What Is Customer Development? Definition, Process, Examples

Did you know that 35% of startups fail as there’s no market need for their products? So if you target too broad or the wrong audience, you run the risk of failure.

What should you do to prevent this negative involvement? Adopt a customer development strategy. This approach will help you understand your core audience better, along with its requirements and pain points.

As a component of the Lean startup methodology, customer development assists in validating your idea in advance. So even before product creation, you can ensure there will be a demand for it. You’ll also have the opportunity to choose the most relevant software features at the customer development stage.

"As a component of the Lean startup methodology, customer development assists in validating your idea in advance. So even before product creation, you can ensure there will be a demand for it."

But what is this approach, and why is customer development important? Today’s article will be a comprehensive answer to this question. Here you’ll also find customer development process examples and guidelines.

Being an agency that makes human-centered products, Arounda can tell you much about the customer development approach. We have over five years of expertise in the niche, having launched over 130 products successfully. So let’s move on to today’s topic.

What Is Customer Development?

Customer development is a methodology developed by Steve Blank. Startups can use this approach to determine their target audience and its needs. As a result, the company can create a digital product that will fully meet customer expectations.

Customer development methodology includes:

• Defining and testing market assumptions for a specific product
• Verifying the problem to be solved by the proposed product
• Creating the most suitable solution to meet the target audience’s requirements

"The primary goal of the customer development strategy is to reduce risks during startup creation and to obtain a thorough understanding of the market and core audience."

As a part of the Lean Startup methodology, the customer development phase is intermediate between the business model creation and the Agile software development stages.

Benefits and Importance of Customer Development

A customer development strategy can help a startup product significantly. Let’s see how exactly.

Customer-Centered Products

The customer development methodology is primarily about your audience. With this approach, you identify your potential users and gain a deep understanding of the problems your product is meant to solve. As a result, you create software that is indeed end-user-oriented.

Reduced Risks and Saved Money

When you apply the customer development approach, you invest wisely in product creation. Before spending money, you confirm the viability of your idea and the value of your software to customers. Guided by valid data and facts, you can significantly reduce the risks associated with product development and launch.

Smart Use of Resources

As already mentioned, don’t make hasty decisions and don’t spend money until you are sure of your digital product’s prospects. This way, customer development allows you to stretch your resources for longer. It is especially attractive to your potential startup investors, as this way, they’ll see that you have a well-thought-out growth strategy.

Only Necessary Solutions

Customer development will also help in creating your minimum viable product (MVP). You’ll know which software’s features will satisfy your target audience. In this way, you implement only relevant solutions for your users and do not waste time and money on developing unnecessary features.

What Are the Examples of Customer Development?

In its essence, customer development involves conducting surveys among customers and showing them potential solutions. Such research is necessary to evaluate which of your ideas or their variants is most relevant to your audience. Let’s look at some cases where the customer development process has come in handy.

Dropbox

Dropbox is one of the most popular file-sharing services today. It is not surprising, since at the time of its launch, there were no alternative products, and those solutions on the market were far from perfect.

Despite having many top developers on the Dropbox team, the project was not immediately successful. The staff struggled with marketing and blew a fortune trying to draw new clients.

Then the Dropbox team decided to focus their efforts on customer development. The conducted research allowed this company to realize that traditional marketing approaches would not give positive results in attracting users, as there were no such solutions on the market then.

As a result, Dropbox has concluded that the best way to raise awareness of its product is through a word-of-mouth marketing strategy.

Buffer

Buffer is an app for managing various social network accounts in one place. This software is popular and has many premium clients.

The problem was that the company did not understand why its solution was in demand. The Buffer team needed to know why customers decided to buy their tools and therefore opted to use a customer development strategy regularly.

Currently, Buffer conducts surveys among its users through its Twitter channel and uses the collected information to improve the product’s functionality.

Groove

Groove is a help desk tool that helps businesses increase sales and improve the customer experience. The company has been successful because of its subscription monetization model.

Although Groove could attract new customers effortlessly, it had a churn problem. Then the team decided to apply a customer development strategy to find out why users leave their product.

As a result, Groove adjusted its strategy and learned more about the needs of its customers. They narrowed their target audience to small and medium businesses and provided them with a more personalized approach. All this helped to reduce churn.

Customer Development Process: Main Steps

It seems you already know almost everything about customer development, except for the most important thing — how exactly this process takes place. That is why we have prepared a step-by-step guide for you.

It is worth starting with the fact that the customer development approach consists of four stages:

1. Customer discovery

2. Customer validation

3. Customer creation

4. Company building

Now let’s look at each of them in more detail.

Stage 1. Customer Discovery

The stage of customer discovery consists in finding and defining your target audience. You also need to understand your users’ pain points and needs. This is how you do it:

• First, you must formulate your idea and vision of your product.
• Next, you must develop hypotheses about your product that need to be tested.
• The next step is to test all your hypotheses and collect the results. You must find out if your product can meet your user’s demands.
• Finally, you need to ensure that you know exactly what the customer’s problem is, how your product can solve it, and how willing the user is to pay for your software.

Stage 2. Customer Validation

Customer validation is the stage when you practically check whether your product can solve the problems of your potential users. After confirmation, you can develop a sales strategy for your software and think through your business model. Here’s what you typically do at this stage:

• You need to find customers who may be interested in your product.
• Next, you should conduct a survey directly among your target audience.
• Finally, it would help if you understand your product’s profitability, market, and relevance.

Stage 3. Customer Creation

The customer creation step involves developing a strategy for your company’s future growth and scaling. You should assemble a clear plan for your transition from a startup to an established business. Here’s what you need to do:

• First of all, you need to determine in which market your company will operate: in a new market, in an existing one, or will it be a new segment of an existing market.
• Next, you need to decide on the positioning of your company and digital product.
• After that, you can directly prepare for the launch of your product, that is, start its front-end development and back-end development.
• Finally, you have to create demand for your product.

Stage 4. Company Building

The last step of the customer development strategy is company building. This stage involves the transformation of a startup into a mature business. How can you do that? Follow this algorithm:

• First, determine your core customers and think through a plan for your business’s sales, marketing, and growth.
• Next, you should consider your company’s management, managing style, and business culture.
• In addition, you should identify your company’s departments.
• Finally, establish effective communication between the departments of your company.

Final Thoughts

Customer development is a fundamental strategy to make sure that there will be a market for your product. This process allows you to test the viability of your idea by analyzing information from your audience.

We hope today’s article helped you learn how to build a digital product that will most likely succeed. And if you need assistance with customer development, Arounda is at your service. We’ve completed numerous thriving projects and can do the same for you. So feel free to contact us!

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