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The Four Steps to Customer Discovery

Customer Discovery Process

Step 1: Division of Labor

Decide on who you want to represent your team.

  • Who is on the Product Development Team?
  • Who is on the Customer Development Team?

Step 2: The Four Hypotheses

During the discovery phase you should test four fundamental hypotheses regarding the potential startup business with actual customers:

1. Problem Hypothesis

Successful ideas and companies solve a particular problem or fill a significant gap. What about yours? Draw from everyday life — common objects, events, and processes can almost always be made more efficient, faster, stronger or more enjoyable. What was the impetus for your idea? Why does the problem persist? How can the scope of the problem be measured? How painful is it?

2. Solution Hypothesis

Next, it is important to think about how your idea specifically will solve the problem you identified in your Problem Hypothesis. A rule of thumb is to determine what 20% of features will satisfy 80% of customers.

This is connected to your minimum viable product (MVP). Which are the minimum features or options that you can provide that viably solve your customers’ problems? Such a minimum feature set will form the basis for part of the Delivery phase.

The Solution Hypothesis includes details around:

  • Product Features
  • Product Benefits
  • Intellectual Property
  • Product Delivery Schedule

3. Price Hypothesis

How will you generate revenue? Are customers willing to pay for your product? How much is it worth to them? Is this a one-time or repeat purchase? Are there additional costs beyond product purchase that are involved in owning or using your product?

Note that the price is closely linked to the significance of the pain you’re solving. The customer will weigh your price against the consequences of buying from a competitor or doing nothing. Does your solution save the customer time? Money?

4. Go-to-Market Hypothesis

How will people find out about the product? Get it into their hands? Your goal is to spread awareness o f your product to the right people and through the most effective channels, and then ensure that product acquisition fits into their existing routines.

People must be willing and able to be your customers. If they don’t know or care about you, if your purchase process is inconvenient or inefficient, then your launch won’t be successful. You can have the best solution to a big problem at a great price, but you’ll fail if you can’t complete the sale.

You first need to determine your target market/s. Start with your primary customer: who feels the pain the most? Who is most likely to pay for your solution? Then what additional groups are impacted by the problem you’re solving, and could become your customers?

A customer brief is an important piece of your go-to-market hypothesis, and includes careful consideration of:

Types of Customers:

  • Decision Maker
  • Economic Buyer
  • Recommenders
  • Influencers
  • Users
  • Saboteurs

A Day in the Life of a Customer:

  • Must spend time with customers to determine their routines, centers of influence and interests. What do they do? Where do they go? Who do they listen to?
  • What does the world look like from THEIR perspective?
  • Do this for each customer type

Customer Org and Influence Map:

  • Show types of users around your solution who will use, buy, or influence it.
  • Show relationships and core concerns between each group.

Market Type:

  • Are you entering an existing market?
  • Are you re-segmenting a market?
  • Are you creating a new market?

Step 3: Testing with Customers

Generate list of 50 target customers that loosely fit the customer brief from your Go-to-Market Hypothesis. Highlight those that you consider your primary market, but be sure to include others in different groups or demographics. Your “true” primary market may not be who you initially think it is, but you can’t know until you actually talk to potential customers.

Talk 1:1 to at least 10 of these individuals per week. Leverage mentors and friends for connections, but also be willing to approach strangers who are likely to be objective.

Ask questions regarding each of your hypotheses. Stimulate dialogue rather than limiting them to “yes” or “no” answers. Uncover examples, discuss options and provide opportunities for thoughtful feedback.

Refine your hypotheses based on customer feedback. Discuss with mentors.

Step 4: Repeat Customer Discovery Process!

Start Co. Resources

In addition to our experienced team and seasoned mentors, Start Co. prides itself on the resources we make available to startups. Here are just a few of the tools we have available to assist founders.