500 Startups Growth Handbook

Customer Development

What is it?

Customer development is talking to enough potential customers to clearly understand (1) know who you’re building for, (2) what their problems are, and (3) what solutions they are using to solve those problems. Customer development is the process of figuring out if your idea actually solves a real world problem. It may not, but after the customer development phase, you will either know you have a real idea on your hands or just a hobby.

How to do it

Here’s a list of potential info. to track (by no means exhaustive, but it gives you an idea):

About Customer: demographic (age, gender, kids, income..), behavioural (usage frequency, context, time spent, decision making hierarchy), psychographic (activities, fears, goals, aspirations, values, how they feel about problem/current solutions, how will they feel if there’s an ideal solution, and how would their life be different if there’s an ideal solution.
About Problem: what prevents you from reaching your goals (you found out about that earlier), what’s the hardest part about doing x, how important is [problem] for your personally/professional/to reach your goals, among all the problems you have in this context, how important is this specific one, what can be done to improve your experience.
About Solution: Current alternatives they use, what do you like/dislike about current alternatives, if you had a magic wand/what is your ideal solution, feedback on your MVP (if you have one), will you use this, will you tell your friends, will you pay, how to improve, what will make you tell a friend.

Of course, follow up every “what” questions with the “Why” and “How” questions. Also, don’t forget to rephrase what you just learnt to validate you heard them right, and, please ask if they’ll be your beta customer, ask for referrals, ask if they can be kept in the loop…. Ask! You don’t get anything you don’t ask for.

Common Mistakes Founders Make

Building the first thing that you think of, hoping you can launch your idea on Techcrunch before getting customer validation
Not talking to enough customers as you’re building the product. As Steve Blank would put it, not getting “out of the building” enough.
Thinking that customer development is one and done process. It doesn’t end.
Having confirmation bias or not being open to what the potential customers are actually saying. In other words, only listening for what we want to hear is a common pitfall.

Fictitious Example

If you’re building a kids app, the customer is the parent - since it’s the parent who makes the ultimate buying decision (even if the child asks for it). Customer Development in this case would be understanding the parents’ age group, the children’s age group, the avg HHI, their goals/aspirations/emotion (parents are filled with FOMO when it comes to enrichment activities/education for their kids), how parents make their buying decisions for child related purchases, (they trust recommendations from other parents - school mailing list, FB groups, local parenting groups etc.). Pay attention because how they buy educational material might be very different from how they buy entertainment for their kids. What is the most expensive kids app they’ve bought, do they spend differently for education vs entertainment, do they prefer one time purchase, in-app purchase, subscription, how do they perceive the value of what you have in mind. You also want to know about the child as well because ultimately they’re the users - the product needs to be engaging to them. Information like what times during the day/days of week would they have access to devices, do they have their own device, how many other apps do they use and what are they, what do they like/dislike about those apps etc. The more you learn BEFORE you build a prototype or even a landing page, the more likely your building efforts are going to be fruitful.

Real world example:

Here is a great example of how to use these methodologies in the real world - here

Related Keywords

Steve Blank, Business Model Canvas, Lean Launchpad, Customer Interviews, customer discovery, Lean Startup, Value Proposition Design