Analyzing Customers? Use Customer Development Model (CDM)

There are numerous ventures that have not yet attained the level of being completely established businesses in the current business environment. This situation is attributable to a number of factors, including the failure of ideas to acquire traction, insufficient funding, and insufficient customer analysis.

Startups make speculative suppositions about their Business Model in their early phases.

These assumptions relate to the ascertainment of their target customers, sought-after product features, suitable distribution channels, revenue strategies, pricing approaches, customer acquisition, retention, growth methods, strategic product delivery activities, internal resource demands, requisite partnerships, and overall costs.

The aforementioned suppositions stay unsubstantiated until they endure testing in real scenarios and receive feedback from actual customers and market interactions. These insights are crucial for the survival of startups during their initial stages of existence.

The Customer Development Model (CDM) can effectively validate assumptions pertaining to customer analysis.

CDM represents an iterative and responsive process that reflects the unpredictability of launching a new business and entering new markets. Each phase of the CDM has a distinct objective and a distinct set of deliverables. The step-by-step procedure aids entrepreneurs in identifying viable business opportunities and transforming them into profitable enterprises.

The primary objective of the CDM is to gain a comprehensive understanding of customers and their difficulties. By acquiring this comprehensive understanding, entrepreneurs can improve the trajectory of their product creation, sales, and marketing initiatives, thereby increasing their efficiency.

By adhering to this methodical model, a learning and discovery cycle can be created, facilitating task prioritization and accelerating the launch and scaling of startups.

Product launch failures are not unique to startups; even well-established and well-financed businesses can come up with unsuccessful new market offerings. A case in point is Motorola's $5 billion satellite-based phone system.

Regardless of the magnitude or stage of a business, distinguishing customers and delineating markets remains an ongoing necessity. The Customer Development Model is not only useful for new businesses, but also for established ones.

Each of the 4 linked steps of the CDM has its own unique requirements and outcomes.

Customer Discovery
Customer Validation
Customer Creation
Company Building

The Customer Discovery part focuses on gaining an understanding of customers, their difficulties, their tastes, and their purchasing behavior.

Customer Validation sets a uniform sales process, which is an essential step in the growth of a business.

Iteration occurs between the initial 2 steps until the stage is set for the 3^rd step, i.e., Customer Creation. This step increases demand and identifies potential customers.

Company Building focuses on building the enterprise in order to encourage expansion and executing the business strategy.

Let's delve a little deeper into the 1^st 2 phases.

Customer Discovery

Knowing the actual customers requires extensive investigation, which is distinct from determining product features or conducting focus group testing.

The approach recommends that CDM implementation teams be on the ground, in the field, to locate markets and consumers.

The consumer search phase eventually centers around the product's vision.

Customer Validation

Prior to Customer Validation, the prospective customer and market must be determined.

This step follows identification because it is explicitly designed to aid in the creation of the map needed for successfully getting to those customers.

What distinguishes the Customer Validation process is that if it fails, the team must commence Customer Discovery from scratch.

Interested in learning more about the other steps of CDM? You can download an editable PowerPoint presentation on the Customer Development Model here on the Flevy documents marketplace.

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