Customer Development:4 Key Strategies Before Spending

Whether you are a startup or a business exploring new areas of the venture, the success of your company starts your customer. The traditional approach was to build a product in isolation and hope that a customer would buy it. Unfortunately, this approach yields a lot of waste. If you are a start-up or a small business, you cannot afford to burn the resources which you don’t have. As a result, your customer development approach will be key to define your operational methodology.

There is often very little benefit in completely developing a product and then going to the market for a sale. You end up wasting a lot of development time. Consequently, it also means that you have not spent enough time talking to your customer or understanding their real need.

In order to avoid this waste, the customer development approach offers 4 important facets for you to consider before jumping into full scale product development. The 4 factors are shown below:

1. Customer Development: Customer Discovery

This is your first step in identifying the real customer needs. It is of primary importance to note that your product development starts with the customer. You cannot initiate product development in a vacuum. You need to understand the person you are selling this product to. Or else, you start from a point of complete isolation which has a greater propensity of failure.

1.1 Customer Discovery: Define your customer

In this process, you need to identify who your real customer is? Define this person using your product.

• What does this person’s average day look like
• Their pains
• Pleasures

You must go into details about defining this person. Their age, earning bracket, everyday life, etc. Keep this as detailed as possible. It helps you identify the person you are selling to.

1.2 Customer Discovery: Identify Pain and Pleasure Points

Once you define your customer and add their persona, the next step is to identify their pain and pleasure points.

• In his/her everyday activity, what causes this person pains?
• What are the pleasures in this person’s everyday activity?

Once you identify this, mark where you stand. Do you try to address this customer’s pain or pleasure?

1.3 Customer Discovery: What can you do?

What can you do to solve this problem? Make sure you don’t get technical in this customer development phase. You are in the process of addressing a business need and not a product need. The product development phase comes later.

Think about how you can ease this problem. What are the solutions you can provide? In other words, what are your key selling points?

Once you identify the above, you have created the necessary hypothesis to start product development and start the next step in customer development.

2. Customer Development: Customer Validation

Once you complete your detailed customer discovery phase, your technical/product team comes into picture. Until then, as an operation/strategy, you are in the listening phase of customer development. Don’t try to skip steps – it will not provide you with any favourable results. In this stage – customer validation, you try to verify your hypothesis about the customer you have identified.

2.1 Customer Validation: Minimum Viable Product

Once you have completed customer discovery, the next step is to create a product. You cannot afford to invest heavily into product development right away. The most important factor for you to consider is to avoid as much waste as possible. In this context, we are talking about both time and cost.

To keep things simple, you start with a Minimum Viable Product. A minimum viable product is a bare minimum you can do to show your customer a glimpse of your ideas. Note that this is a stage even before you enter prototyping. This is the cheapest product you can do which can tell your customer what this is about.

A few examples of MVP’s are:

• Software Company – Wireframes / Front end UI Mock Ups
• Complex Softwares – Videos (Dropbox started with an MVP of a simple video)
• Manufacturing Companies – Outsourced Development

A more detailed explanation about Minimum Viable Product can be found here:

The point is very simple – this has to be the most minimal product you can go to the customer with. This product will not be of the greatest quality. Ultimately, your goal is to find out your customer’s inclination to this before you spend a huge amount of money developing something people don’t want.

2.2 Customer Validation: Feedback

This is a process where you will need to be the most objective. There are numerous ways you can gather customer feedback:

• Interviews
• Focus Groups
• Recording customer’s use of your MVP

There are plenty of ways for you to conduct these interviews to gather actual feedback. These are extremely useful customer ideas which you can use to develop a better product. Your MVP will never be the ultimate product. It will be a simple way to see what your potential customer’s feel and a key step in the customer development process.

2.3 Customer Validation: Hypothesis

Once you gather this feedback, you are now in the process of verifying your initial hypothesis. This process is highly iterative and takes the most time in the development cycle.

Test your hypothesis and see if your customer actually likes this product/service. If they don’t, understand why they don’t like it, what you can do to improve. This gives you a running list or product backlog to create items needed in your product development process.

As you are developing a product, you are also in the process of customer development and you must ensure that you are doing this in a highly iterative manner. Testing is the key.

3. Customer Development: Customer Creation

Once you complete the above processes of customer iterations, you need to ask yourself a few objective questions:

• Is the product now ready to be sold?
• Is there a compelling market demand?
• What is the price a customer is willing to pay?

After you address these key questions in the customer development process, you are now ready for custom creation.

3.1 Customer Creation: Product Launch

Once you are convinced with the developed product, you are now ready to consider a product launch. You have gone through the effort of creating a new product. You now have the responsibility to shout about this product at the top of your voice.

This can be achieved through traditional PR approaches, news releases, etc. A modern approach is using ‘Influencers’ on social media to reach their followers. This would involve some initial free trials with these ‘influential customers’.

This step is all about creating awareness about your product.

3.2 Customer Creation: Product Positioning

Once you create awareness about your product, you need to identify the right market segment for this product. Market Segmentation helps you identify the area of customer you are targeting. It helps you identify whether you are a high-cost product/low-cost product. In effect through this process of customer creation, you will be able to identify where your core selling opportunity lies with the customer. Not only this, it also helps you consider how you are positioned with respect to your competitors.

Once you are complete with the market segmentation, you need to define your marketing approach for this product. The Ansoff Matrix offers a great starting point to define a marketing strategy for you to employ. Through this, you can identify the right market penetration strategy to reach your ideal customer.

4. Customer Development: Company Building

In the first three steps, you have reached out to early adopters of your product. Now that you have established a market need, it is time to capitalise on this.

You have now unearthed a niche market, mapped your customer. It is time to build the foundation to expand your sales to embrace the product potential. This foundation involves building robust operational measures so that you are ready to service more customers.

4.1 Company Building: Pipeline

Now that you have established your product, it is time to pull out the customer list from your pipeline. Before you rush out to talk to them, you need to prioritise these customers. The simplest strategy for this is to use the Pareto Principle: 80% of the business comes from 20% of the customers.

Identify these big-ticket customers from your list. Reach out to these customers and introduce them to your sales cycle. You need to ensure that these customers have key account managers. The sales team needs to be completely equipped with your product capabilities. They are the spokespersons, representatives of your product. Ensure that they have the right tools to cope.

4.2 Company Building: Support

Once you have the right sales team, you will feel the orders pouring through. You will need to create support systems for the increased orders. This involves the development of your customer support team, invoicing, contract teams. This part of the company building exercise ramps up and is usually promoted through venture capitalist funding.

At this point, the company has proven itself to be of lower risk which makes it an exciting opportunity for investors. You can capitalise on this demand to push your company’s goals and ensure that the customer development process continues to feed this exponential growth.

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