- Demonstrate how to test hypotheses and identify customers


[SLIDE 1]

Let's first look at an example of how a bank uses hypotheses to identify customers for its products and services.


[SLIDE 2]

A good example of an organization using experimentation comes from the global sandwich retailer, Subway. In 2008, at the height of the global recession, marketers at Subway suggested that selling foot-long subs at a reduced price of $5 would increase sales. However, there was a concern that it might distract customers from purchasing the more expensive items on the menu. 

So, Subway carried out an experiment: it tested the promotion in some Subway sites, but not in others, and for limited time periods, such as weekends. The results showed that the $5 subs did not detract from the overall sales. However, even if the experiment had failed to support the hypothesis -- if customers had stopped buying the more expensive items on the menu -- it still would have raised many interesting questions: Why were customers not buying the more expensive items? What could Subway do to attract them to the other items on the menu while offering the promotion? The Subway experiment turned out to be a useful way for them to define customer tastes and preferences.

But, you don't need to be a marketer at a major sandwich chain to create and test a hypothesis. We all have the ability to generate a hypothesis and use low-cost experimentation to test its validity.


[SLIDE 3]

One of the most important parts of the experiment is customer engagement in your product or service. Involving real customers is a great way to test hypotheses as it provides you with immediate feedback on how your product or service is received.  It is also an excellent way of making connections with people who may buy your product or service when it is fully launched.

But how do entrepreneurs know which types of customers might be attracted to their products or services? To find out, entrepreneurs need to gain a deep understanding of the different types of customers. 			


[SLIDE 4]

Typically, there are six different types of customers.

End users are the customers who will actually use your product. They will buy it (or not), touch it, operate it, use it and tell you whether they love or hate it. Gaining a deeper insight into the needs and motivations of end users is essential in the experimentation period, as their feedback will help you refine and tweak the product.


[SLIDE 5]

Influencers are also sometimes called opinions leaders.

Sometimes the biggest influence on the success of a service or product comes from people who have no involvement at all. Celebrities, journalists, industry analysts and bloggers with a large following have the power to influence our purchase decisions. 


[SLIDE 6]

Experts, popular bloggers, or CEOs can also influence the decisions of others by evaluating your product and telling the public about it. Their opinions have the power to make or break your reputation. 


[SLIDE 7]

Economic buyers are customers who have the ability to approve large-scale purchases, such as buyers for retail chains, corporate office managers and corporate VPs. Economic buyers have the power to put your product on the shelves, physically or virtually. Connecting with economic buyers brings you one step closer to the type of end-user customers you want to have the opportunity to buy your product or service. 


[SLIDE 8]

Decision makers are similar to economic buyers, but they might have the authority to make purchasing decisions as they are positioned higher up the hierarchy. The ultimate decision makers do not need to be CEOs – they could also be mom or dad, or whoever has the power to approve purchases for the family.


[SLIDE 9]

Saboteurs are customers who can veto or slow down a purchasing decision, from top managers to friends, spouses or even children. Identify your saboteur customers and find out what's putting them off. You might learn a lot from their feedback.