Welcome back in this quick guide to customer development process. In the previous part you have the chance to learn and understand what this process is and hat it is not. You also went through the first two phases called customer discovery and customer validation. Today, you will be able to complete your learning curve of this subject by learning about customer creation and company building phases. With this information, your education will be completed.
Quick Guide to Customer Development Process part 1.
In the customer development model, the phrase “customer creation” represents all the essential marketing activities necessary to help your customers learn about the product you are selling them and create a desire to buy it. In most startups and companies this type of job belongs under the general rubric of marketing communication. Steve Blank, the creator of the Customer Development model, calls these activities Customer Creation rather than marketing communication or PR.
There are four reasons for it. First, in every startup, these events are occurring for the first time. Second, these activities are not just about the marketing department, they are about customers. Third, these activities are creation events, not follow on execution events. Fourth and last reason is that the types of appropriate marketing programs differ widely, depending on Market Type. The traditional marketing communications strategy has six elements. First, is an internal and external PR audit to understand customer perceptions.
Second element is development of a unique company and product positioning. Third is enlistment of key industry influencers and recommenders. Fourth element is recruitment of enthusiastic beta customers (early adopters) ready to sing the praises of the product. Fifth is product launch at first customer ship and the last one is ramped-up demand creation spending n things such as advertising, public relations, etc. However, these traditional rules don’t work for every startup.
Today, most startup marketers tend to fall back on useless worn out marketing phrases and programs. Often, they used the exact same approach at their last company, so they are just building on “proven” technique. However, this is a mistake. These marketers seem to be confusing a launch of a new product or company with execution of a to-do list of marketing tactics. What every startup really needs is to have customer creation strategy and plan that suits them perfectly. What I mean is that these people should think in term of strategies instead of tactics.
Customer creation phase has four building blocks. These blocks are setting objectives for year one, positioning your company and product on the market, launching your product and company and creating demand for your products through advertising, public relations, various growth strategies and so on. Not all of these blocks will be repeated multiple times. For example, company launch is that type of events you will probably do only once (at least with one company). You also need to understand that customer creation is an ongoing process that starts when the company is founded.
The first phase of customer creation – the launch – begins with a series of “getting ready to launch” activities: choosing a market type (existing market, new market, re-segment an existing market) and your customer creation strategy and also setting year one goals, including goals for sales. You should also make a serious effort to understand market size, total available market and available customer budgets a part of this process. The last step you have to do is to write down your goals, strategy, objectives and milestones and put together the customer creation budget.
The second phase of customer creation puts together all the positioning efforts your company has done until now. At this moment and step of the customer development process you should have a lot of data to help you develop effective positioning on the market. In previous part, in the customer discovery, you gained an understanding of what perceptions your customer has about other competitors that might solve their problem. In customer validation step you created earlyvangelists as paying customers and gathered their feedback on your product and positioning.
By now, you also created a value proposition for the product based on feedback provided by early customers (early adopters). Fast forward, this value proposition will become the initial positioning for your product and company. Your goal in this phase of customer creation is gather feedback from your customers, press and analyst to further customize and optimize the positioning of your company and product. Keep in mind that the overall goal of positioning is to control the public’s perception of your product or service and how does it relate to competitors alternatives.
The third phase of customer creation is called launch. This phase starts when all the heavy lifting you did to position your company and product is complete. Now, your company is ready to get to the tactics of launch. The launch phase of customer creation is the result of culmination of all your strategy efforts. A company launch is when your company communicates to an audience for the first time the message about what it is, what it stands for and what it’s selling. A product launch describes why your customers should want to buy your specific product.
In a startup world, it is not so rare that these two launches occur simultaneously. The process for launching is similar. You prepare communications materials, pick the right audience you want to reach, craft your unique message, choose the messengers (well-placed and highly leveraged individuals, more in The Tipping Point by Malcolm Gladwell) and context and get ready to create demand. After doing these steps, you check yourself by measuring how well you did and comparing the results with your goals, so you can correct the course you are heading.
The fourth phase of customer creation is called demand creation. This phase encompasses all the marketing activities that drive customer awareness and desire for your products. These activities include public relations, advertising, trade shows, seminars, brochures, data sheets and so on. It is very common that demand creation is the first phase most marketing communications executives want to execute. However, this phase is actually at the end of a thoughtful process, not at its beginning. In this phase, your goals are selecting a demand creation strategy, agreeing on demand creation measurements and finally iterating, returning or exiting.
