• Questions?

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Thank you!

• Bob Jones
• bobjones_02142_at_yahoo.com