Customer development is the process of identifying target customers and determining how businesses can meet their needs. The process was initially introduced by Steve Blank, an American entrepreneur and Silicon Valley veteran.
Customer development is a four-step framework recommended for startup companies that includes customer discovery, customer validation, customer creation, and company building. The main goal of customer development is to ensure that a company’s product satisfies customer needs. That way, they can build a solid customer base.
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Customer development is part of the three-part lean startup approach to creating businesses and products, famously used by companies like Zappos and Dropbox. Other lean startup processes are business model design and agile engineering.
Why Is Customer Development Important for Startups?
Building a loyal customer base is one of the most critical aspects of developing a company. No business can thrive without people using its products and services. For this reason, customer development is significant for startup companies.
Startups do not usually have enough data to support their business models, and most of them may even operate on a trial-and-error basis. This was Steve Blank’s observation from his experiences in Silicon Valley that drove him to propose the use of the lean startup methodology in building startup companies.
The customer development part of lean startup development ensures that startups do not solely focus their efforts and budget on product development.
Four Steps in the Customer Development Framework
The customer development framework has four critical components. These are:
- Customer discovery: The first step is to turn the founder’s vision into several business model hypotheses. These are essentially assumptions on how to make the business work, which are then tested to see customer responses. It’s about talking to your real customers and understanding their needs.
- Customer validation: In this step, you test the business model for scalability and repeatability, and validate hypotheses with your potential or real customers. If the model is not scalable, then you go back to step 1.
- Customer creation: At this stage, you perform activities that can drive user demand.
- Company building: After you have a scalable business model and enough user demand for the product, it’s time to execute the model.
As you can see, customer development entails that products and proposed business models are tested and validated before full implementation.
Customer Development Manifesto
Steve Blank wrote the book The Startup Owner’s Manual: The Step-By-Step Guide for Building a Great Company. In this book, he and his co-author Bob Dorf wrote several customer development principles listed below.
- There Are No Facts Inside Your Building, So Get Outside
- Pair Customer Development with Agile Development
- Failure Is an Integral Part of the Search for the Business Model
- If You’re Afraid to Fail You’re Destined to Do So
- Iterations and Pivots Are Driven by Insight
- Validate Your Hypotheses with Experiments
- Success Begins with Buy-In from Investors and Co-Founders
- No Business Plan Survives First Contact with Customers
- Not All Startups Are Alike
- Startup Metrics Are Different from Existing Companies
- Agree on Market Type—It Changes Everything
- Fast, Fearless Decision-Making, Cycle Time, Speed, and Tempo
- If It’s Not about Passion, You’re Dead the Day You Opened Your Doors
- Startup Titles and Functions Are Very Different from a Company’s
- Preserve Cash while Searching, After It’s Found, Spend
- Communicate and Share Learning
- Startups Demand Comfort with Chaos and Uncertainty
Steve Blank suggests nailing the manifesto to the wall in this blog post. Below is a screenshot of the said manifesto:
Customer Development Tools
Several tools can make the customer development process more manageable. These include online survey platforms, such as SurveyMonkey and Pollfish. With these tools, you can get the feedback of existing users and determine if your target market is interested in your product.
You can also obtain more feedback through user testing tools like Lookback and UberTesters. These tools can connect you to thousands of testers who can help you improve user experience (UX) and understand user intent.
Several startups have successfully implemented the customer development process as part of the lean startup methodology. At its core, the process requires companies to listen to what customers have to say. After all, they could fail if customers stop using their products and services.
Customer development enables companies to keep up with market trends, too. By listening to customers, they can detect any change in the industry and make necessary tweaks to adapt to these changes.