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Winning Businesses Run On Customer Discovery: The Foundations for Successful Discovery Research

Updated: 6 days ago

Starting a business can be both exciting and horrifying. You're on the path toward transforming your personal interests into your primary source of income. You'll have the chance to set your own hours, prices and mission as a business owner.

It's total freedom, right?

Here's the catch: the only way to sustain this personal freedom is to ensure that your company consistently satisfies other people. These people are your target customers.

In effect, you're trading the demands of your recent boss for the demands of an emerging customer base.

Most people who get into business are drunk on their own vision before they confirm that a target customer exists who will also buy into that vision. The numbers back this up:

65% of businesses fail over the course of 10 years. These failure rates are even higher for startups where 90% fail.

Chart showing what happens when founders don't run customer discovery research.

These numbers shouldn't scare you away from the adventure of business ownership. Instead, they should convince you that you'll have to build your business differently than the average aspiring entrepreneur.

Build Your Business Differently: Preparing for the Customer Discovery Process

Most founders fall in love with a dream product, service or vision that they've built in their head, office, basement or workshop. It's totally based on their own personal wishes and sense of what's missing in the world.

Worse yet, many of these same founders think that raising money from rich friends or investors will be their golden ticket to business success.

These founders are dead wrong as idea validation is the lifeblood for both successful businesses and smooth fundraising efforts. You can check out our thoughts on this topic by visiting this blog.

When these entrepreneurs go to market with products and services built in total privacy, reality usually smacks them in the face and crushes their business ambitions. Instead of reaching the entrepreneurial promised land of financial freedom, their lack of customer validation usually leads them back to 9-to-5 life.

When they've taken money from friends and family during this same process, they may also end up with a bunch of strained or destroyed relationships. It's an absolute nightmare.

You can avoid that nightmare by gathering a legitimate understanding of your customers' needs so that your eventual solution actually solves a real-world problem.

Graph showing common causes for startup failure. Customer discovery interviews can help solve the top 2 problems.

Don't want your entrepreneurial adventure to turn into a long and expensive vacation from working in an office?

Get out and talk to your broader target audience before you build anything. Don't even design your brand until you start talking to your target audience.

These prospective customers are already buying things within the market you're trying to enter and can tell you what they personally think is broken or frustrating within the space.

From there, you can understand what kinds of solutions they would be willing to pay for.

As you dive deeper into this discovery process, you'll pinpoint the problems that will be the most profitable to solve and the most efficient pathway to creating a successful product.

One more thing to remember as you prepare for customer discovery: Not every prospective customer is created equal.

Some prospects will have more budget and direct interest in your initial product than others. These prospects are your ideal customers. While you might not know anything about your eventual product yet, you should always prioritize feedback from people who indicate they would pay for a new solution for their problems.

The more you can dial in on the profile of an ideal customer, the more you'll identify a viable customer base for your initial business plan. Once you get a strong signal on how to consistently please these people, you'll be able to scale your business idea into a product or service that can repeatedly and systematically satisfy their customer needs.

During your company's first go-to-market push, you'll be able to reverse engineer your company's solution based on the stated needs that target customers with budget shared with you.

This is the recipe for ongoing business success and a viable business solution is the ideal outcome of a successful customer discovery process.

The best businesses in the world don't just run this process one time. Their incredible success arises from a commitment to continuous customer discovery.

So, whether you're committed to run this process only once or chasing the lifelong path of continuous customer discovery, it's important to know the four elements that are foundational to any customer discovery effort.

By establishing these foundations within your own business development process, you'll create a launchpad for your eventual company's success.

The Four Foundations of a Successful Customer Discovery Process

Each of these foundational steps plays a critical role in understanding market needs so that you can best serve your customer base. By following these steps, entrepreneurs can tailor their company solutions to the preferences and pain points of their key buyers.

Infograph that shows the 4 foundations of customer discovery.

Here's a brief summary of these four foundations and how their steps will help you make powerful progress within your broader customer development process.

1. Identify Your Target Market:

  1. Key Goal: Define the group of people who are most likely to use your product or service.

2. Conduct Customer Interviews:

  1. Key Goal: Talk to potential customers about their needs, preferences, and pain points. These interviews can be conducted in person, over the phone or online.

3. Create Customer Personas:

  1. Key Goal: Outline the rough profile of your ideal customers. These personas should include information about their demographics, behaviors, budgets, and needs.

4. Determine Your Value Proposition(s):

  1. Key Goal: State how your solution addresses the preferences and pain points within your target market. This statement should position your solution as a no-brainer purchase for ideal customers.

In this article, we'll focus on how to identify your target market and then run an actual customer discovery interview with a target customer.

More interested in how customer discovery will help you create customer personas and determine your value propositions? Feel free to jump ahead to that article here.

For now, let's get into identifying a target market.

