It’s no secret that the customer development process benefits startups that apply it. When paired with a robust agile development process, it helps you find your first, core group of customers, verify product/market fit, and define a sales process for scale. The only problem is that many companies start the process incorrectly.
To really understand where and how companies go wrong, let’s take a look at the original customer development process. The concept was created by entrepreneur and Stanford adjunct professor Steve Blank while working for a startup in the early days of Silicon Valley. The four steps include:
- Customer discovery.
- Customer validation.
- Customer creation.
- Company building.
According to Blank, startups run into the most problems when they skip or skimp on the first two steps of the process: customer discovery and validation. Founders skip these steps because they want to jump straight into scaling their company, without realizing that avoiding the first, research-heavy steps of the process exposes a company to risk.
Without research, you’re simply relying on the strength of your founding idea to carry your company to success. Unfortunately, even the best ideas aren’t usually market ready. You need to talk to your target audience extensively when you have an idea but before you start to build it.
Talking to customers allows you to ditch losing ideas before investing too much time or money, while doubling down on new products that are winners in your customers’ eyes. Many of us have heard the phrase, “Fail fast, fail often.” The customer development process helps you use those early failures as a stepping stone to success.
Below, we do a deep-dive on the first two steps of the customer development process. We’ll show you:
- How to perform research.
- What to look for in your interviewees.
- How to validate your idea.
- How all four steps of the process come together.
At the end, you should have enough information to take your first steps in the customer development process at your company.
Note: Need a hand finding ideal users for your customer development research? User Interviews offers a complete platform for finding and managing participants in the U.S., Canada, and abroad. Find your first three participants for free. Or, streamline research with your own audience in Research Hub.
What Is the Customer Development Process?
As we mentioned earlier, the original customer development includes four steps. When used together, these steps help early-stage startups validate a new business model or product and create a roadmap to long-term financial success.
Today, the process is widely known as part of Eric Ries’ Lean Startup methodology, though the steps were first laid out in Steve Blank’s book, The Four Steps to the Epiphany: Successful Strategies for Products that Win.
Customer discovery is meant to help the founding team gain a better understanding of customers by talking to them via formal and informal research sessions.
Customer validation is where companies find their first handful of high-value customers and define a scalable sales process and business model.
Customer creation involves scaling and more involvement from the sales and marketing teams to grow the company beyond the initial handful of early adopters.
Company building is what Blank describes as the step in which a company transitions from “one designed for learning and discovery to a well-oiled machine engineered for execution.”
Broadly, these four steps can be broken into two main parts: research and scaling. The first section — research — is made of customer discovery and validation. Skipping this step is where startups can run into issues in an attempt to grow quickly. During day-to-day execution, it’s easy to lump customer discovery and validation into the customer creation step, under the pretense of “learning as we go.”
It’s especially easy to skim over the research steps because companies that have iterated on customer discovery and validation a few times often look similar to companies in the customer creation process: They’re presenting their customer base with offers, tweaking, and re-offering.
The difference is in scale, which seems like a simple concept but can be a make or break proposition for companies who lean into customer creation too soon. In the beginning, it’s crucial to follow the advice of Paul Graham — co-founder of Viaweb and Y Combinator — and “Do things that don’t scale.”
If you ignore this advice, you risk creating a cash burn rate that’s too high to sustain the many iterations necessary to fine-tune your products. You also may miss the discovery process required to build early company advocates, or as Blank likes to call them, “earlyvangelists,” a group that naturally comes from the research process, as we’ll discuss a bit later in this article.
The alternative, of course, is to start with customer discovery and validation. This allows you to engage deeply with ideal prospects on a one-to-one basis, glean insights, and test and iterate in a sustainable manner. You know you’re doing it right when you feel like you’re building your company with your customers, which makes it difficult to create something that nobody wants.
Let’s dive a bit deeper into these two first phases to see how you can execute on them and what both research-phase steps look like in detail.
User Research Is the Key to Customer Development Success
At this point, it should come as no surprise that the key to successful customer development is user research. Blank offers a research process that’s tailor-made for the needs of a fledgling startup — one that starts with your big idea and ends with paying customers.
Here’s how it works:
- State your hypotheses.
- Test your problem hypotheses.
- Test your product hypotheses.
- Iterate to product-market fit.
Steps 2 and 3 are separate for a reason: You’ll get better insights if you verify exactly what problem you solve, then test your approach to solving it afterward.
Step 1: State All Hypotheses
The first step in the research process is to state all hypotheses. As Blank explains, most founders start companies with a big idea or solution in mind, so that’s often a good starting point.
