Jeff Hoffman: a value equation and a customer demand check
Jeff Hoffman described two checks he used when considering a business. His event talk connected the cost of providing a product with the question of whether anybody was asking when it would be ready.
The cost belongs beside the price
Hoffman asked whether people would pay more for what the business did than it cost the business to do it. The question puts the activity itself into the economic test. An appealing idea still needs an explanation of who will pay and what it takes to deliver.
An inquiry before the product is ready
He followed that with a question about customers calling to find out whether the product was ready. The two checks examine different evidence: the economics of serving demand and signs of demand itself.
In Jeff Hoffman's words
"Is anybody calling to see if the product's ready yet?" (Jeff Hoffman, Jeff Hoffman's recorded Family Office Club event talk)
How to use this
- Put the expected price beside the cost of delivery.
- Keep a record of actual customer inquiries before treating interest as established demand.
Questions and answers
What does Hoffman mean by a value equation?
Whether people will pay more for the product than it costs to provide it.
What additional evidence did he ask about?
Customers asking whether the product was ready.