Mastering customer development in a structured way

Every company exists with just one goal to become successful and to grow fast. The core of this success lies in how well you address the known or unknown problems of your target customers. You need to make sure, especially at the beginning, that your product is tuned to the needs of your target customers and provides real value to them, and the better it is done, the faster you can get traction and usage for your product. You can study market, competition, brainstorm trying to guess what might catch the attention of your target audience, but the only way to learn about the real problems and needs of your customers is through customer development, i.e. talking to them. Customer development is not a special skill that only extroverted people are blessed with, it is rather a structured framework that helps to understand your problem space, validate product hypothesis, and decide on who is the perfect customer for your product and what can be a business model behind this.

So let’s deep dive into the topic of customer development that is one of the mandatory skills of every product manager.

What is customer development?

Customer development is a hypothesis-driven approach that serves to build your understanding of the following product aspects:

• who are your customers
• what is the best way to reach your target audience
• what problems and needs do your target users have that can become the core of your product’s functionality
• based on which criteria does your audience decide to buy a product that can help you with the product positioning in the future
• what are the solutions your target customers have already tried or are using

These insights will help you to assess the value and feasibility behind your product idea and decide if you need to invest time and resources in building it further. The insights from customer development could be gathered leveraging two approaches:

• quantitative insights. This requires you to work with a big amount of data and do more indirect studies of your target audience. The ways to collect qualitative insights are, for example, surveys, A/B tests, statistics from Google Trends. As this method requires rather a huge set of data, it can be not always easily applicable to products in the initial stages, when you need to learn more about the “why” of your problem space.
• qualitative insights. This is the heart of customer development that helps you learn about the needs of your target audience, how the product has been already used or is planned to be used, what can be your core differentiators, and what should be a part of your MVP. From now on we will be talking about gathering qualitative insights.

However, before talking about the approach to collect qualitative insights, it is important to mention three main rules of customer development:

• it is all about your potential customers and their feedback, and you should focus not on selling your solution at this stage, but rather on understanding the problem space
• the earlier you start building up the knowledge about your customers the better it is for the final product
• you should never stop learning about your target audience and their problem space.

Structuring customer development efforts

There is nothing complicated here to get your qualitative insights if you approach it in a structured way that could be described in the following four steps:

1. Make a plan on what you are going to learn about or form your assumptions.
2. Find people from your target audience you can talk to validate your assumptions.
3. Prepare and execute interviews.
4. Evaluate the results and look for insights.

Nothing complicated, but let’s cover each of the steps in detail.

Step 1: Set a goal for your customer development iteration.

To start with you need to identify the blind spots in your understanding of the problem space, to have a good understanding of which is a prerequisite of building a successful product. To build this knowledge you need first to formulate your assumptions about the problem space or hypothesis that will be validated or invalidated. To start with you can try to brainstorm different aspects from the following hypothesis groups:

1. Value hypothesis: customer — problem — need. For example, what can be a specific problem customer might have. Or are they willing to invest resources into solving a particular problem?
2. Viability: distribution & pricing — demand. For example, how are purchasing decisions made or what are they influenced by. What does it take to acquire X customers?

In these two categories, you can write down things you believe to be true and would like to be clear on before starting building the product. Apart from brainstorming for these two categories, you can also check your business model canvas to see what are the blind spots for you there to validate and come up with hypotheses for all unknowns.

Image 1: Business model canvas

How you can apply business model canvas to come up with the hypothesis? Let’s take for example Value Proposition quadrant. The hypothesis you might need more clarification on is related to:

• What problem does my product/service solve?
• What benefits does it deliver to my customers?

For the Channels quadrant the hypothesis is:

• How are you going to sell/distribute the product?

And so on. By answering these questions you will get the idea of what should be validated with your customers.

Step 2: Define your target customer profile

Define who is your target customer for the hypothesis list you’ve formulated. The target customer is the one who is experiencing the problem you believe to solve, and you should try to narrow down their profile description: What do they worry about? What might be their problems? How is the problem being solved now? Some demographics, level of tech-savviness, etc.

It is hard to segment customers at the beginning, and you can start dividing them based on their needs. It is not bad that you end up with multiple segments, every segment is also your hypothesis that needs to be validated by arranging several interviews with the representatives of these customer segments. To start with you can focus on the biggest segment with the most acute problem or where you know that they are using the solutions that are not good enough.

The next step is to understand where your target customer group can be found and how you can reach them to arrange an interview. If you are building an existing product, then most probably the easiest way is to reach out to the existing users. If you are working on something new, try to target people directly through social media, or connecting on the conferences, etc. You can also scout for help in your network, asking for introductions to your target audience (seek among your friends or co-workers). Do not be afraid to reach out as people usually love to share their experiences and to help others.

The last question you might have is how many people you should be interviewing? Start with at least five per every segment you have identified. If you find recurring patterns in answers, then there is no further need to proceed with the validation, otherwise, you need to interview the further participants until you reach this recurring pattern in answers.

