Customer development
As a product manager, it’s essential to have a scientific approach to validate the assumptions you make about your product and business. That’s where customer development comes in.
Customer development is a four-step process that helps businesses understand their customers, the problem their product is solving, and the significance of that problem. By following this process, businesses can ensure that they are creating a product that meets the needs of their customers and has a viable business model.
In this article, we’ll dive into the four phases of customer development and how you can use them to validate your product and business assumptions. We’ll also provide an example of the customer development process and discuss the pros and cons of this approach.
The Four Phases of Customer Development:
- Customer discovery: The goal of this phase is to discover the customer base of the product, the problem the product is solving, and the significance of the problem. This involves stating a business model hypothesis, testing the problem, testing the solution, and verifying the business model.
- Customer validation: In this phase, the focus is on creating a marketing roadmap, establishing a product revenue model, and creating recurring sales. This involves getting ready to sell, selling to early adopters, developing positioning for the product and company, and deciding whether to pivot or proceed.
- Company creation: In this phase, the focus is on scaling the revenue model and creating recurring sales.
- Company building: In the final phase, the focus is on scaling the operation and organization to support demand in the new market.
Example of the Customer Development Process:
Here is an example of how a company might go through the customer development process:
- Customer discovery: The company has an idea for a new product that they believe will solve a problem for a specific customer group. They create a low-fidelity MVP (minimum viable product) and map their vision onto a business model canvas. They then test the problem by talking to potential customers to understand the importance and size of the problem, as well as their needs and pain points. They also test the solution by creating a presentation and measuring customer behavior when using the MVP. Finally, they verify the business model by checking for product-market fit, confirming customer knowledge, and assessing profitability and growth.
- Customer validation: The company is now ready to sell their product. They prepare materials, build a high-fidelity MVP, and develop a sales roadmap and metrics. They find early adopters and test their selling approach, optimizing and refining their sales roadmap as needed. They also validate and develop positioning for different market types and channels, starting with a baseline perception of their product. Finally, they validate their business model and revenue sources, identifying and monitoring the metrics that matter.
- Company creation: The company is now focused on scaling their revenue model and creating recurring sales. They work on building relationships with key customers and partners, developing a sales and marketing plan, and establishing a strong brand.
- Company building: The company’s product is now in demand, and they need to scale their operation and organization to support the growth. They hire additional team members, streamline their processes, and invest in infrastructure to ensure that they can meet the demand for their product.
Pros and Cons of Customer Development:
Like any approach, customer development has its pros and cons. Here are some of the main benefits and challenges of this process:
Pros:
- Helps businesses validate their assumptions about their product and business model
- Allows businesses to better understand their customers and the problem their product is solving
- Helps businesses identify and address potential challenges early on in the development process
- Can save businesses time and resources by identifying problems and solutions before fully committing to a product or business model
Cons:
- Can be time-consuming, especially if businesses are trying to validate multiple assumptions at once
- May require significant resources, including funding, personnel, and expertise
- May not always be possible to fully validate all assumptions before launching a product or business
- The process may need to be adapted or altered based on the specific needs and goals of the business.
Customer development can be especially valuable for product managers as it helps them validate their assumptions about the product and business model. By following the customer development process, product managers can:
- Better understand the needs and pain points of their customers, allowing them to create a product that meets the needs of their target market.
- Identify and address potential challenges early on in the development process, reducing the risk of launching a product that fails to meet the needs of the market.
- Test and refine the product and business model before fully committing to them, saving time and resources in the long run.
- Develop a marketing roadmap and establish a product revenue model, helping the product manager plan for the success and growth of the product.
Overall, customer development can help product managers create a product that meets the needs of the market and has a viable business model, increasing the chances of success for the product.