Customer Discovery Foundation #1: Identifying Your Target Market

Before you start talking to people, you must determine the domain where your skills, connections and/or passions uniquely position you to develop a business solution. Based on your personal expertise, network and interests, you can then pinpoint a target market that you'd like to enter with your future business.

Your customer discovery interviews may bring you into a crowd like this.

With this target market identified, you'll now have an audience of prospective customers to engage.

For example, imagine that you've worked for 10 years at a luxury skincare company and regularly follow skincare influencers who work with herbal alternatives to synthetic products.

A brief review of your favorite influencers' recent posts might indicate that women between the ages of 19 and 35 are the most active followers of these same profiles.

This initial research will point you toward the general crowd for your initial customer discovery interviews with. Those interviews will help you go beyond mere demographics and better understand the preferences, pain points and associated budgets within your target market.

Let's consider the qualities of an effective customer discovery interview effort.

Customer Discovery Foundation #2: Conduct Customer Interviews

A common conversation among founders who don't run customer discovery projects.

Once you've identified a target market, it's time to approach members of your target audience. These conversations drive your key insights and will fuel your long-term customer development process.

This approach must account for three core elements:

  • Preparing for Customer Interviews

  • Asking the Right Questions

  • Analyzing & Interpreting Customer Feedback

Let's tackle these one at a time so your market research can lead to massive success.

Preparing for Customer Interviews

Before conducting customer interviews, you should create a list of open-ended questions that will uncover the insights you need.

In general, you're trying to discover an existing source of pain that members of your target market express a paying interest in solving.

The more money someone indicates they are willing to spend on an existing pain point, the more signal you have that you a corresponding solution is a viable business opportunity.

As open and honest feedback is required to make powerful discoveries, it's often more advantageous if you don't have a product idea in mind when you pursue these initial conversations.

It's easy to feel personally invested in the possible solution you're already considering. This investment can bias the way you ask questions so that the answers you get will naturally relate to your existing solution idea.

Even if your questions aren't biased, your ability to listen when you have a product idea in the back of your head can also cause distortion in the way you interpret insights from your interview subjects.

As the old saying goes: "When the only tool you have is a hammer, every problem looks like a nail."

When you already have a solution in mind, it's easy to interpret every piece of feedback in terms of its relation to your existing solution idea. There is no room for authentic discovery within this situation.

Beyond mentally preparing for these interviews, it's also important to consider the environment in which you'll talk with members of your target market. The most ideal environment is one that allows all participants to be comfortable and easily heard.

The worst places are those that are noisy, crowded and normally populated by people who are in a rush.

By preparing your headspace and environment for meaningful communication, you'll have the best chance of making powerful discoveries within these interviews.

Avoiding the Wrong Introductory Customer Discovery Questions

The power of your insights depends on the quality of your questions. If you ask garbage questions, you'll get garbage answers.

Within customer discovery interviews, the most common mistake someone can make is asking yes/no questions. These questions are weak because they don't support the flow of a conversation or provide any underlying context for a given answer.

Circling back to the aspiring skincare entrepreneur, a bad question within their market research effort might be something like:

"Do you buy premium skincare products that are made with all-natural ingredients?"

This yes or no question is garbage for several reasons. First of all, what's premium to one member of this target market might not be premium to someone else in their peer group.

This is a recipe for bad data.

It's also not good that this questions stacks two qualifying criteria (interest in premium skincare products and interest in all-natural skincare products) into one question.

The problem with this lack of context is that it prevents a founder from confidently outlining key customer segments and pinpointing their most valuable customer persona.

A better approach here would be to create two or three separate questions.

Asking The Right Introductory Customer Discovery Questions

Instead of the yes/no example given, here are 3 key questions that would help our fictional skincare entrepreneur get a better sense of their target market members:

  1. What is your favorite skincare brand?

  2. How much money do you usually spend when you stock up on skincare products

  3. What kinds of ingredients do you look for when considering a skincare purchase?

The first question allows the respondent to naturally talk about their own interests while revealing the class of skincare products they normally buy. On its own, this question can reveal a lot about a interviewee's budget and preference for organic products.

The second question allows the interviewer to segment their target market according to stated budgets. If the entrepreneur wants to charge a specific dollar amount for a bundle of skincare products, they need to pinpoint who currently spends around that dollar amount for existing options.

The third question allows the interviewer to uncover the extent to which their interview subjects prioritize organic ingredients versus synthetic alternatives. Some amount of interviewees may admit they don't check ingredients at all.

Besides making the conversation flow more smoothly than a yes/no question, these alternatives serve two helpful purposes. They qualify whether a target market member meets any of your preliminary customer criteria and they set the stage for the founder to meaningfully segment prospective customers within their data set later.

