Customer research vs. customer development.

September 05, 2018

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Michael.

Design & Strategy Director


Customer research and customer development share similar characteristics, while they both evangelise getting out of the building and speaking to real users, their purpose, outcomes and speed in practice are very different.

I'm going to talk about the journey we go on from customer research to customer development, the difference between them and how we use each throughout the entire project lifecycle to help our clients achieve three key objectives.

  • Prove we can solve a problem worth solving
  • Identify a profitable and scalable way of doing so
  • Make the solution an engine of growth

The difference between the two

In its simplest form:

  • Customer Research is a ‘needs finding exercise’ engineered to develop a deep empathy with an audience in order to identify any existing unmet needs.

  • Customer development is about taking a hypothesis or solution for an identified need and proving there is an appetite for customers to exchange currency for that solution - Currency can be defined as email addresses, tweets, cash or anything your customer gives up to receive a solution to their problem. For example, the customer interview is a common tool across both. But they are conducted in very different fashions and look to discover something very different.

CR v CD (blog image)

Customer Research

Customer research starts with its audience, this could be an audience already served by your client or a completely new audience. It then proceeds, through well established human centered approaches to uncover their needs in order to form new product / service innovations and reduce the risk of launching them by accelerating learning through rapid prototyping.

Simply put this means we find a group of people and learn what problems they have, then build quick, small, cheap tests to see if they like what we’ve created. For a business, that means derisking ‘innovation’ by starting with an identified customer need rather than making a lot of investment on assumptions.

  • Depth interview - 60+ minutes, qualitative research, intensive individual interviews, explore their perspectives on a particular idea, program, or situation
  • Shadowing - Accompany the user and observe how they use the product or service within their natural environment.
  • Diary Studies - Users self-report their activities at regular intervals to create a log of their activities, thoughts, and frustrations.
  • Focus groups (I wouldn’t bother) - A group of people generally listening to the two loudest people in the room giving their opinion on an idea, program or situation

Customer research to create new markets

A global food manufacture had insight that there was a large amount of elderly customers purchasing their frozen meals. They partnered with Reason to identify how they might be able to serve this audience in a better and more meaningful way.

Through a series of customer interviews (with both the direct audience as well as those people around them), shadowing, diary studies et al, we were able to uncover the needs that went beyond food. We discovered an audience that wanted to stay active, stay connected and stay involved. From this insight we were able to rapidly develop and prototype a frozen meal delivery service that not only delivered food but also friendship, right to our customers door, including:

  • Meals for two, Family roasts
  • Physical messaging service between local customers
  • Volunteer delivery driver service for customers
  • Exercise routines for when meal is cooking

Such was the success of the work at demonstrating customer interest and a clear revenue stream, our customer acquired a meal delivery business to fast track the realisation of such a service.

Customer Developement

Coined by Steve Blank in ‘The 4 Steps to the Epiphany’, Customer Development is predicated on taking an existing vision, hypothesis or a product already made and finding its customers and markets. From the academic point of view, Blank’s method is built on problem assumptions, solution hypothesis and a target customer profile. Practically, this involves:

  • Defining and finding a target customer profile
  • Understanding if the perceived problem exists and why their current solution (if any) is not awesome
  • Proving this customer set will pay for our solution
  • Prove the business model makes sense

Unlike Customer Research, Customer Development doesn’t begin with a ‘needs finding’ exercise. It starts with a vision, hypothesis or even a product in hand and looks to find a viable customer base.

The product or website might be awesome, but if it puts itself in front of the wrong market, or presents itself so the right market can’t understand why it’s awesome, the idea will fail. Most ideas fail not because they have an idea problem, or a product conversion problem, but because they have a customer problem - customer development seeks to solve that problem.

  • Customer development interviews - 20 minute, structured interview focussed on perceived problem, “What’s the hardest part about....’ or “tell me about the last time you....’ Funnel testing - Start driving acquired traffic through a purchase funnel, don’t have anything to sell at least we know who is willing to pay for it and how much
  • Fake door testing - Target your defined customer base, test iterations of digital messaging to drive them to your product landing page // oops we are not live yet, but at least we know what messaging is working for who.
  • Customer advisory panel s who are representative of who you think you’ll eventually be selling to, but the point is being able to ask a cross-section of potential users questions and get their opinions as you develop.

Customer development to prove the market

Our client came to us with an idea that small business would buy flexible, monthly insurance policies. It sounded like a good idea but we just didn't know if this was a real problem, who our audience was and if they wanted it solved.

Working backwards we started with all of the assumptions that were being made as part of this idea, we then created a series of problem hypothesis and identified our target customer profile.

We then targeted our audience on LinkedIn, Facebook and other forums and validated by creating offers in exchange for currency.

In 4 weeks we were able to:

  • Run 12 customer development interviews across 2 weeks
  • 8 iterations of customer acquisition propositions across linkedIn and Facebook
  • Drive 1211 users through acquisition journeys to website offerings
  • 151 (12.5%) customers entering the funnel with 27 (2.2%) target customers exchanging currency, in our case email
  • Build prototype to demonstrate end solution for qualitative testing and funding

A working product isn’t the most critical thing for starting a business, it’s having customers to buy what you’re selling.

So?

Depending on where you are on your journey, if your company, client or team is looking to uncover new value-driven digital opportunities, then Customer Research is fundamental to conceiving products and services that people need. It de-risks innovation - making it realistic rather than pie in the sky and makes for higher rates of success and greater rewards for the business.

If you have your vision, hypothesis or idea, then ongoing customer development is as important as software development when it comes to launching and scaling new digital products.

Being flexible is essential when commiting to a new project. We don’t assume one or the other, and neither should the client. There is no right process for all types of project, the first step is to understand the distinction between the two approaches and decide which process best fits with the situation.