Customer discovery

  • July 19, 2022

Many of our customers in the early stages of business have not been acquainted with the process of customer discovery. Customer discovery, quite simply, is in-person market validation using surveys or questionnaires.

The concept is quite simple, but like all activities in business, there is a right and a wrong way to approach customer discovery for the best results. Below are some tips on creating a successful customer discovery plan. The information gained through this process is vital when applying for non-dilutive funding, especially federal research funding such as Small Business Innovation Research.

“Customer discovery” is one of the many new buzzwords being thrown around in the startup community, but many startups struggle to identify what customer discovery actually is, how to conduct it accurately, and how to leverage it to make pitches or proposals stronger. The concept is actually quite simple: is there a need for this product or service and if available, would people buy it from your company at the price listed?

Need: the primary component of customer discovery

Think of the most successful products on the market, both those brand new as well as time-honored classics. These wildly successful products have something in common – they solve a major need for a large pool of potential customers. It may sound obvious, but products that do not serve a customer’s need or meet a need found within only a small percentage of a niche market are not likely to be successful. Also, be careful not to confuse needs with wants. A product that would be “nice to have” is not likely to be as popular as a product customers can not solve a widespread problem without. Many startups wonder what the best method is to determine needs. The solution is more simple than many businesses may think. If you want to know what unmet needs your potential customers may have, ask them! Customer discovery will help businesses determine if their hypothesis regarding customers and market potential are accurate. If they are not, it’s back to the drawing board.

Who are your customers?

The first step in customer discovery is identifying who potential customers may be. An important distinction to make is to separate customers from end-users depending on the nature of the product. Medical devices, for example, will have patients as end-users but the true customers will be pharmacies or physicians. To determine who customers will be, ask yourself “who is going to be buying this product?

Once you have determined this, go find these people and start asking them questions about their needs, problems, income, demographics, lifestyle, passions, ethics, and preferences. Ask them about their interest in finding a solution to their needs and problems and how much they would be willing to pay for such a product, as well as what they feel the most important features of this product would be.

Determining what features must be present in your upcoming Minimum Viable Product (MVP) is completely dependent on customer discovery. The best way to document customer discovery is through surveys and reports. This way, you have an easy source of reference for the feedback collected that can be easily deidentified and disseminated.

Customer discovery and SBIR

Customer discovery is helpful to an emerging small business in many ways but is a required element of a competitive SBIR proposal. The marketing section is a critical element of the SBIR proposal and requires companies to illustrate customer needs, market segments, potential revenue, and a plan for commercialization. Needless to say, none of this information is obtainable without a good grasp of who the customer segment is, what market competitors exist, what the value proposition is, what trends are influencing the market and what customers are willing to pay for your product or service.

Customer discovery is a fairly simple process that many small businesses overthink. For guidance on the process of customer discovery, consider joining a program such as NSF I-Corp, a local accelerator or incubator, or one of many various programs to help small businesses identify and focus on their customer segment.

We work with high-growth startups and organizations that support the startup and innovation ecosystem. We build highly specific non-dilutive funding menus, provide proposal preparation services, and measure outcomes of funding through evaluation. Schedule a consult call with us HERE.