Customer development: the method to create a customer base
Customer development: ever heard of it?
It is a methodology for building the business model of start-ups. Designed in the early 2000s, it has only become established in Italy in recent years, thanks to the Lean Startup method.
This method is particularly suitable in a situation where one wants to attack a new market with a newly developed product or service. It is part of relationship marketing strategies, in which everything moves around the customer.
In this article we see what it is, why it is important and what the rules are for its application.
Customer development: what is it about?
Definition
Customer development methodology consists of a procedure for the creation of start-ups and new enterprises.
This methodology was theorised by Californian entrepreneur Steve Blank in his bestselling book The Four Steps to the Epiphany. The author starts from the assumption that the management methods and practices used by traditional companies are not suitable for start-ups.
Usually, large companies can develop and market a new product or service, already aware of the existence of a potential market. Start-ups, on the other hand, in addition to the development of the product/service, must also concern themselves with the creation of a market for that product/service.
This is the objective of customer development: to help the entrepreneur in customer creation.
Why is this important?
Many growing companies spend a lot of effort on designing and perfecting their product and very little time on ' creating a potential market'. The customer development model, on the other hand, encourages them to spend more time researching potential customers.
It is, therefore, a more consumer-focused method. The product must try to respond to customer problems in order to satisfy their needs.
The aim is thus to overcome the 'product-oriented' approach that was once so much in vogue.
☝Making the best possible product and then waiting for customers to arrive without actively seeking them out no longer works.
The 4 phases of the Customer Development Model
Let us look together at the 4 phases of the model devised by Steve Blank.
Customer discovery
During Customer discovery, it is necessary to identify the first potential customers, in order to understand whether they are actually interested in solving the problem targeted by the start-up's product/service.
☝The identification of early adopters, usually through interviews and surveys, allows one to understand what features they are most interested in.
Customer validation
The customer validation phase must make it possible to understand whether the solution hypotheses of our products or services actually respond to the problems encountered by early adopters.
The creation of a Minimum Viable Product (MVP) is fundamental. This is a prototype to be tested by early adopters to gather feedback and assess their level of satisfaction.
Customer creation
Customer creation is about understanding whether our sales strategies and channels are able to serve a large-scale end demand. We need to understand whether our business model is sustainable or not. To successfully pass this step, we need to acquire an early majority, i.e. the first consumers willing to pay for our solutions.
Here are the two key activities to focus on
- retaining and retaining the customers obtained,
- expanding the customer base as much as possible.
Company building
Company building is the phase in which the transition from start-up to company is realised. A formal structure is created, consisting of the sales, marketing, research and development, etc. department.
Completing this phase should enable us to set both short- and medium- to long-term goals, plan investments and draw up a business plan.
Here are two software tools that can make your life easier during customer development: Bitrix24, Zoho CRM.
The Lean Startup method
As mentioned in the introduction, the Lean Startup method has enabled the spread of Customer development in Italy.
It is an Agile method for launching a product on the market based on experimentation and feedback. The method was developed in 2008 by Eric Ries, an entrepreneur active in Silicon Valley.
Customer development is one of the three parts that make up Lean Startup (together with Business model design and Agile engineering).
The 14 rules of Customer Development
The ultimate goal must be to achieve a repeatable, scalable and profitable business model.
Let us look at the 14 rules to follow according to Steve Blank to apply the methodology:
- There are no certainties: one must test by comparing with the market;
- One must combine Customer Development with Agile Methodology;
- Be aware that mistakes and errors are part of the research;
- One has to repeat a process several times until a predefined goal is reached;
- One has to use a Business Model Canvas with untested assumptions, constantly modifying it;
☝It is a strategic model for designing and developing one's own business model.
- Design experiments and tests to validate hypotheses;
- Identify the type of market and, therefore, the rules of the game;
- Knowing that metrics of a start-up are different from established companies;
- Speed up decision-making processes and minimise the duration of development cycles;
- Being passionate;
- Be aware that the workforce required for a start-up differs markedly from that for an established company;
- Save as much liquidity as possible for the right time;
- Communicate and share knowledge;
- Involve all components of the start-up, including investors and founders, in the process.
Following this model allows proper planning for the realisation of your goals.
However, one must always remember that the transition from theory to practice hides several pitfalls. Only by doing does one really learn and gain experience.
It is therefore essential to test, fail and try again and again to achieve the desired results.
Article translated from Italian