Episode 115: Market Research: How do you identify a company’s expensive problem(s)?
Summary
Nick and Kai work through how consultants diagnose expensive problems in a client engagement, from pre-call research to on-call questioning. The conversation covers why stated client needs are often a symptom rather than the root problem, and how repeated conversations with clients build into pattern recognition at the industry level. Kai closes with a clean framework: clients know their current situation and desired outcome; consultants own the gap between them, the actual problem and the solution.
Highlights
- Nick’s pre-call research routine includes checking public Baremetrics accounts for AOV and growth rate, scanning AngelList profiles, and talking to colleagues who know the prospect before the first call.
- The question ‘what was the latest fire you put out?’ consistently produces high-value diagnostic information, per Nick.
- Stated needs often mask the real problem. Nick’s example: a client asking for A/B tests was actually dealing with a conversion rate cratered by a Google downrank. Without probing, the actual problem stays buried.
- Kai separates problems by urgency for deal velocity: a vague ‘we’ll fix this someday’ problem produces a proposal that sits in a pile; a problem the client has already invested in and prioritized for the quarter closes faster.
- Pattern recognition compounds across clients. After enough conversations in an industry, Kai says you can build a mental checklist of common problems and run through it with each new prospect, surfacing issues the client didn’t know to mention.
- Nick’s point on tools versus outcomes: clients don’t care how the problem gets solved. He comes from design research rather than marketing but sells on conversion rate lift, not methodology.
- Kai’s closing framework: clients understand their current situation and the outcome they want, but not what’s causing the gap. Consultants understand the problem implied by the situation and the solution needed to reach the outcome.
Read the transcript
All right.
So we’ve talked a lot about expensive problems on the podcast in the past. I think that we’ve done a good job defining them. Like, what is an expensive problem? Well, it’s a problem. The business is obviously feeling it. They are aware of it. And it’s costing them money, right? The inaction is costing them money. We’ve talked a lot also about how to identify an industry’s expensive problems, I think. We’ve talked about, let’s say, your Shopify store. you work in e-commerce. Having a lot of apps or too many apps is harming your optimization efforts. That’s an expensive problem because your funnel is not optimized. You are losing considerable amounts of money. But that’s all Shopify stores, right? Let’s say we’re going to talk about a Shopify store, I don’t know, Tetra, something like that, or I don’t know, Boom, whatever, one of my clients. What expensive problems are they feeling, right? What does the diagnosis process look like before you even come in the door? Because I think there’s, you know. We’ve talked about this in the past, too, where you make part of the sales process a diagnosis on the business. And that can either involve road mapping or making like a diagnostic report or something like that. Or it can involve just getting on a call with the client and asking them, tell me where it hurts, right? Either is fine. But what do you do when you have no information on the client? And you’re coming in and you wonder what is going wrong.
I think there’s something to that there. Within an industry, you might have a broad understanding, say in e-commerce, that repeat customer purchases, checkout flow, whether they’re using email marketing or not to stay in communication with customers. Those are typically expensive problems or expensive situations a company might have gotten themselves into. But you’re contacted by a prospect, they’re interested in working together, you know, Jack nothing about what they need help with. Typically, I fall back to pre-call questions and during the call questions. For the pre-call questions, I just want to understand at a high level: okay, why exactly did you reach out to get in touch with me? Why did you want to speak with me? Just to understand from their perspective why they thought it was a good idea to get in touch with each other and start assessing: okay, what exactly is the situation they’re experiencing? What’s the outcome they’re looking for? And just do sort of a casual sniff test. Does this seem like something I probably can help with? Yeah, it does. Okay, let’s move forward to an initial call. And on that initial call, I’ll typically kick it off just asking, how can I help? And then I’ll just shut up and let the other person either be quiet or speak and tell me what exactly. Is happening in their business that made them think, oh, we need a consultant to help us solve this problem. Since honestly, it’s impossible for us to read the mind of a client or a prospect and guess what they need, the only way we could actually understand the current situation they’re experiencing is letting them tell us, hey, this is the situation we’re experiencing. But it could often be like pulling teeth to get that information.