Write down what problem you’re trying to solve, who it’s for, and what your solution should look like. Blank calls these the “product hypothesis” and “customer and problem hypothesis.” Then you move into more detail with the demand creation, market type, and competitive hypotheses as shown in his customer discovery map:
Note that your founding team should absolutely be involved in the conversation at this step in the process. They came up with the entire idea for your company, so they’ll be able to help define what problems you’re solving and who you’re solving it for. Get the leadership team together, and go through each hypothesis in the first line of the image above.
Your description of each hypothesis doesn’t have to be extremely detailed, but should be specific enough to have a conversation about it. A decent heuristic is to ask yourself, “Can I explain this hypothesis clearly enough that a friend in an unrelated field could understand what I’m talking about?” If yes, you’re probably ready to explain it to your new best friends — your potential customers.
Step 2: Test Problem Hypotheses
The second part of the research process involves getting in front of users for the first of many times. Notice how the process of stating hypotheses started with your solution or big idea and moved to defining details about your customer base and features. This next step flips that order on its head by starting with a focus on your customers. But first, you have to find them.
Finding Quality Interviewees Is Crucial to Your Product’s Success
At this stage in the process you don’t need a ton of interviewees — six to eight should do just fine —but it’s crucial to focus on quality. Find earlyvangelist prospects so you can design for them, and turn them into customers right away. You’ll be interviewing them frequently as you iterate, so find the right people to make sure they’ll take you in the right direction.
According to Blank, the best customers are those who have “visualized the solution.” This means they not only have a problem you can solve but can picture a potential fix. It’s even better if they’ve tried to implement their own solution but have been met with limited or no success.
This kind of customer can provide feedback that will help you create real, meaningful solutions. Plus, since they’re already in some sort of pain, you have the opportunity to provide a profound sense of relief. And that relief is what transforms interviewees into loyal customers and proud proponents of your brand — the perfect earlyvangelists.
All-in-all, Blank lists five criteria to look for when vetting potential prospects:
- They have a problem.
- They understand that they have a problem.
- They are actively searching for a solution.
- The problem is painful enough that the customer has put together an interim solution, though it’s not working well. (This is a bonus criteria. If it’s not met, you still may have a potential earlyvangelist on your hands, it's just not as sure of a bet.)
- The customer has or can acquire a suitable budget for your product.
If you meet all five of these criteria, you’re almost guaranteed to have an earlyvangelist on your hands if you can effectively solve the problem in question.
Finding Earlyvangelists Is Important, but Challenging
Of course, it’s one thing to know what kind of customers to look for and another entirely to go out and find them. Blank doesn’t explain in detail how to find these customers though, so you’ll have to be scrappy and get creative. If you can’t think of anything, remember the old marketing line, “Go where your customers are,” and search until you find them.
For Marie Prokopets and Hiten Shah —co-founders of SaaS app FYI — finding customers meant launching an early-access version of their app on Product Hunt. Because their target market was already spending time on Product Hunt, Prokopets and Shah were able to collect more than 700 signups. As part of the signup process, they asked users to complete a short survey about their needs and whether they’d be willing to be interviewed to provide product feedback.
Product Hunt obviously won’t work for every company as a recruiting medium, but the FYI story is a great example of how to find customers and research participants. By going where their customers already were, the FYI team was able to recruit 52 participants for research, which is more than enough feedback to help you create a viable MVP using the customer development process.
If you have customer emails or even an in-app communication/alert tool, an opt-in form could be an option to source current customers.
You can learn more about how to recruit user research participants here.
Recruit and Interview Participants Using User Interviews
Another creative way to get a jump-start on testing problem hypotheses is by using User Interviews. You can use our platform to find, vet, and organize prospects for your research. You only pay for interviews you perform, and your first three are free when you sign up using this link.
Before you get started, we should mention that User Interviews is set up specifically for research, not customer recruitment. When you interview people on the platform, they’re not expecting a product pitch, so it’s not recommended to use the platform as a place to find paying customers.
Still, it’s easy to find someone who has the same needs as your ideal customer, so you can certainly use User Interviews to jump-start your research process. According to Blank, the customer discovery process will take months for fast-moving companies, or even years under certain circumstances. During that time you’ll undoubtedly have to recruit customers from several sources, so use User Interviews as your first stop while you look for other sources of paying customers.
To get started, enter all of your preferred interviewee qualifications into User Interviews. You can select from over fifteen out-of-the-box demographics, then draft a screener survey to filter for other criteria. When you’re done, our platform will automatically send it to the most relevant potential interviewees in our database of 200,000+ participants.
Once you’ve selected your favorite respondents, you can choose to perform a second round of qualification over the phone. This is where you find earlyvangelists.
