The Five Epiphanies – the proven path to growing your startup

by | Jul 8, 2016

I met with two founders of a local startup software company last week. After learning about their history and current situation, we started to dig in on their big question, “How can we grow faster?” Game on.

Regardless of company size, my first question is always the same: How are your customers experiencing your product at each stage of their experience?

The good news is that this startup has actual customers in the first place. This is a remarkable feat when starting a business.

The real measure of growth potential is the level to which your prospects and customers have positive experiences at each stage of their journey. Can you get potential customers to engage and buy, then use your product and rave about the results?

I call these stages of the customer experience “The Five Epiphanies.”

The Five Epiphanies

  1. Are enough potential customers hearing about your product and connecting it with a problem they care about?
  2. Are potential customers engaging with your product messages, your product trial, your sales team or your landing pages?
  3. What does it take for customers to actually buy your product?
  4. Are customers using your product and getting the results they want? Are they ecstatic about the value your product provides?
  5. Are happy customers spreading the word to recruit more new customers?

These positive customer experiences, the customer’s own “epiphanies,” reflect the stages of the customer lifecycle: awareness, engagement, purchase, use and referral. Customer lifecycle stages have been described in countless ways through the years (also called the buyer’s journey, sales funnel or marketing lifecycle).

Like links in a chain, customers need to experience each of the Five Epiphanies successfully for your company to grow revenues and create a sustainable business.

  • You can have a great product that creates value, but you won’t grow if you can’t generate enough signal strength for your message to reach your target market.
  • You can generate website traffic and leads, but if the leads don’t convert to customers, you’re out of business.
  • You can sell new customers, but if they aren’t happy and don’t spread the good word, your business model is probably too expensive and unsustainable.

Micro success before macro success

Not all of the Five Epiphanies are equally important.

For early stage growth companies of all types, the most important indicator of future potential is #4: Are customers using your product and getting great value? All the other measures are useful and important, but everything else follows from real customers getting value and feeling great about their purchase of your product.

In Lean Startup, Eric Ries calls this the “value hypothesis.” The value hypothesis tests whether a product or service really delivers value to customers once they are using it. (His other key question for startups is the “growth hypothesis,” which tests how new customers will discover a product or services. Can the startup get more happy customers like these and scale up?)

Micro customer success always comes before macro company success. If you can’t get one customer to achieve the Five Epiphanies, you won’t get 100 or 1,000 customers to to that level, no matter how much you spend on sales and marketing or how hard you work.

A single, truly happy customer always precedes 100 happy customers. As Guy Kawasaki says, your product doesn’t need to be perfect, it just need to 10x better than the alternative in your customers’ eyes. Great enough.

It’s easy for employees, leaders and investors to view revenues or the customer count as abstract numbers that “just will keep growing.” The reality is that those are made up of individual customers with unique experiences — bad, neutral, good, or Wow!

Long-term growth requires that you find a way for your early customers to experience serious value when they use your product. Startups typically underestimate the level of value required to get customers to refer their product to others — achieving the last of the Five Epiphanies.

My ACT! epiphany

My first job out of college in 1987 was selling software in a retail store called Egghead Software. I stood in front of a wall of hundreds of software products (which were in boxes with floppy disks!) and helped customers solve their problems by choosing the right software product. I got to see the Five Epiphanies first-hand with thousands of individual customers.

New products appeared every week. For people who asked for software “to manage my contacts,” I recommended ACT!, a new software product that had a contact database and other features. They took the ACT! box home, installed it on their computers and figured it out on their own.

Amazingly, the first ten people to whom I sold ACT! came back and raved about how it had “changed their life!” and how they were already selling more. One of these customers even bought a new $5,000 Compaq “portable” computer so he could take his contact files with him when he travelled. ACT! was worth $5,000 to him!

Epiphany proved.

I ended up joining the ACT! company in 1989 when it only had 15 employees. People thought I was crazy, since “salespeople won’t use computers” (most didn’t) and it wasn’t cool to work for a software company yet. But I had proof of all Five Epiphanies. I used ACT! myself and I was all in.

ACT! went on to become one of the top 25 most popular business software products of the ’90s, with millions of users and recognition as the leading contact manager. Most salespeople in that era used ACT! when they finally got around to using a computer.

That was a different era, but the Five Epiphanies have never changed.

Achieving the Five Epiphanies is critical for growing any business beyond a small startup. The most critical Epiphany is #4: creating incredible value that makes customers rave.

  • Is your product achieving the final two Epiphanies – great value and raving fans
  • What would it take to make that happen?
  • Which of the Five Epiphanies is the weakest link in your customer generation chain?