Yeah, and it can also be a kind of Dunning-Kruger effect, right? Like people don’t know what they don’t know. So part of it is that you have to know what kinds of questions to ask. And unfortunately, I don’t have a whole lot of like tactics for you on understanding exactly what questions to ask other than gain a lot of experience and pay very careful attention to like internal politics. That’s basically it. I think that there is a challenge where you eventually, the way I leveled up as a consultant is to start asking questions about business, right? What growth stage are you at? How quickly are you hiring? What’s the thing keeping you up at night? What was the latest fire you put out? Oh my God, you get amazing stuff out of that one. And these are terribly general, but you can try and adapt them to the specific business. This is going in a kind of the pre-qualification stage. Things that I do before I get on the call. If you have, God help us, a public bear metrics account. That would be amazing to take a look at. You know their AOV, you know exactly their growth rate, you know all these things. I take a look at their Angel List profile. I talk to other employees at the company if I know them. Because usually I’m referred in and other people know. I will ask your colleagues about you and what it is like to work with you. And sometimes that gives you a lot of really, really valuable insight. I feel like I’m dancing around this without stabbing it dead, but that’s kind of some of the initial things that I tend to think about.
What I like to think about is once we’re in that conversation with the prospect, the types of questions we want to ask to really get at what the situation, what the issue is they’re experiencing. To jump back a thread to your reference about People not quite understanding what the problem is that they are in the middle of. I like focusing on understanding the situation they’re experiencing. I don’t think people are great at self-diagnosing a problem. I think they’re great at telling you. Hey, it hurts when I touch here, and as you pointed out, hey, we just put out this fire. Okay, that tells us about the situation that’s happening. They know something’s wrong, they don’t quite know what the problem is, what’s causing these fires, what’s causing these issues. by asking around them and then probing with questions like why? or tell me more or what assumptions did you make or and what triggered that will help you understand the background, the context, the greater story surrounding whatever the situation the client is experiencing.
Yeah, and you know, sometimes what they tell you they need help on is not really what they need help on. Like sometimes, I mean the Common thing for me is, we need A-B tests. Okay, well, why do you need A-B tests? We want you to make money for us. Why do you want me to make money for you? Well, because our conversion rate is dismal and it cratered because Google downranked us. Now we have a thing, right? Like we have something in front of us. If I hadn’t asked those questions, I don’t think I would be able to help them out effectively, you know? Like, that’s. That’s very challenging if you aren’t like probing that sort of thing and trying to find a decent diagnostic.
And there’s also the qual, sort of like the quantity effect for a problem. How painful is the problem for the company? It might be something that’s small and annoying, or it might be something that’s gigantic and overwhelming for them. In either case, they might have sought out a consultant, but it’s again, it’s in the name expensive problem. The more expensive, the more painful problem will be one that the client or the prospect is more motivated to move forward with. If it’s a We’re kind of thinking about fixing this sometime down the line type problem. If you send over a proposal, chances are it’s just going to end up on a stack and in a few months get a reply back. If it’s a problem they actually care about fixing that they’ve invested in before, that they say, hey, this is the focus for the next quarter or the focus for the next year, you have a better degree of landing that project.
I think there’s also surprises that happen when you walk in, right? And you always have to try and assess that and stay on your toes. But this should give you a good sense for a diagnostic process. What do you do when you’ve done this for one client? Because let’s say you do it for a client, it doesn’t close. Well, you’ve still learned a lot of stuff about the industry, right? And you can try and speculate that the expense of problems this particular company is experiencing can be backfilled into other clients. Because I assure you, there are no new ideas. The problems that somebody’s experiencing are probably broadly felt by a subset of companies in the industry. Is it a characteristic of growth companies? Is it characteristic of companies in a specific space like skincare or lifestyle goods or something like that? These are things that you should be always journaling about and trying to assess what the patterns are. And the more insight you have into that, Both the more you have an idea of how to actually operate in a consultative capacity, but also the easier it is for you to suss out expensive problems in the future. And the narrower you can go on your positioning in the future, which is tremendously helpful.
