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What is Customer Development and Why Do We Need It

What is Customer Development and Why Do We Need It

April 21, 2020
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6 min read
Business
By
Artem Barmin
Co-Founder
Alexandra Lozovyuk
Content Strategist

How to become better at creating and selling products and services? How to increase profits, reduce waste, and remain competitive?

In this article, we will tell you about the HADI cycle, customer interview method, ABCD segmentation and plenty of other marketing features.

Why customer development model matters

Projects fail when they don't solve a market problem and that is a common pain of startups. According to CB Insights research, 42% of startups fail in the cause of poor product-market fit. Supposedly, these startups had good products but didn't find customers for them. You may have a really perfect technology and expertise. But if you have no valid business model that solves a pain point you are taking big risks.

On the one hand, businesses often launch their product without knowing who their target customers are. On the other hand, there are sometimes too many personas which blur a marketing focus and it leads to failure. Both of these situations are not suitable for successful development.

One way to solve this problem is to adopt a methodology of customer development (Blank S.). With this approach, customer development vs product development happens in tandem. And this means that your business engine works smoothly eliminating fuel overruns.

Cusomer development for entrepreneurs: jobs to be done-concept

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Jobs to be Done is a theory of customer action promoted nowadays first of all by Alan Klement. It describes the algorithms causing consumers to adopt innovation. It's a good analytic tool for observing markets, consumers, and their needs and expectations. By doing so, it makes your business process more profitable and predictable.

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Book "When Coffee and Kale Compete" by Alan Klement is written in an approachable way, with a lot of memorable stories that help readers retain the concepts. Probably you will find a lot of reasons for thinking about your product innovation and marketing strategies.

Customers make their decision considering the way you present a product and the level of service you provide. Moreover, clients pay attention to how favorably you compare with your competitors and how you are represented in the media space. Often, product competitors are not so obvious.

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The "Job" in conjunction with the "Jobs-to-be-Done" concept is connected to a variety of requirements. And it is not only functional requests but also emotional and social, which proves that context sometimes is crucial.

The best way is to take every customer Job as unique despite the fact of many Jobs are arising from the common emotional desires (e.g., belonging or self-expression). In fact, every Job is a unique combo of such desires and it's a cause why each product should be delivered in its own way.

marketing jobs to be done

There are two types of Jobes:

  1. Main jobs to be done, that include major tasks consumer strives to achieve.
  2. Related jobs to be done, which consumer wants to complete along with the main jobs.

Then, each of these groups is divided into two parts:

  1. Functional part, including objective (pragmatic) customer requirements.
  2. Emotional part, including subjective requirements connected with feelings.

Ultimately, within emotional requirements there are:

  1. Personal dimension — client feelings about the solution solving his needs.
  2. Social dimension — client idea of how he is perceived by people while using this solution

Customer development process: HADI cycle

HADI cycle

All startups use this step-by-step methodology to check some ideas quickly. Firstly we formulate <medium>a Hypothesis<medium>, a certain forecast. In this way we predict some algorithms: if we do something <medium>(Action)<medium>, some metrics <medium>(Data)<medium> presumably will increase. Then we implement this Action as quickly and cheaply as possible, and check, is our Data changing or not. Thus, we gain an <medium>Insight<medium> into the effect of our Action. If Data didn't change at all, most likely initial Hypothesis will be refuted. So we can check out tons of ideas quickly.

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For example, the Amazon team must test up to 10 hypotheses per sprint. You pick up tons of ideas, validate them, do customer interviews, create landing pages, build prototypes, and finally confirm or deny the initial idea. Thus, HADI testing is a great tool to test your hypotheses efficiently.

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Lean customer development in action, or let's start the interview

customer interview tips how to prepare

The best way to validate the hypothesis is to talk with your potential clients. Customer research methods are divided into <medium>quantitative vs qualitative methods.<medium> Quantitative methods are primarily represented by survey researches with closed-ended questions. The main qualitative method is an interview mostly with open-ended questions. It focuses on <medium>subjective and context-informed ways of gathering data.<medium>

Customer interviews are divided into two types: <medium>planned and ad-hoc<medium>. First are scheduled well in advance and their time frame typically is longer (one-half to 2 hours). Ad-hoc interview is requested on the spot (e.g., in a store) and last for 5 to 15 min. Let's go with the first one.

The vital key is to talk to clients. A lot of successful enterprises prefer personalized service over all other strategies. Companies can increase their business growth curve by meeting customer requirements with adaptability and attention to detail. The first-hand analysis really helps with understanding clients' needs and unlocks the product development model much faster.

So let's check 5 main steps in the customer interview process:

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ABCD segmentation as customer retention and development tool

A vital component of business growth is your clients. But not all of them are alike. That's why customer analysis is a crucial tool that will help you to segment clients and tailor different strategies.

ABCD method is a comprehensive way of segmenting your customers. Some of them are perfect to deal with, and others can cause endless meetings and sleepless nights.

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Once you've categorized clients, then it's time to draft and implement client management plans for keeping "A's" stay "A's" and try to turn "B's" into "A's".

Freshcode can help you segment your customers while you can focus your time and resources on satisfying your best clients, resulting in longer A-List. Moreover, our business analyst team is ready to provide any analysis and consulting services for keeping up your business ideas!

Author
linkedin
Artem Barmin
Co-Founder

12 years in software development. Co-founder of IT agency and EdTech company.

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Alexandra Lozovyuk
Content Strategist

With a passion for technology, business ideas and storytelling, bridges the gap between technical concepts and engaging narratives. Writes catchy texts and explores design and marketing trends to find the best experiences to implement.

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