How to Apply Customer Development and Validation Cycle in Your Startup?

Customer Development Process and Validation Cycle
Customer Development Process and Validation Cycle

The core of every business is having a product or a service to offer. For that business to thrive, it requires a base of customers willing to purchase its products. This constantly drives businesses to come up with cool products/ideas that can grant them loyal customers and widen their consumers’ base. But in the rush to present new products to the market, many businesses skip the due diligence needed to confirm the viability of these products or the needs they satisfy. This leaves them with products having no or limited markets than originally assumed.

So, instead of building products in vacuum, you should always keep in mind why you are building them and who you are building them for. One model that can help business, and specially startups, put customers and their needs first is the customer development approach.

What is customer development?
The customer development method was first introduced by Steve Blank in 1990. He defines it as “the formal process of identifying potential customers and figuring out how to meet their needs.”
Steve Blank was the first to offer that startups are not smaller versions of large companies and that new ventures are different than existing ones.

Through his book “The Four Steps to the Epiphany: Successful Strategies for Products that Win”, Steve Blank has elaborated that customer development process aims to validate 4 important steps:
First step: Customer Discovery
This stage focuses on understanding the problems for an identifiable group of users.
Second step: Customer Validation
In this stage you validate that your product can satisfy your customers’ needs.
Third step: Customer Creation
This is the beginning of the execution stage where you start building the sales and marketing roadmap.
Fourth step: Company Building
In this final stage you execute your plan and scale your project.
Customer Development Process

Now that we have a view of the overall process, let’s understand more about each step in the customer development process.

Customer Discovery

Problem exists: A strong pain/problem that you validated with prospect customers
Problem-Solution fit: Your solution solves this problem and customers buy it
Solution-Customer fit: Your solution solves a given problem for these specific customers
Sales Funnel: You build a proposed “sales and marketing roadmap,” which lays out the business activities to move prospects through the funnel.

Design Thinking

We can say that the customer discovery stage really builds on design thinking. But what is design thinking in the first place? It’s a human cantered approach to problem solving and innovation that includes the methods and tools used to make products and services economically viable, technically feasible & humanly desirable.

Customer Validation

Create empathy in your business; product, sales, marketing and customer success all need to empathies with the customer.
Validate MVP (minimum viable product): Understanding the core value that you are offering to your customers.
In this step, sales and marketing initiatives and indicators can guide your: Competitor analysis, conversion funnel, scalability assessment and Keep Customer Acquisition cost /Life Time Value low.

Customer Creation

Create end-user demand and drive that demand into the company’s sales channel. Creation comes after proof of sales.

The process of customer creation varies with the type of startup:

  • Enter existing markets, well defined by their competitors.
  • Create new markets where no product or company exists.
  • Re-segment existing markets (e.g. a low-cost entrant or creating a new niche).

Company Building

Company transitions from its informal discovery-oriented customer development team into formal departments with VPs of Sales, marketing and business development.
These executives now focus on building mission-oriented departments that can exploit the company’s early market success.

Most of startups have business models that are lacking in critical data

Here are questions asked at different stages of the product life cycle that you can ask your team:
What problem are we solving?
Who are our ideal customers? What are their needs?
What channels can be used to reach them?
What methods can we use to maintain customer growth?

And at the end, remember “Start with the problem, not the solution”!

You can watch the full webinar here.
Learn more about our Product Management Program.

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