Customer discovery is a great way for startups to determine whether or not a product is worth putting out into the market.
It can help startups understand how valuable and sought after their product might be. Customer discovery will also give you the tools to understand how to make your product or service better. This article will detail what customer discovery is and how to do it.
Before talking about customer discovery, we need to understand why it is so important. Customer discovery is especially important for startups with limited capital and only a few products. Understanding your potential consumers will help your company thrive in the long run.
Startups generally fail because they do not fit into the market. Understanding whether or not your customers have a need for the product you intend to commercialize is crucial for a startup. Obviously this is important for all businesses, big or small. But, with startups, there is less room for error.
The textbook definition of customer discovery is a mouthful: the process of gathering and analyzing feedback from external stakeholders to test commercialization-based hypotheses. Another way to say this is running an experiment. Even if you are not a scientist, you should understand the importance of running an objective experiment with controls. The purpose of these experiments is to validate or invalidate a hypothesis about your product or market.
Customer discovery serves to give you insights about your potential market and customers. It will provide high quality inputs (data and assumptions) into your business strategy. Using this data, you can make projections and a game plan for your business; a ‘play book’ before the game even starts. Asking these questions and analyzing the answers will give you insight on your potential customers.
In healthcare, identifying these groups and people can be very difficult. There are hospitals, CEOs, universities, individual patients, and more that could all be affected by your product. Doing a customer analysis will give you insights on what each group wants and needs.
You can also use customer discovery to align your company’s milestones to commercialization goals. This way, you can synchronize your internal and external processes.
The best way to understand customer discovery is through a concrete process and example. But, it is important to remember that this can be done in multiple different ways. The example and steps below are just a way for you to familiarize yourself with the process, and then you can make adjustments based on your company’s specific needs. Here are the 5 basic steps:
For the following steps, we will use a specific case to discuss and point to as an example. The fictitious case study is OncoloSense, Inc, an in-home device that delivers chemotherapy based on the patient's vitals and health information.
The first step is quantifying your objective and setting your hypotheses. There could be multiple or just one. Here are some questions to consider when looking at which objectives are important for your company to de-risk its path:
Lets evaluate this question for our OncoloSense example. The OncoloScence will bring the chemotherapy to a customer’s home, instead of at the clinic. This could be helpful to reduce the spread of COVID-19. But do we need a nurse to come in, or some type of monitoring? Would the patient need to go into the hospital anyway? Thinking about these types of questions for your company will help you understand whether or not your product/service is actually necessary. You can read more about successful businesses who met an unmet market need here.
Here is another question to consider:
Your company might have a great idea for a product, but you might not know if it works yet. Do you need an informal study that takes a few months, or a trial that can take years? Depending on your product or market, the answer will be very different. This can affect your funding and even the date that your product is ready for the market. Read more about fundraising for a startup here.
Now that you have an idea of the questions you will have to answer, you need to find people to answer them. One of the first things you need to do is understand your buyer. Your buyer can be entirely different from who will actually be using the product.
For example, OncoloSense might be bought directly by the consumer, by the hospital, or paid for by insurance companies. You may need to do some research and try to create diagrams to better understand this. Following the money can be difficult for medical products because it goes through so many hands. Understanding who your real customer is will help you find who to contact. You should try to find local contacts for whomever your customer base will be. This way, they will give you the most accurate answers on how your company will be affected.
Now that you have researched the types of people that will be your customer, you need to do some outreach. You can use your network to find mutual connections and receive warm introductions. Using your own network will bridge the gap between you and them, through your mutual connection. More often than not, people are willing to share with someone they know, rather than a stranger.
One thing to emphasise when reaching out is that you are asking to learn about the market, not just to make money. Especially in a sector like healthcare, it is not just about making profits. Professionals want to help you understand the customer so you can bring something worthwhile and innovative to the healthcare and medical world. Coming across as profit hungry will hurt you more than help you.
The two best ways to reach out to these customers is through LinkedIn or through email directly. There will be people that do not respond, but do not be discouraged. Focus on the people that do instead! In reaching out, make sure you explain what you would be asking and what your product is trying to do. These interviews should be about 15-30 minutes and could be done over the phone. You do not want to take too much time out of their day.
After you find a group of people to reach out to, you can start asking them questions about your product. Creating a guide will be very important for this. A guide will allow you to collect proper data and differences between the people you interview. You can make a combination of questions and try to ask as many as you can within the time frame. But, it is important to get their genuine reaction, so do not rush just to get through the questions you have prepared.
You should also avoid yes or no answers. Instead, you will want to ask open ended questions. This way, responses can differ greatly, even if you do not ask a very large group. In person interviews are typically best, but with COVID-19 spread, zoom meetings and phone calls should be acceptable. You can learn more about interviewing customers from this article about the Voice of Customer (VOC) process.
One of the main takeaways from this article is to listen to the interviewee instead of talking at them. You want to get their honest opinions, even if it is a negative one. Recording interviews (with the interviewee’s consent) is also very helpful. It will allow you to look back and hear exactly what they said, instead of just your memory.
The time you spend assessing your interviewees is equally important as the time spent interviewing them. This is when you will decide whether or not your hypothesis has been proven true or not true. One way to assess your responses is to compile them in a spreadsheet. Having them all be in the same location where you can easily compare what interviewees say is helpful for your assessment.
In the spreadsheet, you should keep track of your questions, your hypotheses, and their identifiers. For example, if someone is a doctor, list that in the spreadsheet ad include their specialty and place of work. This way you can easily find patterns. When reviewing the spreadsheet, look for themes and trends among the responses and their
identifiers. This can pinpoint exactly what needs to be improved.
To quote the physicist Richard Feynman, “The first principle is that you must not fool yourself, and you are the easiest person to fool.” This quote conveys the importance of removing as much bias as possible from this process. Completing customer discovery might not get you the results you had wanted or anticipated, and that is ok! Gathering this data and talking to professionals will give you insights on how to create something better and more worthwhile. Being able to adapt is an important part of growing a small business and creating a product that the market needs.
At what point should a company start the customer discovery process?
You should try to start as early as possible. Understanding the customers and their needs will be important in creating and finalizing a product. You do not want to start production and then realize there is no market need.
What should my hypothesis be?
Your hypothesis (or hypotheses) will vary depending on the stage of production that you are in. When you are very early on, it will be worthwhile to ask about what type of trials you will need. During production, you should ask questions about how best to market the product, or what it can be used for.
How long does a customer discovery process take?
To go deep and generate a large number of interviews, it will usually take at least 3 months. It could be shorter or longer depending on how much time you have in your schedule to devote to this process. It will also depend on your resource level.
What is the most difficult part of the customer discovery process?
This will vary for each person. But, for many, it will be (possibly) coming to terms with the fact that the market does not have a need for your product. You might need to pivot and think about your product in a different way.
What are some ways to use customer discovery for a product already on the market?
A great use of customer discovery for an existing product is finding new markets to enter. By interviewing these people, you will be able to see different uses for your products and different ways to advertise that fact.
This content comes from a University Lab Partners webinar hosted in partnership with ScienceDocs, presented by Ryan Sadlo.
Ryan Sadlo is an entrepreneur and healthcare executive that focuses on go-to-market and commercialization strategy for early-stage healthcare technologies. He has deep subject matter expertise in the US healthcare system and has built a broad network of existing contacts across the US healthcare landscape (payers, IDNs, GPOs, hospital systems).