Africa has continued to record a rise in the number of new tech startups in the ecosystem. Based on an opinion piece on BusinessDay, this wave is not one that will fade off soon as more tech-driven solutions will be developed to solve problems peculiar to this region of the world.
More businesses are springing up and new products are being launched, however, a major challenge faced by African tech business owners and teams is reaching and sustaining the right customer.
From my experience with helping tech businesses scale across Africa, I have come to realize that one of the problems with startups is that they build for investors over building for the user. While it is good to consider the investor when developing your product, relying solely on satisfying them is not a sustainable business model. Sustainable businesses are built by putting the customer first. So, how is this done?
One of the most important questions to answer when developing a product is “Who is the customer?” This is important to consider before talking about investor funds.
Tech business owners need to understand that their business is not for everybody. You identify your ideal customer by using these criteria; they must have a problem (this is the business opportunity), they must want a solution, and they must be willing to pay for it.
While it is good to acquire users who have a problem and are in need of a solution, if they are not willing to pay for it you’re not going to have a sustainable business model.
An effective customer acquisition strategy for tech companies is offering free trial plans. However, for continued business patronage, the Founder or Business Team has to figure out how to move users from being free users to paying customers. To achieve this, the user must see value in the product. This then leads to the question “What does value mean to the customer?”
A step to answering the value question is to identify what value is. The definition of value by business owners varies from the perception of value by the user.
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A product can be created by two different manufacturers and perform the same function, however, they are priced differently. While both products serve the same function, one might offer more exclusivity than the other. As such, the exclusive experience of the other product can be of more value than its basic function to the customer.
A framework Startup LaunchCode has successfully been used to help tech businesses in defining “Who? What? Why? How?” That is, who is the customer? What do they want? Why do they want it? How do we get it to them?
Answering the question “Who?” helps businesses define their ideal customer and their traits. This is done by defining their demographics which are factors like their age group, location, earning power, etc. Next, evaluate their psychographics. This means their belief system, how they think, and what job they want to be done. Lastly, examine what the customer wants to achieve and how they look at your product as the vehicle to achieve that.
For startups with limited resources or funds, I often advise that they apply this method to get laser-focused on their target audience so as to maximize resources for an effective outcome. While it is good to have high aspirations and dreams of expanding, it is advisable for tech startups to have a niche first.
Businesses also need to identify the key purchase drivers for their ideal customer, the customer’s pain points, and frustrations. In addition, tech startups need to understand why their ideal customer is looking for an alternative like theirs and what gaps exist for their businesses or products to fill.
Understanding who your company exists for can be the challenging part of starting a tech business. However, once you identify who your company aims to serve, you can begin to grow from there.
Thompson is a managing partner/co-founder with Startup Launchcode