If an interview subject names the cheapest brand as their favorite when responding to Question 1, the interviewer will know that they aren't spending a lot of money and likely don't care a lot about premium organic ingredients either.

With this more nuanced introductory question hand, an interviewer can quickly end the conversation when it's immediately clear that there's no road forward for a target market member to become a prospective customer.

No matter your target market, an effective set of screening questions is one of the powerful customer discovery tools you can have as you begin talking within your audience.

At that point, it's time to immediately end the interview so no useless data is collected and everyone involved can save their time. If an interview subject gives appealing responses to your introductory questions, it's time to dive deeper into how they currently navigate the space.

Asking the Right Follow-Up Questions

Let's imagine a scenario where a target market member tells our fictional skincare entrepreneur that they love La Mer skincare products, spend about $500 when stocking up on relevant items and prefer to buy products that have as many natural ingredients as possible.

This person absolutely fits the mold of a premium skincare fan with an interest in organic products.

Customer discovery work is the simplest and most affordable way to validate a new business idea.

With that criteria proven, it's time to ask some follow-up questions.

Customer Discovery Follow-Up Question Examples

The most valuable forms of additional context will revolve around the habits, friction and gaps within a relevant purchasing patterns.

Here are some follow-up questions this entrepreneur might ask a prospective customer to get additional context:

  • Habit: How often do you stock up on skincare products?

  • Habit: Where do you normally go to buy your favorite skincare products?

  • Friction/Gaps: How many non-La Mer products are involved in your skincare routine?

    • If any: Why do you buy those products rather than La Mer?

    • What part(s) of your skincare routine feature non-La Mer products?

  • Friction/Gaps: If the product leader at La Mer called you and asked what they could do to convert you into a buyer of the relevant skincare products for the part of your routine where you're using competitors, what advice would you give them?

  • Friction/Gaps: Within your skincare routine, where do you most often feel like your particular needs are not being met by existing products on the market?

At this point, our example entrepreneur has their target market identified and a series of powerful customer discovery questions to better understand what their prospective customers are looking for.

Recording Customer Discovery Interviews: The Bridge Between Information and Insights

Without recording customer discovery interviews, there is no reliable way to uncover valuable customer insights.

On your path toward developing the right product and confirming your business idea addresses a market need, it's essential actually collect customer feedback. There are a few affordable ways to do this as an early stage founder:

  1. Bring a trusted friend or business partner along with you. They can transcribe the conversation while you talk with a member of your target market.

  2. Use a recording tool on your phone. If you're running solo, in-person interviews, you may be able to use a pre-installed recording tool on your smartphone. If your phone doesn't have a pre-installed tool, you can download some free recording apps from your preferred app store.

  3. Record your virtual customer discovery interview. Most virtual meeting software include a call recording feature that will automatically save your interview for you. If you pair this feature with a speech transcription bot, you'll be able to get your interview transcribed for you.

Once you've concluded and successfully transcribed your interviews, you're ready to move into the data analysis part of the customer discovery process. With this work done, you're one step closer to confirming a market fit for your business concept.

Summary: Concluding Discovery Interviews Within Your Target Market

Once a founder considers where their expertise, passions and connections qualified them to start a business, it's often easy to identify an initial target market. Once the target market is clear, it's time to ask members of that market questions that will help you create key customer segments and pinpoint a valuable customer persona.

In total, our skincare founder now has has 10 key questions that cover essential areas of discovery within their initial target market conversations. These questions are the customer discovery tools that can fuel the path toward qualified early adopters.

These early adopters will drive the demand creation within the target market that may eventually lead to market fit. This is the promised land of startup success and the most idea outcome for all of your customer discovery activities.

It's common to wonder how many of customer interviews you should run as an aspiring founder. The rule of thumb here was developed by Abbie Griffin, a professor from the University of Chicago, and John R. Hauser, a professor from MIT, in their landmark "Voice of the Customer Study" back in the 1990s.

Griffin and Hauser advised that 30 qualified customer interviews per segment would allow a research team to gather around 90% of the needs of the overall population for that segment.

They also mentioned that interviewing 20 qualified customers would allow research teams that gather over 90% of the total needs that would be uncovered by a research effort that met with 30 qualified customers.

It's important to consider that Griffin and Hauser's findings assume that an expert research firm and team of analysts are available for these customer interview efforts. They also assume that each interview will last 60 minutes.

Don't have an expert team of researchers or analysts on staff?

No problem, our team at Venture Validator specializes in customer discovery research that helps founders like yourself test your business assumption with 100-200 qualified members of your target market.

You can talk with an expert from our team by booking a call on this calendar: Research Intro Calendar

However you end up gathering your data, the next step of your customer discovery process will require you to both analyze and interpret the dats so you can create meaningful customer personas and impactful value propositions for your company.

You can check out our deep dive on those next steps by reading our follow-up article here.

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