Step 3: Prepare for the interview and execute it

After you are done with your hypothesis and focus of your customer study, as well are clear on the target group you’d like to approach first, you can come to the most interesting part of crafting the list of questions you’d like to build your conversations around. This list should not be a long one and fixed. Try to find the top five questions you’d like to use to steer the conversation, and let the customers talk. You will learn much more from listening.

To break the ice start with the questions that help to understand if an interviewee is a right person to interview. These can be the demographics related questions, as well as the following questions that give you more understanding of the person you are interviewing:

• “Tell me about the way you usually do ___?” A customer should describe the way he does his usual job and you can observe if he complains about doing some part of it, or even the whole.
• “What are the efficiencies and inefficiencies in the process can you spot?”
• “What was the hardest thing doing __?” This helps to understand if a problem is big enough which is a good characteristic of the problem.
• “Why was it hard (doing this thing)?” Helps to understand how to position the product.

The next set of questions can help you to go deeper and let the customers “dream”:

• “Would you do anything differently?” Here you need to communicate that a customer should use the full imagination to think about the task. Meanwhile, you can learn about the biggest pain point that can be your core feature and main differentiator.

To understand where potentially can your product be positioned ask questions about the tools and the way a customer is solving the problem right now:

• “How did you do it the last time? Tell me the last time you faced the problem?” Helps to understand a use case better.
• “What did you do to solve the problem?” This shows if a problem is real. If a user did not do anything, then the problem is not big enough and not relevant enough.
• “Do you use any tools to complete this task?” You can note what tools customer names, and what is category he will compare you to in the future.
• “What did you not like in the solutions you’ve used?” This is a potential feature list of your product.

To get the urgency about the problem that can later be reflected in your business model, try to ask the following question:

• “How often do you have the problem?” The problem should be frequent because it is directly connected to the LTV of your customers and shows how much you should be able to pay for the marketing budget.
• “How much would you pay for this solution?” This can be also a question that helps you to better understand the urgency of the problem.
• “Do you know anyone who has the same problem?” Shows if they often discuss this problem and you have a chance to get another contact to reach out to.

Important is to keep in mind that you should avoid letting customers talk about features. Make them describe their problem and routine to the full extent so that you can come up with the proper way to solve this problem. And avoid them describing their ideal way of making things. It is important to understand what they are actually doing to complete the task. What helps here is if you can observe the way customers complete their tasks and observe their reactions/challenges. This is the best way to understand how customers are making decisions. Try to understand what motivates your customer that will help you tune your product better to the target group.

Step 4: Evaluate the results and look for insights.

This step requires rather a diligence in working with all the data you have generated in your interviews, looking for the commonalities and insights. To evaluate the results first we need to be clear on what a validated hypothesis is. A validated hypothesis means that your target customers confirm having a problem while doing a specific job and s/he is looking for the solution to solve this problem or has tried to solve the problem in another way. What also helps to evaluate a potential is understanding how severe the problem is and how often does it occur.

You should not be afraid to prove that your idea/hypothesis is not feasible. This is also a good sign and the only thing you need to do is to use the insights you’ve generated in the interview to adjust or pivot your business idea. No matter how hard you believe in it, if customers do not see value for them, you will not be successful.

To sum it up here is a template that might be used to structure customer development efforts. For every validation category that you find the riskiest for your product, a set of hypotheses should be identified with the profile of your target customers that should take part in your validation. This is your setup. Then we look at two dimensions: things to observe (or quantitative understanding of a problem) and questions to ask (qualitative understanding of a problem. For every category, you select the most appropriate method to study users: interviews, surveys, studying support feedback, usability testing, eye tracking, usage statistics. After getting the answers you can document insights and plan the next steps/actions. That is it, repeat it for every category you find risky for the success of your product.

Customer development template

Mistakes to avoid

Last but not least let’s talk about the mistakes to avoid while doing customer development. I collected common anti-patterns you’d be better to avoid:

Talk about your product first.

Your main goal is to focus on the problem, otherwise, you will get the opinions on the features you need to introduce, and not a real validation of the viability or value behind your product.

Ask leading questions.

Your goal here is to get honest feedback, but not to confirm what you believe should be a problem. That’s why try to keep your questions as free from your own beliefs and assumptions as possible.

Focus on the ideal way of solving things or how it should be.

It is a big difference between what people do and what they say. That’s why the most relevant for your data will be in the past, what people actually did to solve the problem, but not what should be an ideal way to solve it.

Try to validate all the hypotheses you have in one customer interview.

Focus is a king, even in such unstructured on the first sight thing as an interview.

Do interviews only at the beginning.

Make it a habit to talk to your users constantly. Even if you have a mature product.

Go into the interview without any goal.

This is also about placing focus on everything you do.

In the end, what matters is if your product nails down the customer's pain point. This will define its success. The only way to achieve this is to introduce customer development as a constant practice, you should not be afraid of it, but rather approach it in a structured way. What I can recommend deepening the knowledge into this topic is checking up the following resources:

• Book “Lean customer development” by Cindy Alvarez
• Book “The Mom Test: How to talk to customers & learn if your business is a good idea when everyone is lying to you” by Rob Fitzpatrick
• Video on how to talk to users: https://www.youtube.com/watch?v=MT4Ig2uqjTc&t=1s