Customer Feedback

Listening without losing focus

Happy Thursday,

More than a century ago, Chicago retailer Marshall Field helped popularize a phrase that is still found in many business conversations: “The customer is always right.” In 1905, newspapers described it as part of Field’s approach to running his department store. The principal idea was to encourage stores to take customer complaints seriously rather than dismiss them.

It has become a sensible approach to customer service. For startups, the phrase can become less helpful when it is interpreted to mean that every customer request deserves a place on the product roadmap. Founders need customer feedback to understand the problem they are solving, but they also need to decide which suggestions improve the product and which would take the company in a different direction.

Early Customer Feedback

Many startups launch with a founder trying to solve a problem they encountered firsthand. The founder’s experience is valuable, but it is still a sample of one. Conversations with prospective customers, pilot programs, and early deployments help reveal how others experience the problem and what they would need before adopting the solution.

These early discussions often reveal capabilities missing from the initial product. A customer may like the broad concept but need a different workflow, a basic integration, or a more reliable way to measure results before agreeing to buy. Making some of these adjustments is part of moving from a single idea into something that attracts customers within a specific market.

An important part of these early conversations is understanding what is behind each piece of feedback or feature request. When a customer provides feedback, we encourage founders to ask about the underlying problem the customer is trying to solve and how they manage that problem today. Asking what a customer might pay for a new product or feature can also be useful, although an expression of willingness to pay is much different from a signed contract.

Launching a new product or service often involves incorporating several points of customer feedback. Since startups have limited budgets and need to find a path toward revenue generation, founders should prioritize feedback that improves the product’s appeal to their target customers rather than building a separate version for each account.

Feedback Inflection Point

As a startup gains customers, the habit of adapting to early customer feedback can quickly become a risky process. The product is working, customers are paying, and the team has evidence of demand. Yet the number and variety of requests continue to increase. This is the feedback inflection point where the startup team must become more deliberate about which requests belong in the product.

The conversations sound familiar: “It would be nice if…” or “Could you also add…” Then there is the challenging statement, “We would increase our contract if it also did…” Each request comes with a plausible reason to say yes. Founders want to keep customers happy, sales teams want to close deals, and the team knows revenue growth is important.

The danger is often not one decision, but a series of small changes made to the product without considering the combined effect. Each new feature requires testing, ongoing support, and may also require adjustments to customer integration. A change requested by one customer may complicate the user experience for several others. Slowly and often without notice, the product roadmap begins to reflect a growing collection of individual requests rather than a coherent plan for improving the core solution.

Similar challenges arise when a founder decides to pursue different industries. It often seems reasonable to launch the product in an adjacent industry, only to discover the new market requires different workflows and support. A startup that once had a focused product offering can find itself maintaining several variations of the product across more than one industry.

Over time, these decisions create additional demands on the team. Revenue and customer counts may be increasing while margins decline as more employees are needed to support each different version of the product. The company may slowly lose focus on the core problem it started out solving and find itself trapped in a cycle of supporting existing customer requests while it becomes more difficult to secure new customers.

To prevent this from happening, founders need to remain selective about which requests strengthen the core product and justify the resources required to build and support them. Customer feedback remains valuable as the company grows, but each decision needs to account for its effect on the business as a whole.

Exit Challenges

That loss of focus can also affect how investors and potential acquirers view a business. Strategic buyers often pursue acquisitions to obtain a capability they can integrate into an existing product or customer base. A startup with a clear solution to a well-defined problem can be an attractive acquisition target and easier to integrate into an established business.

A company that has expanded into several industries or built highly customized solutions can be a more challenging acquisition target. A potential acquirer might value only one part of the business and have little use for its other markets or products, leading to a lower offer or a decision to pass. Although the founder and team may have grown revenue to support the next funding round, that same strategy could weaken the company’s appeal to a strategic buyer or future investors.

We are not suggesting a startup avoid expansion or adding new products. The question is whether those activities build on the company’s original operating model or are just new approaches to closing the next customer contract based on customer feedback. Founders therefore need to consider whether each strategic change makes the business more coherent and valuable, not simply larger.

Final Thoughts

Customer feedback gives founders valuable information, but gathering it and deciding what to do with it are different skills. In a research paper, psychologist Robyn Dawes reviewed data on people making predictions from several pieces of information. In his research, he found simple models that combined relevant information often outperformed expert intuition. His explanation was that people could be effective at identifying useful information but were not as good integrating it into a final judgement.

Dawes studied prediction rather than product strategy, but there is still a strong application for startups and founders. A large customer asking for specific product modifications in exchange for increasing a contract size can be tempting, but that opportunity still needs to be evaluated alongside demand from other customers, the cost of supporting the change, and it’s fit with the company’s overall strategy. Basing decisions on consistent criteria helps the team make that comparison without allowing the latest customer conversation to redefine the priorities. The criteria can evolve as the startup learns more about its market, but the team should not make a change simply because the most recent customer feedback sounds persuasive.

“The customer is always right” remains a reminder to take customers seriously. It means understanding their problems and considering customer requests thoughtfully, even when the answer is no. For a founder, that discipline protects the startup’s ability to deliver for the customers who already depend on it while creating room to add new customers. The goal is to build a business that becomes better at serving its market with each new customer, rather than having to reinvent itself for each new customer.

Wishing everyone a great weekend,

-Eric.