The Customer Development Model (CDM), divides customer-related activities carried out in the early stage of a company into four easy- to-understand steps: Customer Discovery, Customer Validation, Customer Creation, and Company Building. These steps support ongoing product development activities. The CDM could be a companion for NPD processes because of its rigor and flexibility.
Customer Discovery focuses on testing a company’s business model and whether its product meets customer needs (product/market fit). The goal is to determine who the customers and end-users are, what the customer problems are, and what it is about the product that solves these problems.
Customer Validation represents the development of a sales model that can be replicated. The goal is to build a road map for the sales and marketing teams showing proven and repeatable sales processes field-tested by successfully selling the product to early customers (Early Evangelists). Only once a group of re-approachable customers with a repeatable sales process are in place, which together yield a profitable business model, can a company move to the next step (scaling up and crossing the Chasm), which is to consider which market to enter.
The goal of Customer Creation is to create end-user demand and drive that demand into the company’s sales channel. Customer Creation represents the marketing activities necessary to help customers learn about a product and create a desire to buy it. Integral to this model is that ‘Market Type’ choices affect the way the company deploys its sales, risks, marketing and financial resources. Market type determines how to shape a customer creation strategy and the source of the firm’s positioning activities. Each of the following Market Type strategies requires a very different set of Customer Creation activities.
- Entering an existing market
- Creating an entirely new market
- Re-segment an existing market as a low cost entrant
- Re-segment an existing market as a niche player
Company Building focuses on transitioning the organization from one designed for discovery to that engineered for execution. The company transitions from its Customer Development team into formal departments with Marketing & Sales and Business Development. Now the focus is on building mission- oriented departments exploiting the company’s early market success. In contrast to this incremental process, premature scaling will ruin the start-up.
Source: Steve Blank, 2006, “The Four Steps to the Epiphany”.