No, I completely agree with all of that. I think that as you have more conversations with companies in an industry, exactly to your point, you’re able to backfill and start making assumptions and say, okay, five of the six companies I’ve talked to have mentioned this. Let me bring it up and see if it’s a problem that the seventh company is experiencing. Oftentimes, it could get to the point where you either have a literal or a mental checklist of common problems, and you could just, as part of the conversation with a prospect or as part of a conversation with a client, Run down the checklist. How’s your email marketing? What’s your repeat customer purchase rate? How many leads are you getting each month? How many proposals are you sending out each month? and just asking questions around potential problems or potential signs that there’s a problem could help you and the client become more aware of, oh, this is something we need to focus on. We never realized it was an issue, but you brought it up and we could see this is actually a big hole in our business. Yeah, yeah.
Sometimes clients are surprised when you find things that they felt but didn’t know. Right. And I think that’s some that’s a lesson that you should be taking as you’re trying to understand what’s going on with these clients and what that could mean for your future deal flow. Mm-hmm.
Yeah. And I think as you get more experienced understanding first a company’s expensive problems and then from there, an industry’s expensive problems then you’re able to keep your finger on the pulse of the industry at large and say, well, okay, let’s say Shopify Unite is coming up to continue the e-commerce thing. Well, what Topics are people presenting on? And if you see that there’s a strong amount of resonance between problems you know people are experiencing in the market and what people are talking about. That’s a wonderful sign that there’s about to be a very nice coherence between your marketing and the conversations that different industry leaders or different companies are having. And so you’ll be able to more effectively say, oh, hey, the big topic of conversation at Shop of I Unite was XYZ. I specialize in companies solving XYZ. Do you need any help with XYZ? So it sort of is an evolution. You start off understanding a single company’s expensive problem, broaden your scope of perspective to an industry’s expensive problems, and from there. be able to better assess, okay, what do the wins look like? What do the next six to twelve to eighteen months look like in this industry?
Yeah. And I think there’s One last point I want to be making about that is you’re focusing on the problem and not on the actual tools, right? When I always talk with clients and they’re surprised to hear that I’m a designer and that I have I use design research instead of coming from a marketing background, because that’s usually what conversion rate optimization people tend to come from. And so that’s completely fine. But then you say, okay, well, I help increase your conversion rate. That’s all people care about, right? They don’t care if you literally like rub your tummy and pat your head in order to increase their conversion rate. They don’t care if you use a sledgehammer to increase their conversion rate. as long as you’re not hurting anyone. That’s all that matters is that the outcome is that you increase the conversion rate or you lift up a conversion rate that was doing poorly. The same with the expensive problem that you’re solving, because you can just say, I do this, right? Like, I don’t care how somebody does surgery on me as long as they actually fix the problem, right? The same with a consultant.
Here’s something I’ve been thinking about, and I’m curious your perspective on it. I’ve become more fond of saying that clients understand the situation they’re experiencing and the outcome they’re looking for, but they don’t understand anything in between. And at best, it’s a poor guess. As a consultant, we understand the problem they might be facing because of said situation and the solution to said problem to get them to the outcome. But that’s really our side of the table when we engage in a dialogue or a conversation with a prospect or a company or somebody in an industry At best, we could extract from them, hey, what’s your current situation? Hey, what do you want your situation to be? What outcome are you looking for? And that’s really all the client can know. what the specific problem is, why their conversion rate has dropped, they most likely don’t know, otherwise they would have fixed it. What steps should they take to fix it? Again, if they don’t know the problem, they don’t know what solution makes the most sense to diagnose themselves with. the client understands their current situation and where they want to be. As consultants, we understand what problem is implied by that situation, what solution we need to diagnose for that problem to get the client to the outcome they’re looking for.