On the call, you can ask one or more open-ended questions to verify they’re suffering from a real problem that you can solve. Keep this initial conversation short — no more than 10 minutes. Your goal is to get enough information to determine if the prospect will provide solid info during a research interview.
During screening, you can ask questions such as “Tell me about your experience with X,” or “How does that affect your business/family/life?” Make sure you’re inviting a detailed response, and don’t ask leading questions or present your hypothesis for approval. You’re trying to uncover their problem, and then you can see after the fact if it matches your hypothesis.
As you ask questions, be on the lookout for specifics. Your best candidates will have a specific number in mind, though it won’t necessarily be accurate to the cent. Responses such as “We spent about $500 on that problem last month” are generally better than “We spent a lot.” But make sure to use reason. It’s highly unlikely that an executive will know the exact cost down to the cent for a million-dollar problem.
From here, you can select the best candidates to interview further. Reach out when you’re ready for the first conversations in your customer development process.
Remember: Don’t take any shortcuts when vetting your first few interviewees. At this point, you’re defining what your ideal customer could look like. These first few interviewees may not be your first paying customers, but they set the stage for what one might look like.
Here are some resources for when the interview stage begins:
- 7 Tips for Better User Interviews.
- A Guide to Customer Interviews.
- 100+ User Testing Questions.
- Learning from Steve Portigal’s “Interviewing Users”.
Remember: The focus at this stage of research is to understand fully the problem your potential customers are facing. Dig into what’s aggravating, frustrating, and difficult to solve. Understand exactly how the problem impacts them and to what degree they want it fixed. Use your findings to adjust your problem hypotheses.
Note: Also remember when you recruit through User Interviews, you only pay for completed customer interviews, and you’re connected with your first three users for free when you use this link.
Step 3: Test Product Concepts
At this point — after you’ve performed interviews and clearly defined the customers’ needs and pain points — you’re ready to start building a minimum viable product. According to Blank, it’s important to build a high-fidelity, functional prototype so users have a realistic understanding of how it could solve their problem. Still, you don’t want to overdesign and risk spending time and money creating features that are changed immediately. It’s important to find a balance.
It’s also important to note that your design should be sufficiently high fidelity so that customers will pay money for it. This is where customer development veers away from other design-focused specialties that only require you to improve an experience. Here you have to sell as well.
A great place to start is by re-engaging your handful of interviewees from earlier in the process. If you’ve vetted them correctly and truly created a solution to their problem, now is the time when you can present your solution and ask for a financial commitment.
If all was performed correctly up to this point, these customers should be asking you how they can get their hands on your product, so it should be an easy sell. If not, feel free to ask for commitment in a low-risk way. For example, ask if the customer would like to sign up for a paid beta program.
Step 4: Iterate, Iterate, Iterate
It’s important to note that even given your best efforts, it’s still possible — even probable — that you’ll require multiple iterations of research and product development before landing on a winning formula. You might create a product that’s solving the right problem but doesn’t integrate with your customers’ current technology. Or you could create something that seems to solve the customer’s problem but doesn’t command as high of a price as you expected. This is completely fine.
Just return to Step 1, perform more research, and try again. This process is meant to be iterative, and it’s actually unlikely that you’ll succeed on your first try. That’s why Blank’s design diagram has an arrow going backward between the first two sections; it’s meant to be repeated.
After Initial Research, Start to Scale
It’s only here — once you’ve performed the necessary user research, created a viable MVP, and found your first handful of paying customers — that you can start to scale.
Now you can spend marketing budget on your product with the knowledge that it’s going to be of good use. With the knowledge of customer discovery and validation under your belt, the question you have to ask is simply, “How can I most efficiently acquire customers?” not “How much should I charge? Who will buy it?” Or even the dreaded, “Will anyone buy it?”
As you start to scale, you can gradually focus on building out company infrastructure with departments, management, and new employees. The exact methods you’ll use to perform either of these tasks — scaling and building — depends heavily on your company, industry, and existing market and are a bit beyond the scope of this article.
However you scale or build, once you’ve done the proper user research, the decision-making becomes easier. When you know your customers well, you know how to talk to them through your marketing, which helps you create a steady, dependable source of income around which to build. Plus, you put your company ahead of the pack, in front of any competitors who decided to ignore the wisdom in the customer development model and started scaling too soon. All that starts with user research.
Note: Need a hand finding ideal users for your customer development research? User Interviews offers a complete platform for finding and managing participants in the U.S., Canada, and abroad. Find your first three participants for free. Or, streamline research with your own audience in Research Hub.
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