I contend that five times two is more than ten times one. I am sure my fifth-grade arithmetic teacher would disagree with me. Further, I contend that five times two is also more than one times ten. With this steadfast position, I am sure my teacher would have had me stay inside working on my Times Tables instead of going out to recess with my classmates. In reality, I believe that we are both correct. From a purely mathematical perspective, there is no difference between 5x2, 10x1, or 1x10. But from a prospect, partner, or investor perspective, five times two is better than either other combination.
The five times two that I am referring to involves customers and their purchases. It is better to have five customers that have purchased twice from you that ten customers that have purchased once or one customer that has purchased ten times. The reasoning is simple: Customers would not make a second commitment unless they were at least satisfied with their first purchase. We have all experienced the opposite. It is referred to as buyer’s remorse. Most often, it is buyer’s unspoken remorse. Many of us have closets full of examples – the shirt or blouse that looked so nice in the store that we only wore once. Our pantries also have examples – the “As Seen on TV” Turnip Baker that seemed like the perfect new kitchen accessory is now gathering dust. How about the space-age non-stick frying pan that seems to be coated with flypaper?
As a business setting example, new restaurant owners can easily fall into a trap after the first month’s sales. Their restaurant was packed but what about month two? We all have gone to a restaurant for the first time and, for whatever reason, never went back.
On the other hand, customers that have purchased from you the second time are indicative that they value your offering. If a second purchase is not practical, a good, perhaps even better, alternative is if they recommend you to a friend or colleague. They would not make the recommendation if they were not confident and pleased with their first decision.
As discussed in article 3.040202, “Three Kinds of Revenue,” the first, and most important type of revenue is Referenceable Revenue. It proceeds Scalable and Profitable Revenue. The key attribute of Referenceable Revenue is external customer validation. Quite simply, it is not what you say that counts; it is what customers do! When they buy the second time or refer you to someone else, they have validated your premise that “You are solving a problem that customers agree needs to be solved now and are will to pay for it.” Article 3.010002, “A Quick Blink Test,” discuss this one sentence, all critical concept, in detail.
Not only will your second-sale success impress new prospects, but it will also impress would-be business partners and financial investors. In fact, for both groups, external customer validation may be table stakes that they require to move forward with you. Customer discovery and market studies can be effective pre-cursors to help you validate what you plan to do, but they do not replace actual customer orders and payments.
The five-customer total is, of course, only a metaphor for “lots of customers.” Care must be taken to ensure that the initial customers are truly anonymous customers and not friends and family or “Rolodex” customers that know you and trust you from a past life. The anonymous customers do not necessarily have to be in your long-term ideal market. In fact, a strong argument can be made for not approaching your long-term market first. If you stumble, which commonly occurs, you may set back your acceptance into your primary market. Remember, there is a reason for the pre-season!
So, five may not be the right number of paying customers, but whatever it is, “times two” or more is the correct other half of the equation.
Perhaps with the above explanation, my fifth-grade teacher might let me go out for recess with the other kids.