Customer discovery (phase 4): Evaluate customer feedback and determine next steps

 

Note: This article is part of a four-phase process designed to help entrepreneurs develop their value proposition. This article describes the fourth phase in the process which is based on the method of “customer discovery” in Steven G. Blank’s book, The Four Steps to the Epiphany.

The previous three phases are discussed in the following articles:

• Customer discovery (phase 1): State your hypotheses
• Customer discovery (phase 2): Test your hypotheses
• Customer discovery (phase 3): Test your product concept

For more information, see The Customer Development Model.

 

Evaluate customer feedback and determine next steps

This step is the final phase of the customer discovery process; its purpose is to weigh the information you obtained earlier (in phase 2 and phase 3) from potential customers regarding your target market and product solution. Consider whether you are ready to proceed with your current plans. If you are not, the alternatives are either to conduct another iteration of problem/solution validation (i.e., phases 2 and 3) or to halt your plans.

Before you decide whether or not to move ahead, you need to answer the following critical questions:

1.  Has the customer problem been verified?

2.  Has the product solution been verified?

3.  Has the business model been verified?

1. Verifying the customer problem
Condense all the information you have obtained during your conversations with potential customers and other stakeholders in the market. Have you been able to verify that you have identified a problem that is important enough that customers would pay for a solution? If not, another round of the customer discovery process is required. The outcome of this process will be an updated customer problem statement.

2. Verifying the product solution
Summarize the information acquired from customers regarding your product concept. The most important question to answer is whether your solution solves the problem that your target customers have. If it does not, you need to review your product and iterate with another round of customer interviews. Make sure to sum up any information you have regarding the key features required by your customers. The outcome of this will be an expanded product requirement document and a clear and succinct value proposition.

3. Verifying your business model
The third and final question to consider concerns the sustainability to your business model. Assess whether you have been able to verify the key elements of your business model such as:

• Pricing
• Sales process
• Delivery and service requirements
• Partners and their associated cost
• Desired mode of customer relationships
• Other key costs related to customer acquisition

A great way of testing your business model at this stage is by trying to complete Alexander Osterwalder’s business model canvas (for details, see the article Business model design). Are you missing any information needed to test the financial viability of your business model? In addition to the business model canvas, the outcome of this phase will be a sales and revenue plan as well as a business and product plan.

Next steps
Having answered these three key questions, you will be able to decide whether to advance to the customer validation stage of the customer development process or whether you need to recommence the customer discovery process or halt your project.

 

References

Blank, S.G. (2005). The Four Steps to the Epiphany. Self-published: Cafepress.com.
Maurya, A. (2011). Running Lean. Self-published.
Ries, E. (2011). Lean Startup. New York: Crown Business.
Vlaskovits, P. and Cooper, B. (2010, July 29). The Entrepreneur’s Guide to Customer Development: A cheat sheet to The Four Steps to the Epiphany. Self-published.

Tags: business-models, customers, early-stages, value-proposition