4 Essential Steps for an Effective Customer Discovery Strategy

Entrepreneurs or early-stage startups may have a brilliant business idea they believe will succeed, but if their product doesn’t align with their target market or customer, they’re at greater risk of failure. In fact, 42% of new businesses fail due to misreading market demand. That’s why utilizing customer discovery is so critical. By understanding your target audience and uncovering their needs or problems, you can better develop and align your products or services to solve their pain points. The customer discovery process helps remove the guesswork from product development, increasing your odds of success.

What is customer discovery?

In the simplest definition, customer discovery is about understanding your target customers’ needs and pain points. That way, you can create services or products that align with their preferences and are more likely to drive sales. It uses direct feedback from customers to define what problems or market needs exist instead of developing products based largely on assumptions about your target customer or market.

In this process, you’ll not only define who your target customer is, but also help validate new product ideas or pivot existing product development strategies if needed to increase customer satisfaction and ultimately perform better in the marketplace. It can also inform your marketing and sales strategies, from enhancing lead generation to improving customer loyalty.

4 Benefits of Customer Discovery

By implementing customer discovery, businesses can achieve better outcomes and benefits like:

Making Well-Informed Decisions

The assumptions your company has about who your customers are, what challenges they face, and what they desire may not be accurate. If you’re basing your product development process or marketing and sales strategies on assumptions instead of hard data, your business could be making costly mistakes. The customer discovery process uses direct feedback from existing and potential customers to replace assumptions with insights. From there, you can make informed business decisions that help capture more qualified leads, move them more effectively through your sales funnel, and increase your revenue.

Developing Products or Services Customers Want

Gathering data and direct customer feedback through the customer discovery process helps you uncover unmet customer needs, desires, or challenges. It’s also useful for further defining your customer persona, the profile of your target customer you’ll use for product development, and marketing strategies.

Gaining more insight into who your customers are, what they want, and what demand exists within your target market is essential for tailoring your products or services and creating a strong value proposition. It’s also necessary to refine your original ideas to better meet market demand and ensure you’re offering improved iterations of your product or service. The steps taken in customer discovery ultimately inform product development, so your service or product offers meet customer expectations, leading to increased customer satisfaction.

Save Time and Money

No business wants to waste resources developing products or services that don’t sell. By using the customer discovery process, your company can quickly test product ideas for validation and learn whether market demand exists. This step reduces the risk of investing in a service or product that eventually fails or needs major reworking, which can be extremely costly. It also ensures that the hours spent developing products see a positive return.

Customer discovery extends beyond initial product development, too. Your business can implement this process to find gaps in your product or service offerings or modify existing products with new features, functionalities, or designs that better suit your customers.

Gain Loyal Customers

Your company builds trust with customers by offering products or services that directly address their needs. And, by fine-tuning your offerings based on customer feedback, you show your customers that you care deeply about solving their problems and ensuring a great customer experience—not just making a quick profit. When customers feel that they can rely on your solutions, they quickly become loyal to your business.

Customer Discovery Process in 4 Steps

Customer discovery was first popularized by Eric Reis’ Lean Startup business model, which encourages the use of customer feedback and scientific experimentation in product development to find the best product market fit. Here’s what the method looks like in (X) easy steps:

1. Define the Hypothesis and Your Solution

In customer discovery, your first step is forming a hypothesis. To do this, you’ll need to identify a problem your customers have or need in the market and then offer a proposed solution. Developing a hypothesis starts by observing your market to spot trends, problems, and challenges before brainstorming possible solutions.

Each hypothesis should clearly state one specific problem and its solution. For example, your business may address the problem of costly customer experience strategies by offering an affordable AI tool to answer customer questions and offer guidance.

You can also create hypotheses based on specific segments of your customers that share characteristics since they have separate desires and problems. For instance, a B2C company may focus separate hypotheses on working parents, single 20-somethings, or those married without children to offer various iterations of their products.

Along with problem and segment-based hypotheses, your business can develop:

• Behavior hypotheses: bases hypotheses on how customers behave or make decisions
• Value hypotheses: explores your product’s or service’s unique benefits or selling points that differentiate you from competitors
• Go-to-market hypotheses: outlines how customers will find or purchase your solution

2. Identify Your Assumptions

When creating your hypotheses, you’re often basing them on common assumptions. In this step, you’ll identify your assumptions, which may include the assumption that you’re:

• Addressing a real problem or need
• Offering an effective solution
• Targeting the right market or audience for this problem
• Offering a product or service at a price your customers are willing to pay

To ensure your assumptions are accurate, you need to understand who your ideal customer is and develop a customer persona. That process involves learning about their key demographics, including their gender, age, location, income level, and other important behavioral or psychographic data. B2B markets may also want to uncover firmographic data about their ideal clients. A better understanding of your target market is key for defining your assumptions and establishing your hypotheses.

