Customer Development 101: Cust Dev for Product Managers in 10 minutes

A short summary of key ideas, concepts and patterns about customer development.

What is Customer Development?

Customer development is a methodology for building businesses that is applicable to startups and existing companies. It is one of three pillars required for a lean startup:

In brief words, customer development as part of a lean startup focuses on understanding customer problems and needs, defining a repeatable and scalable sales model for your product/company, and helps to get product/market fit.

4 Phases of Customer Development:

Each of these phases can take a few iterations before getting the proper results and getting product-market fit. And it is totally ok since quite often initial hypotheses about users/needs/product/traffic sources may be wrong or require significant tweaks — “No business plan survives the first contact with customers”.

If you succeed in the phases of customer discovery and customer validation, you have proven your business model. If not, you need to pivot and test other hypotheses.

Getting through the first two phases - customer discovery and customer validation — guide you to find product/market fit, where most start-up companies and products fail to reach.

Customer discovery is the core part of Customer development.

Product ideation

Great products came from great ideas. Sources for new product ideas can be internal and external to your company. Product managers need to be able to build a systematic process for generating, analyzing, and prioritizing ideas that come from different sources and stakeholders.

All products are created either to:

One of the most effective ways to validate your ideas and hypotheses is a Customer Discovery via user research.

User research

Nothing is more important than user research. Companies often assume they understand their user so well that they can build a product without talking to their users at all, and they’re almost always wrong.

Without performing user research, you’re betting on your ability to totally guess at what a user needs and you’re betting that you can build a product, put it out into the world, and people will flock to it.

So, to avoid that and give yourself the best shot possible, you’ll spend a lot of time looking through secondary research and conducting primary research with surveys and customer interviews.

Remember, a product starts as just an idea quite often based on assumptions. Through customer discovery, you’re trying to turn your assumptions about the customer, the market opportunity, and the business model into proven facts.

To run the customer discovery phase, you need to ask yourself:

Answering these questions requires research from both secondary and primary sources.

If you’re worried that talking to potential customers will reveal bad news about your idea, then it’s probably a bad idea.

Target Markets and Target Users

Products are created for users, but not everyone is your target user. You need to talk with people that actually may find value in your product (product for US lawyers may not be interesting for US truck drivers).

You may start with Demographic information to describe your target users initially by:

When you start talking to users you may notice some additional patterns that give more insights into your true target users’ attitudes and other psychological criteria. These are called Psychographic information. People who are vegetarians or believe in a flat Earth are psychological profiles, for example.

Psychographics is a better way to segment a target audience than demographics. It expands your potential target audience above age or demographics brackets. For example, a 20-year-old woman can have similar interests as a 48-year-old man and both may fit our target audience based on a psychographic profile.

You may need a Screener to filter users you want to talk to later. It is based on questions that help you to define your assumed target audience. For example, you may ask the user’s age, gender, job position, interests, etc. Use digital tools like Google forms, Survey Monkey, or Typeform to create a digital screener survey to collect and process users’ responses.

Your survey needs to be disposed to a potential target audience. Not relevant responses have no value for you. So, you need to think, where to find your target audience: posting in thematic FB or LinkedIn groups, website topic forums (Reddit, as one of many), or launching targeted ads. Later these traffic channels may be used again for Customer validation with your product MVP.

Also, you need to think about how to make users interested in taking your Screener survey (offer them something in return — valuable content, promise to give free access to a future product, etc.)

Secondary sources

Secondary sources include anything that you don’t learn directly from your users — these are market research, scientific papers, experts publications, interviews with experts. You may want to check these sources initially to quickly learn if your initial assumption is in the right direction. And this is good to know now before wasting any more time.

As a start-up, you don’t have a lot of funds to invest in user research, and you need to aim to get maximum info for the fewer expenses. So you can benefit from free internet sources and researches done by others that are freely available on the Internet:

You’ll use this information to augment your primary user research, but all information at this stage is valuable. In some cases, a start-up may stop on secondary sources and do not invest enough effort in actual talk with users. This approach may work if you plan to launch a product on a well-known market, you copy market leaders and know what features are valuable for users, and you can develop and iterate your MVP fast based users’ feedback. But even in this case, it is recommended to talk with the user before customer validation just to double-check that your assumptions are correct.

Primary research

In a startup, no facts exist inside the building, only opinions, so it is important to “go outside” and talk to some real users. Talking directly to your target user is called primary research.

User interviews and user surveys are two primary methods for collecting users feedback. Both depend on the quality of your questions.

They serve different purposes:

User Interview

Interviews are flexible and effective tools for gathering user feedback. You need to make an interview comfortable and enjoyable for your user — build rapport with users, think of them as friends, use your body language to make this conversation more comfortable for both. Show curiosity and respect to user’s opinions (even if you disagree). Your users should talk more than you. Remember, when you are talking, you are not learning.

Tips for interview:

User Survey

Surveys are for quantity information. They can be misused instead of user interviews since are made quickly and cheaply to collect information.

Surveys are great for three things:

Surveys are bad for:

It is better to use interviews for problem discovery and product discovery (yeah, these are two different interviews). If you interviewed few target users and discovered a problem they face, you may create a survey with answer options to gather quantitative information about whether other users face similar problems, how often, how important those are for them, etc.

You should keep your surveys short (make it possible to take within a few minutes), since large surveys may scare potential users. Every question must have a specific goal or collect quantity insights, questions should be grouped and have logical connections (do not do jumps forth and back, since it is confusing). Ask broad questions first before moving to more specific ones.

Do not use leading questions!!! Questions like, would you use a product like this, lead to biased responses. Also, questions shaped as “do you agree with a statement” lead to a Yes/No answer, but it is better to ask “how the user feels about something on a scale from 0 to 10”. It gives more granularity to users’ responses. Avoid open-ended questions in surveys (leave those for interviews), use quantifiable questions, like rating scales.

When you analyze survey results remember about statistical significance — if you have more replies from target users, then the more accurate your survey is for a target market.

Also, don’t look only at average values of survey responses, look at details for each score given — there may be additional segments of target users hidden, that can be valuable for you and need to be interviewed.

When to Pivot?

Based on your research results, after you talked with users, your hypotheses will fit one of three groups:

If Customer Validation is not successful then you need to do a pivot and form new problem hypotheses and talk more to potential users. For example, there is a problem identified, but no one wants to pay to solve it.

Pivot at early stages is a good thing — it saves your money from being wasted and saves time that you can spend on discovering and developing a product that people really need or will love.

Recommended books on Customer Development:

PM at Genesis (gen.tech) || Product & Project Manager (PSM 1 certified) || Legal Manager (LL.M. USA) Business / Corporate / IT Law / Compliance