In the end of customer creation phase, you successfully positioned and launched your product and company and introduced them to public. You also developed a set of messages to communicate your positioning and chose key messengers to carry your story. Through the demand creation, you are driving end user demand into your sales channels. Finally, you are using and improving the metrics you have created to measure how well or bad are dollars you invested in marketing are spending. Now, you have to remain flexible and be able to iterate if necessary.
At the end of customer creation phase you should be looking for signs that will tell you that you are ready to move forward to the final phase of customer development process – company building. How will you recognize what signs should you be looking for? Simply ask following questions and if the answers are positive, you are ready to build a company.
When your demand creation efforts and methods become more effective are your sales going up as well? Are your competitors noticing your company and even starting to copy you? Is the business model working for you on a continual basis? If you have positive answer for each of previous questions, you should notify your staff about finally entering he final part customer development process and building the company.
It is kind of a startup mystery that in case of some companies hiring fast and getting bigger early on will result in generating momentum and future success while in others it will lead to the increase of chaos and entropy, layoffs and ending up in a death spiral. Think about it … Why what for some companies mean new blood to others mean slow dying or running out of money? I think that one of the things every entrepreneur have to know, in order to succeed, is when to use company’s resources to hire new people and when to cut spending and go into survival mode.
Keep in mind that the long-term success of a startup requires founder to learn and adapt as his company does instead of following the conventional wisdom and replacing him with “professional” CEO. Understand that startups that will get to the end of the customer development process are not just large business entities waiting to get rid off their founders to be able to grow. They need to never stop and constantly innovate themselves so they can become large, sustainable businesses.
In order to build a large company and complete the customer development processes you have to build a mainstream customer base that goes beyond the first earlyvangelists customers you have reached in previous stages; build the company’s organization, management, and culture to support greater scale at which you are going to operate from now and create departments to sustain the climate of learning and discovery that got your company to this stage. So, forget about resting on laurels. You have to stay alert and watch for changes on the market to truly thrive.
Even though this is changing now, many startups don’t spend too much time on planning their organization and culture. Some startups “solve” this issue by offering couple free time and team-building activities to their employees and selling or giving them something to drink and eat here and there. Entrepreneurs often tend to assume that in order to succeed they must grow their companies as quickly as possible into something larger. The result is rigid system full of bureaucracy. You should remember that market is place full of uncertainty and disorder.
For the transition to a large company, your startup needs to become agile and be able to respond quickly no matter how many people are on board. Such agility and flexibility will require you to create and implement company’s mission. This mission will be the main driving force behind day-to-day operations of the departments and the employees. Remember that this mission has to grow into the mantra that will be ingrained in the culture of the entire company.
When creating a functional organization, what do you want to achieve is a management system and departments that communicate and delegate strategic objectives to the employees. This communication is done in such a way that they can operate without direct daily control while still moving in the right direction following the company’s mission. To make this possible, you have to hire people for their personal values and ability to lead others, not just for their shiny CVs.
Company building phase consist of four block. In the first block, you have to set the company up for switching your focus and selling mainly to earlyvangelists to mainstream customers, the majority of the market. Tools to get this done you are hiring more people to sales department, increasing your spending on marketing and relentless execution. In the second block, you have to review your current executive management and assess whether it can scale or not.
You have to pay attention to creating a mission-centric organization and culture as essential tools for scaling the company. The third block of building a company is about capitalizing on all the learning and discovery your company has done so far. It is crucial that every department supports the overall mission of your company and develops its own departmental mission. In the last block you and your company focus on creating fast response departments for scale, speed, and agility. Meaning, you move and respond to changes and customers much faster than your competition.
In the end of company building phase and customer development process you should end up with company and management processes that are still able to scale while remaining more responsive than competitors and relentless and ruthless in its execution. In other words, you have built a successful, profitable, relentless, driven and tenacious company with great culture and mission employees love to work for and you are on the path to an IPO.
Closing thoughts on customer development process
That’s all. Reading this second part you’ve successfully finished the customer development process curriculum. The next step for you is to extend the knowledge you learned with more resources and put it all to practice. Only by testing it, you will be able to see what is working and what’s not and where your knowledge is weaker. In the end you have to remember that building a company that will last is a long process full of possible pivots and dead-ends. Stay flexible and agile.
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