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Customer Discovery Step by Step Process: 4 Phases of How to Validate Your Customers

What the heck is customer discovery?

The process of understanding your customers and how your proposed solution can assist solve a problem is generally known as customer discovery.

While the sum of UK company births remained positive from 383k to 414k between 2015 and 2016, a birth rate of 14.6% compared with a rate of 14.3% in 2015, the number of UK business deaths also rose from 283k to 328k between 2015 and 2016, a death rate of 11.6% compared with a rate of 10.5% in 2015. London remained the area with the highest birth rate at 17.5% and the highest death rate at 14%.

 

As you can see from the graph above if you don’t want to be one of the 328,000 start-ups, you need to go through the discovery process.

The main objectives here are to identify your first customers, what problem you are solving, how they will buy from you and form hypothesises based on these. The last step will be to test your hypotheses – usually, you do that by conducting interviews with your potential customers.

The idea is to find your first customers and not necessarily a broad customer base.

Why?

The reason for this is that, usually, the first customers of a start-up are likely to be a limited figure. Steven Blank, who is a lecturer in entrepreneurship at the University of Berkeley and Stanford University, describes them as “Earlyvangelists”; in Crossing the Chasm, Geoffrey Moore describes them as “Visionaries.”

Mr Blank gives the following classification of this group which will help you recognise a possible “Earlyvangelist”:

1. They have a business problem.
2. They are aware that they hold this problem.
3. They have searched for a solution.
4. They have put together a “DIY” solution.
5. They have access to the budget required to purchase a solution.

Customer discovery is a part of The Customer Development Model (CDM) that was described initially by Steven G. Blank in his book, “The Four Steps to the Epiphany” and is also formed by 4 phases.

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1. State your hypotheses

Write down your most essential business hypotheses on the following:

  • Product idea
  • Clients and the problems they want to solve
  • Distribution and prices
  • Demand creation
  • Market type
  • Competition

For the discovery plan to work try not to delegate the hypothesis creation. Who else but you and your team know more about your business? There are also a couple of benefits of doing this as a team. As a start-up, that will be probably your first team building exercise.

Also, by including your team in this, they will feel better later on if you (when) need to make changes. Everyone will be on the same page and understand why.

Make sure any hypothesis you form is testable. That is critical because if you come up with something that in reality is not testable, then it will not work anyway.

Speed is in essence as well. Don’t try to make your briefs perfect – better concentrate on and spend more time on the interviews with your customers.

Top one reason why businesses are failing is “No Market Need.”

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2. Test your hypotheses

Once you are done forming your hypothesis, you are now ready to create your validation process.

Before you begin to create your validation, remember that this is not a sales-oriented process.

The testing process happens in four validation steps. Please see below:

image source marsdd.com

How do I know if my idea is a good one?

Ask your Customer!

Asking the Wrong Way

“Death by Demo” or “Here’s my idea. What do you think?” – I wish it was that easy 🙂

Best Way to Validate your Hypothesis

As Steve Blank said the best way is to

“Get out of the Building!”

How to do this?

The best way is to conduct face to face interviews, but you can also get away with surveys and phone call interviews. Hint – always aim to meet your customers face to face. Keep in mind no one will do it because they like you. You may want to consider a prize.

One critical details here is how many people do you need to interview? As in CRO (Conversion rate optimisation), you will need to reach statistical significance that has in mind sample size.

The recommendation is to interview 100+ Stakeholders.

Sample survey questions

  • What is a typical day like on your job?
  • What are the top 3 challenges? How often do they occur?
  • How much time do you spend on those challenges?
  • Can you tell me a story about the last time that challenge
    happened and what you did?
  • What, if anything, have you done to solve these
    challenges?
  • What don’t you like about the solutions you tried? OR On
    a scale of 1-10, how would you rates each solution? Why
    did you give it that number?
  • Who has to approve purchases? Do you need any
    approval to try them?
  • Who else should I talk to?

3. Test your product concept

In this stage, you will be qualifying your product concept, and you do that only after have a deep understanding of your customer’s problems.

Once you gather all the information you collected conducting the interviews, share it with your development team. At this point, you can compare your findings with your initial product hypothesis and see if you were heading in the right direction or not.

Different customer or different market?

Now is the time to make the tough decision. If your product is not solving your customer’s problems, need to decide (better now) that you may want to look for a different market.

However, if your product partially matches customer’s expectations – you may want to consider adding more features.

Let’s say you made a decision, and your product is a partial match of what your customer’s problems are. Well done – you are on the right path.

Now you will have to create a new product presentation and share it with your customers and product development team.

At this point you will have enough information to create the following documents:

  • A product requirement document
  • A sales revenue plan
  • A business plan

Got this ready? Now you can move to the last phase of the customer discovery process – Evaluate customer feedback and determine the next steps, where you will form your value proposition.

What is a Minimum viable product (MVP)?

“A minimum viable product (MVP) is a product with just enough features to satisfy early customers and to provide feedback for future product development.” – source Wikipedia

A minimum viable product (MVP) is a growing method in which a new product or website is produced with enough features to convince early adopters. The final, full set of features is only created and developed after analysing feedback from the product’s original users.

Why is that important? (especially for start-ups)

Well, would you invest millions in developing something that is not proven to sell or not solving customer’s pain? I think we all know the answer to this question. MVP (it can mean also minimum lovable product) is a crucial component for start-ups as you may get caught in spending too much time developing your product without making any sales. Speed is essential here.

“A minimum viable product is the version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effect.”

In the end, it does not matter if you are going to call it “minimum marketable product” or whatever name you choose for it, what matters is taking a start-up off the ground as soon as possible.

Joining Agile Scrum Methodologies and MVP

Why would you want to do that?

Scrum as an already proven “ritual” in combination with MVP concept will give you the framework of building your product while using intelligence from the customer discovery platform.

4. Evaluate customer feedback and determine next steps

This step s the final phase of the customer discovery process, and its purpose is to evaluate your finding from the previous phrases. You need to honestly answer if your hypothesis is solving your customer’s problems and if they are not you have two options:

  • go back and do all steps again

OR

  • put a hold on your current plans

Again, ask yourself:

1. Has the client pain been confirmed?
2. Has the product solution been tested?
3. Has the market model been validated?

There you have it!

Recommended books to read:

  • Blank, S.G. (2005). The Four Steps to the Epiphany
  • Ries, E. The Lean Startup: How Constant Innovation Creates
  • Vlaskovits, P. and Cooper, B. The Entrepreneur’s Guide to Customer Development: A cheat sheet to The Four Steps to the Epiphany

Conclusion

I often get asked the following question:

“How do you do conversion research if this is a startup?”

With no customers to survey and no data to analyse yet, I always point them to the Customer Development Methodology – figuring our what product to build and who will buy it. As you can see from the graph on top number 1 reason startups are failing is “No Market Need”.

Questions? Put them in the commentaries sections.

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