Customer discovery-what is it and why do you need it?

  • October 5, 2021

So many of our clients are familiar with the term “customer discovery,” and many think they have completed the process. Unfortunately, many clients who think they successfully completed a round of non-biased, reliable, customer discovery have, in fact, not done so, or at least not to the expectation of federal agencies supplying funding such as NSF, NASA, DOD, NIH, DOE, and others. In this post, we will discuss what customer discovery truly entails to serve as a guide for how to go about navigating the process. This is an important process to complete before applying to Small Business Innovation Research (SBIR) funding or other non-dilutive grant opportunities.

Customer discovery is the process of validating your market. This is done by collecting feedback from potential customers and quite literally, as the name implies, discovering who your customer base is, what they value about your product, and how much they would be willing to pay for it. This helps determine if your business assumptions are accurate. The key to successful customer discovery is ensuring that evidence leads you to an unbiased solution to the customer’s problem. Customer discovery should be built around the scientific method and be performed objectively. Customer discovery is an important step to take before attempting commercialization. The data acquired in the process can help companies avoid fruitlessly trying to market something that customers are clearly disinterested in. An estimated 42% of businesses fail due to a lack of market need for their product. Developing the value proposition is an important part of customer discovery. The value proposition is an analysis of what the product offers customers that market competitors do not. The value proposition is a short statement about what the product can offer customers. Below is an example of Airbnb’s Value proposition. There are 4 key steps to customer discovery.

“Airbnb exists to create a world where anyone can belong anywhere, providing healthy travel that is local, authentic, diverse, inclusive and sustainable.”

Step One: Define a hypothesis

What does your idea do? How does it do it? The answer to these two questions will help you define your hypothesis. Take care to create a hypothesis with only one problem and one solution and ensure it is specific, not vague. For example, if you were creating a grocery delivery service, your problem should be something like “reducing the time and effort required to create nutritious home-cooked meals by offering an all-organic grocery delivery service” as opposed to “solving people’s need to go grocery shopping.” You should directly address the problem and offer a specific solution. Some questions to ask include Is it an actual problem people have? Why does the problem exist? Does the solution solve the problem? What’s the scope of the problem? Does the solution address the feasibility of your solution? Are customers willing to purchase it? Can it generate revenue? How will customers buy the product?

Step Two: Define your assumptions

Assuming your hypothesis is correct, the next step is to create some assumptions about your customers. Who are your customers? What are their values, ages, income brackets, interests, and motivations? How does your product fit their needs and lifestyle? Given these assumptions about your customer, what is the most likely marketing tactic to reach your target customer segment?

Step Three: Questions for customer discovery

Now that you have identified the hypothesis and potential target market find real people that represent your customer segment and start asking them questions about this hypothetical product. Record their reactions and use the information to create iterative changes on the product, if needed, to better fit customer needs. By asking the right customer discovery questions, the customer will actually help design the product for you. Example questions might include:

Tell me how you currently do _________.
How is that process working for you?
If you could do anything to improve your experience with _______, what would it be?
What’s the hardest part about __?
What do you like/dislike about __?

The customer’s responses not only give concrete answers but also allow insight into how much the customer cares about the given topic and how emotionally invested they are in each response. You may even uncover new and unseen problems customers have. This can be accomplished through interviews, surveys, focus groups, Observation/Ethnographic Research:

Step Four: Evaluation for customer discovery

Customer discovery should expose some pain points or customer needs that were previously unknown. This is when iterative changes may take place until such a time as customer responses match the hypothesis. Revising at this stage, while frustrating, is much less expensive than overhauling a fully developed and commercialized product.

Ready To Take the Next Step?

We assist our clients in locating, applying for, and evaluating the outcomes of non-dilutive grant funding. We believe non-dilutive funding is a crucial tool for mitigating investment risks, and we are dedicated to guiding our clients through the entire process—from identifying the most suitable opportunities to submitting and managing grant applications.