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I considered lumping failure to figure out what customers should be acquired with ignoring your customers and their real needs - but ignoring your customers implies you have already identified them in some way.

As a Software CEO one of your jobs is to ensure that the projections for building, releasing, marketing and supporting your products is the result of professional analysis. Projections are based on data that is highly qualified. Let’s look at two places where this breaks down.

There are two elements of importance to the first - quality of process: the mechanism by which data is calculated and judgement applied to that data.

Think about all the dot coms that expired horribly. A great number of them generated extremely polished market scenarios that passed inspection with purse heavy venture capitalists - VCs that certainly had their share of lawyers and accountants on staff. The spreadsheets looked good, and because many of the dot com companies were trailblazing in new, yet unrealized (or never realized) markets, the few industry executives that reviewed those plans couldn’t bring their experience to play in judging those plans. They lacked the pre-knowledge or experience to apply to those scenarios laid before them.

A spreadsheet cannot easily predict actions in a competitive marketplace, any more that having the highest quality product in a market space ensures that the product will become the market leader (or even a survivor). To ensure quality of process - the numbers need to add up, plus they need to be validated within context of knowledge of the competitive marketplace.

The second major breakdown is in the quality of the information used to make decisions. Just how good are those numbers? Did you miss any major disqualifiers to have even a wild guess as to what kinds of customers you can really acquire in the next quarter, six months or year? Quality of information is like purchasing a mobile home - the value plunges immediately after you drive it off the lot.

One problem that can arise is grossly overestimating the actual market by missing critical dis-qualifiers. What didn’t you account for in your analysis? Consider the very lopsided desktop database market, with Microsoft Access in the huge leading position and Apple Filemaker in the distant second position. Small to large companies use desktop databases so the potential market appears huge - or is it? Switching to a new database is not easy - and thats the way desktop database companies like it. A very large number will never switch to another solution. Even though they may be attracted to specific features in your database product, the conversion or integration challenges can outweigh the benefits. As a market newcomer, you also may be disqualified as too new and therefore untrustworthy. In this specific example then, the key is to recognize a much smaller but more profitable target customer group and make the product as irresistible to that segment as possible.

Another serious problem is that, by doing a poor job on disqualification, you never realized that the data which was left was entirely irrelevant. No matter how small your user base, quality feedback from them will definitely indicate - wait for it - why a small number of people bought your product in the past. Most companies want to capture new, much larger and much more profitable customer groups. A tiny sampling of previous customers will give you very little relevant information on how to expand your customer base. A tiny sampling can be useful in other ways. Your tiny user base can provide valuable feedback on usability flaws or critical bugs for example.

Points to Consider in Failure to Figure Out What Customers Should Be Acquired:

• Your projections on customer acquisition must be based on highly qualified data or you may end up marketing to an unprofitable or non-existent segment
• Quality of process in the pursuit of new customers is the mechanism by which data is calculated and the experience is applied to that data.
• Quality of information about potential customers is determined by freshness and relevance specific to the competitive market space
• If you extrapolate in the pursuit of new customers based on a tiny segment of existing customers, you will only be modestly successful if your new customers are exactly the same as your existing customers.