Why the Customer Development Process is So Important

Iwanted to pass along this blog posting from the guys at Venture Hacks, who in general put up really useful, practical info. I thought this post was particularly important as it has three specific detailed case studies on customer development. Be sure to link through to the actual case studies (not just the summaries in the blog posting) - there's a lot to be learned here! Case Study number two is so simplistic but so important for startups to put on their list of things to do. Nothing speaks louder to an investor than a customer (or propsect).

http://venturehacks.com/articles/case-studies?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+venturehacks+%28Venture+Hacks%29

3 customer development case studies
3 customer development case studies
by Nivi on November 22nd, 2009
2 Comments

If you’re trying to implement customer development at your startup, you’ll learn more from these 3 case studies than anything else I’ve seen. I consider each of these a “must-read”. I’ve quoted some great bits from each case study, but make sure you click through and read each one in full.

1. Using an LOI to get customer feedback on a minimum viable product:
“We decided from the get-go that, while we clearly saw the benefits and necessity of our concept, we would remain fiercely skeptical of our own ideas and implement the customer development process to vet the idea, market, customers etc, before writing a single line of code.
“My partner was especially adamant about this as he had spent the last 6 months in a cave writing a monster, feature-rich web app for the financial sector that a potential client had promised to buy, but backed out at the last second. They then tried to shop the app around, and found no takers. Thousands of lines of code, all for naught — as is usually the case without a customer development process. (See Throwing away working code for more on this unfortunate phenomenon. – Eric Ries)

“We made a few pencil drawings of what the app would look like which we then gave to a graphic designer. With that, the graphic designer created a Photoshop image. We had him create what we called our “screenshots” (which suggests that an app actually existed at the time) and had him wrap them in one of these freely available PS Browser Templates. Now armed, with 4 “screenshots” and a story, we approached our target market, some of which was through warm introductions, and some, very literally, was through simple cold-calling.

“Once we secured a meeting, we told our potential customers that we were actively developing our web app (implying that code was being written) and wanted to get potential user input into the development process early on. Looking at paper print-outs of our “screenshots”, no one could tell that this was simply a printout of a PSD, and not a live app sitting on a server somewhere. We walked them through what we thought would be the major application of our product. Most people were quite receptive and encouraging…

“On the third visit, we pressed those who saw merit in the idea to sign a legally non-binding Letter of Intent. Namely, that they agree to use it free of charge if we deliver it to them and it is capable of X, Y and Z. And not only do they agree to use it, but that they intend to purchase if by Y date at X price if it meets their needs.”

The author of this case study is currently looking for a technical co-founder.

2. proof that we’re not (completely) crazy:
“The few customers we talked to had little in common except for the core problem we were solving. Two had very similar job titles, (let’s call them Ditch Diggers), so we ran a facebook ad with the job title at the top of thead, which was roughly, “Ditch Digger? Feeling spread thin? Click here to complete a survey and tell us about it.” Facebook ads were the easiest because we could pick types of people — we have yet to create an effective adwords campaign. We offered $10 Amazon gift cards to complete a 15 minutephone interview.

“What followed next was absolutely amazing. When we talk to a Ditch Digger it’s like every response has an exclamation point. “Yes, that’s me exactly!”, “I can’t believe you’re building a tool for this, thank you!”, “Here are 5 emails of other people that will want this!”, “It’s only (number that was so high we had to force each other to ask)/month? Great deal!”

3. How I built my Minimum Viable Product:
“I filled out a set of hypothesis worksheets in Steve Blank’s book on product, customer, channel pricing, demand creation, market type, and competition. I would recommend everyone formalize this process. My initial scan of the worksheets made me believe I already knew all the answers. I involved Sasha in the process, and discussions that I thought would be 30 minute conversations turned into 2 hour discussions as she questioned almost all my assumptions… Yes, I still love her after that… The biggest mind shift following a customer development process is from thinking you know something to testing everything you know.

“We built out our initial customer problem presentation and decided to target people just like us – busy parents with young kids.

“Our top 3 problems where:
Sharing lots of photos and videos is a hassle
A lot of services downsize the images so the quality is poor
Notifying family and friends of updates was manual and a chore

“We were able to find the initial batch through friends and daycare, and subsequent batches through follow-on referrals. I’ll add that it is very important to talk to complete strangers to keep objectivity in check. Family and friends can be too kind sometimes and really lead you down the wrong path. We debated paying for their time with gift cards or doing a DSLR camera raffle and in the end decided to just lay out our objectives and ask for 30 mins of their time. That was enough.…

“During the interview, we were particularly interested in learning what their sharing workflow was like. We set up the stage and let them tell us everything they did with their photos/videos taking them from camera to shared, what they wished they could change, and the magical pricing questions: Would they use a solution like the one we were envisioning if it were free? Would they use it if it were $X/yr? X changed from customer to customer but we kept it as real as we could.

“We talked to enough people until their answers started sounding the same…

“Our revised top 3 problems were:
Sharing lots of photos and videos is a hassle (stayed the same)
Requiring visitors to signup is annoying
Photo gallery design was too busy or complicated

If you’re crazy for case studies, I’ve found at least a billion at the Lean Startup Circle. Let me know if you find any good ones there.