3. Talk to Real People

Now it’s time to collect insights from people who could be your potential customers. Asking your target customers open-ended questions in surveys, interviews, or focus groups gives you valuable feedback and helps you learn more about their needs and pain points. Learn which customer discovery questions are must-haves below. In general, these questions should help you test out the hypotheses you developed earlier.

Pay close attention and take notes or record the conversations so you can refer back to the information later. Their answers to these questions can help you validate a product idea or realize a specific problem or challenge for your target customer isn’t as significant as you thought it was. This step provides you with valuable feedback, so you can feel confident about moving forward with a product idea or determine if you need to come up with a new solution that is a better fit for your target market.

4. Test and Refine

After performing customer discovery, you can refine your products or services and your value proposition based on their insights and opinions. You may also need to evaluate and modify your hypotheses or assumptions to account for the new information you gained and run another round of customer discovery. Continuing to test and refine your product in this process can take time, but getting it right from an early stage will set your business up for long-term success.

6 Types of Customer Discovery Approaches

There are two main types of customer discovery approaches your business can take: online or in-person. Each has its own advantages and disadvantages—it’s critical to understand their differences and choose the approach that best suits your needs.

Online Customer Discovery

Online methods of customer discovery allow your business to capture feedback from target customers across the country, regardless of where your business is located. This method is great for ecommerce businesses and offers more convenience to customer participants. Here are a few online options to consider:

Surveys

Quickly gather feedback from potential clients through low-cost online surveys using Google Forms, SurveyMonkey, or others. This method is easy to create and distribute to a bigger audience through email, your website, or social media channels. Also, its quantitative data is easy to collect and analyze. However, surveys are a less personalized method of customer discovery, and you may not receive in-depth feedback.

Online Interviews

Connecting with potential customers online is easy thanks to tools like Zoom, Google Meet, and Microsoft Teams. You can hold more personalized conversations and ask follow-up questions to gain deeper insight from customers. This method even lets you record your one-on-one or group interviews for later use. But, online interviews require a set date and time, which may not be as convenient for customers. You also run the risk of technical issues.

Online Focus Groups

Virtual focus groups can offer a more diverse group of participants than in-person events and are typically less challenging from a logistical perspective. This method allows you to gain feedback on specific topics, product features, or challenges your customers face. However, you may be limited by the abilities of your video conferencing software or encounter technical issues.

In-Person Customer Discovery

This traditional method of customer discovery still provides many advantages in today’s digital world.

Interviews

Face-to-face interviews offer your business the best opportunity for in-depth feedback and insight into customer problems, needs, or desires. You’re able to form a more personal connection with participants and pick up on their non-verbal cues from body language and tone of voice. The method’s only downside is that they can be time-consuming and costly to coordinate and run, so they may not be the best choice for every business.

Focus Groups

In-person focus groups may require even more resources to run than interviews, but this discussion-based customer discovery can provide valuable insights from a wider variety of viewpoints. Keep in mind that it may be challenging to recruit participants for your focus group, and you run the risk of groupthink, which can discourage participants from sharing their true feelings.

Observational Research

In this method of customer discovery, you won’t ask customers any questions. Instead, you’ll observe potential customers in their natural environment to get a better understanding of their behaviors, motivations, and what services or products they use. While this method does offer businesses a great amount of unbiased context for customer decisions, it’s more time-consuming than other approaches and doesn’t guarantee you’ll walk away with critical insights.

5 Must-Ask Customer Discovery Questions

The best customer discovery questions are open-ended, unbiased, and without reference to your specific product, service, or idea. These questions are designed to get your customers talking about their experiences and what they consider to be an ideal solution. Here are five questions to include in your customer discovery process:

• What is your current approach to [solving the problem]?
• What frustrates you the most about [current solution/approach]?
• On a scale of 1-10, how important is solving this problem to you?
• How can [the problem/current solution] be improved for a better experience?
• How much would you be willing to pay for a solution that [solves the problem]?

Accelerate the Customer Journey With Podium

With customer discovery, you can validate your ideas and bring strong products to the market from the start. But even that step doesn’t guarantee success. You also need strong lead generation, marketing, and sales strategies to grab your audience’s attention and make sales.

That’s where Podium can help. Our AI Employee captures leads and moves them down the funnel 24/7, helping you earn 30% more sales without any extra effort on your part. Book a demo to learn how Podium’s AI Employee can grow your business.