What do you think is the №1 reason that startups fail?
According to CB Insights, it’s building products that nobody wants.
Imagine spending month after month poring over a product, building and re-building it, then crafting and executing a brilliant marketing campaign — all for nothing. Nobody signs up. That would be devastating, right?
Avoid that fate with the customer development method. This is a method that eliminates the guesswork in the product development process by roping your customers into your work. The result is your figuring out exactly what your customers want, and then incorporating that into your product.
Here are three actions you’ll take when using the customer development method:
1. Identify Who Your Customers Are
The first question that customer development forces you to ask yourself is this: who are my customers?
It’s easy to jump into product development without imagining who your users will be. But it’s a critical step, since understanding a user affects everything from early-stage marketing to choosing the right platform.
Imagine you’re building a financial app that allows people to manage their insurance. If you research your customer demographic, you might find that most of your users don’t use Apple smartphones, so building a mobile app for iOS may not be a very good idea. That’s key information to have.
2. Confirm That Your Audience Has the Problem
After researching your audience, you need to see if the problem your product is trying to solve is actually a problem your audience thinks they have. You can find this out by simply doing some online research. Are there any articles and blog posts that offer solutions to the problem you’re solving? Are people discussing this problem in forums and other online communities? Are there books about this problem? If your answers are “no,” you might be in some trouble. It’s easier to fix problems that people know they have.
If they don’t know there’s a problem, then they’ll never buy your product. You need to educate them that there is one — and that can be a very time consuming expensive endeavor. Because startups need to focus on getting positive revenue, building a product that solves a problem people don’t know they have is the quickest path to failure. Apple is smart about this issue. They wait for someone else to educate their market first, then release a product they know their audience wants.
3. Learn How Your Customers Currently Deal with Their Problems
After identifying your audience and confirming that your customers have a problem that your product will solve, you need to learn how your customers currently deal with this problem. This will show you how painful their problem is. If they’re just ignoring the problem, then they probably won’t be that excited about your product. But if it’s quite painful and they’re using some other app to cope, you’re in a sweet spot.
Now you just need to learn about the shortcomings of your competitors and build a product that doesn’t have them. How do you do all of this? You need to talk to people. It’s easier said than done, but there are several ways to go about it. One is to find an online community where your customers hang out and simply ask people for an interview. You can even offer them an Amazon gift card in return, as encouragement.
How do you conduct interviews? There’s a great framework called Jobs to Be Done, or JTBD, which focuses on the needs and feelings of the customer. Using this framework, you first need to know what triggers the problem, since triggers lead to habits. For example, a trigger to search for CRM systems might be a user’s need to get reminders to follow up on sales emails. If you ask your interviewees how they’re solving this problem now, they’ll likely tell you that they just make a note in a to-do list of theirs. (This is a habit.)
But then something happened, and that habit no longer worked. When you ask about what changed, your customer might tell you about a switching trigger. For example, your interviewee might have gotten distracted, forgetting to create a to-do list reminder, then missed an important contract that went to their competitors. Learning about the context, triggers and other forces that drive customer behaviors is indispensable. You can learn a lot by just asking questions and listening to the stories people tell you.
What Comes Next
If you complete all three of these steps early on, you’ll finish all of the heavy liftings before any product development begins. You won’t have paid a dollar to developers or designers and you’ll already know what problems people have and how your product will fit into their world. Isn’t that fantastic? Without customer development, you would figure that out only after launching the first version of your MVP, at best.
Don’t get me wrong: MVPs are a great way to learn about your customers, market, and product, but you if you build it on a foundation of information you gathered from the customer development method, you’ll save yourself a lot of trial and error.
The next step is to test your assumptions. Again, you don’t need a product for that. A lot of testing can be done in the early stages of product development. My favorite test is building an extremely simple landing page with a sign-up form to join a waitlist. The design and copy on the landing page don’t matter much because the goal is to test whether or not people respond to an ad — not to get them to actually sign up.
You can even skip the landing page altogether and just run ads that point to nowhere, or to Google. Yes, it’ll be perceived as an error by those who click on it, but it’s still useful, as you’ll be able to quickly see how the audience you picked, responds to the offer you’re making.
Can you guess what CB Insights said was the second reason that startups fail?
Running out of cash.
Blowing through your cash when you have a software startup is so easy due to the nature of software development — every task is new, the scope is always changing and the amount of time that it takes to build a product is often unpredictable. But hey, if you start with customer development, you’ll be much less likely to run out of cash. That’s because customer development is relatively inexpensive — and sometimes even free! You may spend a few hundred or thousands of dollars on running experiments with ads, but that’s nothing compared to the cost of building a product.
What’s more, customer development allows you to come up with a marketing strategy early in the game. Marketing is essentially a combination of targeting the right audience with the right message: exactly the two factors you’ll be testing after you conduct interviews.
Originally posted on Medium