Customer Development

How does Customer Development model work?

Alexander Sergeev avatar
Written by Alexander Sergeev
Updated over a week ago

Customer Development (custdev) is testing an idea or prototype of a future product on potential consumers. The term was introduced in the 1990s by American entrepreneur Steve Blank

The author formulated a customer development methodology and a client-oriented approach to creating a business. According to this concept, any product must necessarily solve the client's problem. First, the problem is identified, and then the product is developed but not vice versa.

What is Customer Development?

Customer Development is a 4-step framework for discovering and validating the right market, testing the correct tactics for acquiring and converting clients, building the right product features that solve customers’ needs and deploying the right resources to scale the business.

The framework teaches that you should apply an engineering or scientific approach to validate your ideas rather than assume your unclear beliefs. 

According to the approach, you don't need to spend extra money discovering what works, you save the money for executing and scaling what you have already shown to work. 

Customer Development helps businesses become highly focused and efficient.

4 steps of the framework are:

  1. Customer discovery. You understand your customers and their needs to be able to satisfy them.

  2. Customer validation. You have a product able to satisfy customers needs.

  3. Company creation. You define whether your product will satisfy the customers' needs.

  4. Company building. You grow and develop your company to support the demand for your product.

Step 1. Customer discovery is the first step of customer development model. It helps to determine whether you understand the need you are trying to satisfy and whether you are satisfying correct needs. Here you observe and describe.

This step is for figuring out exactly who the customers are. Blank recommends teams to “get out of the building” to find their markets and clients. It means doing research in the real world with potential customers.

Step 2. Customer validation is the next part of the process that can only take place once the target audience and the market have been identified. The validation process is designed to help you create a map that you need to reach those customers.

Step 3. Customer creation is an integral part of the process as it acknowledges that not all businesses enter similar markets. The author suggests to define 4 key startup markets:

  • business enters the market that is pre-existing.

  • business enters the market that is completely new.

  • business enters the existing market as a low-cost alternative.

  • business aims to cover a new segment in an existing market.

Step 4. The final part of the process is Company building. At this stage, the business can begin spending more money on marketing and driving customer sales.

The benefits

The main Cusdev benefit is that it provides teams with the approach to take to validate assumptions. It also provides a way to check whether the team is delivering the right thing.

When can it be applied?

The framework was initially described in the context of tech startups. Today the concept of building a shared understanding about customers and their needs prior to creating a product is applicable to all businesses. It can also be used in internal product situations. 

For the new product development, cusdev approach is especially relevant and useful to determine if there are problems that need to be solved.  

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Want to find out more about the method? These resources should be helpful:

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