Customer discovery programs allow you to work on an important problem closely with a group of customers. It needs to be a limited amount, and you need to avoid the trap of building a custom solution for one customer. Marty Cagan – who writes about this in his book Inspired – advises to limit to one target industry at a time. The end result is a group of delighted reference customers, and product / market fit.
Everything depends on strong products
Without strong products, our marketing programs require customer acquisition costs that are too high; our sales organization is forced to get “creative,” which drives up cost of sales, lengthens the sales cycle, and puts downward pressure on price; and our customer success organization is forced to take it on the chin every day with frustrated customers.
The downward spiral continues because the sales organization loses a lot of deals when they try to compete with a weak product. So, what do they do? They start yelling at you about all the features you don’t have, and the competitor they lost to who does, which typically just makes the bad situation even worse. And then you start complaining about working at a sales-driven company.
This entire book, in one way or another, is intended to prevent or correct this situation.
There are few things more powerful to a product organization than reference customers.
…I will warn you that this technique takes substantial effort, primarily on the part of the product manager. I wish it were easier. But I will also say that if you do this technique, I consider it the single best leading indicator of future product success.
…The basic driver behind this technique is that, with a significant new product, the most common objection is that prospective customers want to see that other companies, like themselves, are already successfully using the product.
…If you end up targeting two or three customers from two or three different markets, this program will not give you the focus you want and need.
…For example, first develop six references for the financial services industry, then six for the manufacturing industry, and so on.
Only launch when you have the reference customers in place
I do my best to persuade teams to not launch a product in the marketplace until after they have those six reference customers. We don’t want to turn on the sales or marketing machine until we have evidence that we can help them be successful, and the reference customers are our best evidence.
We are looking for prospective customers that truly feel the pain and are near desperate for the solution we want to build. If they could find a solution that worked for them elsewhere, they would have already bought it.
Avoid custom development
…You are, however, deeply committed to coming up with a product that works extremely well for them and just a handful of other companies.
Further, your job as product manager is not to put in the features that all six companies request. While that would be much easier, that would yield an awful product. Your job is to dive deep with each of the six customers and identify a single solution that works well for all six customers.
Limiting the number of customers to six or eight
If you are working on an important and difficult problem, you will likely be overwhelmed with customers that want to participate. It really is a good deal, and customers know this. If you have a sales organization, they’ll try to use this as a bargaining chip, and the result is that you’ll be leaned on to include many more customers than you can handle. This will take finesse at times, but it’s important that the members of the customer discovery program be the right set, and no more than eight. However, it’s no problem also having an early release program that is essentially unlimited for those customers that want the software early, but you determine aren’t right for the customer discovery program.
Finding the right product ideas
Remember that this technique is not designed to discover the necessary product – that comes next. Rather, it is designed to give you direct access to the target customers where you’ll find the product ideas necessary to generate reference customers.
Product / market fit
If we can get to the point where we have six reference customers in a specific target market, we will typically declare product / market fit for that market.
So, each reference customer is a truly significant milestone. But, for example, getting six reference customers in a given target market for a B2B company is perhaps the most significant, meaningful milestone business result for a product organization and something truly worth celebrating.