what is customer development
TRANSCRIPT
What Is Customer Development?
Objectives• Understand the Customer
Development process• Crystallise product & business
model hypotheses• Aware of CD next steps
What is it?
Classic Chicken
or the Egg problem?
Product ready for sales vs
Customers to work with
Hint… the right answer is CUSTOMERS
Customer Development = framework for 1. discovering & validating the right market for your
idea
2. building the right product features that solve customers’ needs
3. testing the correct model and tactics for acquiring and converting customers
4. deploying the right organisation and resources to scale the business
Startups don’t fail because they lack a product. They fail because they lack customers and a profitable business model.
Steve Blank
MARKET
Problem Customers Willing to
Pay For
Your Solution
Borrowed from Adreas Klinger
Is your problem worth solving?
• You can ID your customers
• Customers have confirmed they want it and are willing to pay for it
• You can define the MVP
• Customer is willing to pay
• You can deliver the product/service through a profitable (or sustainable) business model
Lean Methodology
• Find a problem worth solving
• Find a potential solution
• Validate that the solution works
• Validate that the market wants the solution
• Validate the business model
1. Problem Statement (Reason for Testing)
2. Proposed Solution (Description of What to Test)
3. … will result in [Quantitative Statement] (measurable Outcomes)
Hypotheses
Hypotheses
• Customer/Problem
• Product
• Distribution & Pricing
• Demand Creation
• Market Type
• Competitive
• Customer/Problemo Types of customers/archetypes
oMagnitude of the problem
o Visionaries
o A day in the life of a customer
o Organisational impact
o ROI justification
o Problem recognition
o Minimum feature set
• Product
o Features
o Benefits
o Product delivery schedule
o Intellectual property
o Total cost of ownership
o Dependency analysis
• Product
o Positioning & Differentiation
• Competition
oWho is out there?
o Why are they important?
o How do customers use them today?
o What don’t customers like about them?
Example Hypotheses• Problem Definition: Users don’t see filters on our
search results page• Data Validation: Less than 15% of users use filters
when searching for products, which is low compared to industry standards
• Solution Description with Rationale for why the right solution to solve the problem– Move the filters to the left side of the results– This is the most common place for filters to be located
• Predict a result with metrics to determine the success/failure of your experiment
Activity: List 20 initial target customers
1. _________________2. _________________3. _________________4. _________________5. _________________6. _________________7. _________________8. _________________…20. _________________
Activity: Problem statement – from Customer’s perspective
Activity: Write out some of your assumptions
1. _________________2. _________________3. _________________4. _________________5. _________________6. _________________7. _________________8. _________________9. _________________
“I (or We) believe…”
First Steps
Translate founder’s vision into a hypothesis
• Product
• Business Model
Create experiments to test your assumptions
• Simple pass/fail tests
Establish your customer discovery exit criteria
• You know their top problems & how much they will pay to solve them
• You know your concept solves them, customers agree, and you know how much they will pay
• You can draw a day in the life of a customer (archetype) before & after your product
• You can draw the org chart of users and buyers (B2B)
Cold email template
Hi Sam,I read your article on volunteering your professional skills in Guatemala – it was really inspiring. I’m looking to travel more and you’ve got me thinking about incorporating volunteering when I do!
I have a software company trying to improve remote medical record coding.
I’m not looking to sell anything, but since you have so much expertise with remote coding, I’d love to get your advice on our product so we don’t build the wrong thing.
If you’re available, I’d love to chat for just 20 minutes – Thur or Fri morning?
Thanks for any help,Justin
Customer Interviews
First Rule of Validating Your Idea…
Do NOT talk about your idea!
Second Rule of Validating Your Idea…
Do NOT talk about the future!
Third Rule of Validating Your Idea…
Ask about a significant problem context
• Face to face conversations
• Don’t pitch your idea, learn from your potential customers
• MEASURE your results
Customer Interviews
Before you rock up to an interview…
• Know what you want to learn (2-3 key objectives)
• Define your questions
o Formulate testable hypotheses
o Cluster by topic
Step 1: The Problem Interview
Template• Welcome, set the scene
• What’s the biggest challenge you face as a [relevant role]?
• When’s the last time you tried to solve that problem?
• Can you tell me about the last time that problem happened?
• Why is it a problem for you?
• How did you find your current solution?
• What isn’t ideal about your current solution?
• I’m actually exploring a solution thi [problem]. Can I follow up with you if we find a viable solution?
• I’m trying to understand this problem from a wide range of perspectives. Do you know 1 or 2 other people who are struggling with [problem] that I might talk with?
http://customerdevlabs.com/script/Check out this cool, free resource:
Good - Bad
• Do you have a problem about X?
• Tell me about x.
• Do you think it is a good idea?
• Would you buy a product which solved this problem?
• How do you currently deal with this problem?
• Talk me through the last time you had this problem.
Good - Bad
• How much would you pay for this?
• How much money does this problem cost you?
• Is there a budget for it?
• Who else can I talk to?
• Is there anything you think I should have asked?
Activity: Draft 10 customer interview questions
1. _________________2. _________________3. _________________4. _________________5. _________________6. _________________7. _________________8. _________________9. _________________10. _________________
Analysing the Results
• Sounds great. I love it!
• Brilliant – let me know when it launches!
• I would definitely buy that!
• There are a couple people I could introduce you to when you’re ready
• We are spending $500/month on this
How do I know when I’m done?
When feedback repetitive and not gleaning new learnings
Step 2: The Solution Interview
Before you rock up to an interview…
• Build a demo/MVP
• Define your questions
o the product with the highest return on investment versus risk
o the smallest thing you can build that lets you quickly make it around the build/measure/learn loop
o the smallest thing you can build that delivers customer value
o the minimum product that you can take to market successfully (allowing a start-up to generate positive cashflow & fund further development work)
GOAL = to test fundamental business hypotheses
Minimum Viable Product (MVP)
Validating Your Solutions
• Revisit interviewees
• Discuss current solutions, flaws
• Show mockups, interactive demos
• Get improvement feedback
• Get them to commit (without a hard sell)… or iterate
Goal: Product-Market Fit
People want/need your productAnd they represent large enough market
Differentiated from alternatives
Users will pay for your product
Recap
• Get out of your own head, your own building, your own echo chamber circle of contacts
• Validate your assumptions
• Learn from what you hear from customers & make changes to your plan accordingly
Recap
HOMEWORK• Write your interview script• Find contact details for your
20 initial target customers• Craft an introductory email• Initiate contact
Dr. Laura FaulconerCOO
0413 467 201
1 Dalmore DrScoresby, VIC 3179Australia
www.STCaustralia.org +61 3 9763 4777
Reach Out