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It doesn’t matter if you run a Fortune 500 company or are a sole proprietor, it can be difficult to find new growth avenues. It can take time, money and be risky to add a product or service. Before you invest, make sure that the growth strategy is worth your time and money. Customer-discovery research is the best way to get an idea of how it works.
My experience working in high growth startups and now operating my own, CustomerDiscovery.co, has taught me the importance of building your startup around consumer’s pain points and goals. If done correctly, a customer-discovery program will reveal areas where businesses can be improved and help identify potential growth opportunities.
Four areas are the most popular for businesses to grow in. It is essential to understand your market in order to determine which strategy works best for you product.
Market penetration: starting fresh
To penetrate a market, you need to find out the strengths of a business in establishing sway and then double down. Businesses sometimes need to get customer approval before investing in new products or services. They risk spending time and money on something users will not find worthwhile enough to buy.
Market development: venturing into a new market
Gap took an enormous gamble recently to enter the unknown resale market that was dominated by Supreme, Nike and Jordan. They also invested $1 billion in Kanye West. No one would have imagined that Gap clothing could be listed on StockX before the deal. All three Kanye puffer jackets can be found on StockX at $700 today. The stock has increased 50% over the last year.
Development of a product: Creating a brand new product for an already existing market
The U.S. strategy of Tesla vs. the rest of world is an excellent example of product design. Although the EV company is trying to increase EV adoption worldwide, the U.S.-based firm is adopting a new approach. Telsa will release a $25,000 Chinese-made compact car while promoting the Austin-made Cybertruck in its home market.
But, the latest Tesla Bot proposal by the company could cause both plans to be thwarted. Will Smith will save us all, we hope.
Diversification is the addition of new products to an underexplored market
Companies in the tech sector are constantly looking to increase their customer base through new services and products. Diversification can be seen in Apple AirTag and Facebook’s purchase of WhatsApp.
Use customer-research to identify areas of growth potential
My specialty is helping businesses determine which route to take and then how to implement that strategy. To get the most information possible from their target audience, it starts by creating a plan. The approach we take goes beyond simple card sorting or multiple-choice survey. We combine qualitative and quantitative analyses to identify areas of growth potential.
The five-step process of customer discovery
We go through five steps before we jump into any new strategy for expanding a company’s reach. To illustrate our process, I will use an example from a coffee ordering app.
1. 1.Listen to your most critical assumptions
How important are assumptions to validate in order for the growth strategy to succeed? Before testing the new growth strategy, we ask operators to share their thoughts, hopes and fears in writing.
They assumed that people would order coffee from the app before actually going into the coffee shop.
The next step is to convert the subjective assertion from step 1 into a hypothesis. Next, quantify the amount of interest required for validation. The theory should be validated against the minimum success criteria in order to decide if it is necessary to change or continue.
We move on if we interview ten coffee drinkers daily and seven of them sign up to our waitlist for the coffee app. If only one person is interested, however, we pivot to explore other growth options.
3. 3. Conduct customer-discovery interview
The growth strategy is moving ahead, and we need to hear from early adopters. This is a case where coffee drinkers are not interested in waiting in line.
Qualitative research is done through interviews. Interviews are where we dig deep into potential consumers’ hopes, dreams, and aspirations. It’s not as simple as just asking some questions. To avoid giving swaying responses, we use our knowledge to ask open-ended questions that measure the pain of respondents. On a scale from one to ten how frustrating is it standing in the line every morning for coffee?
Compare the data with your hypothesis. You should seek out areas for growth during feedback.
We calculate the product-market fit (P/M), and net-promoter score. This is done during a customer-discovery conversation. Two simple questions can be used to determine your product-market fit (P/M) and net-promoter score (NPS).
If more than 40% of respondents say that they would not be satisfied if the product did not exist, then market fit has been established. NPS can be calculated by ranking every answer, subtracting the percentage of detractors from the percent of promoters. To categorize an answer, we use these: 6 = detractor; 7-8 = passives; 9-10 = promoters. An NPS above 20 indicates a favorable situation, 50 or more is good and 80 is exceptional.
If you’re a startup with a small staff, we recommend that these metrics be collected. It may not be necessary for you to go into detail with card sorting and affinity mapping in order to identify areas where you could improve.
5. Iteration with a focus
Startups are constantly looking for ways to make the most of limited resources and move quickly. It’s only half of the fun to conduct customer-discovery interview. Now, you can use these insights to build your product. Real user feedback is a great way to create an optimized process that minimizes delta. This refers to the difference between your product and your customer’s expectations. Multiple studies may be required to identify growth opportunities.
Customer discovery is crucial, whether you’re looking for a growth strategy or validation of your initial business idea, as well as to test your UX/UI. Entrepreneurs must keep their fingers on the pulse and listen to potential customers. It is possible to identify and test growth strategies with no customer discovery, but it can lead you to losing capital or worse, creating something nobody wants.
Publited Fri, 17 Sep 2021 at 13:37.43 +0000