Customer development pitfalls that will sink your startup

by Steli Efti

Your product has a bit of traction, but you can already tell it’s not going to push your business to the heights you want to achieve. The feedback you get is positive but lukewarm—not enough to keep your business afloat.

You and your team create a customer development roadmap to discover and validate the right market fit for your product.

But the more desperate you grow to find that market, the more you start grasping at straws. You need to succeed so badly, you build false hope and make decisions that are bad for your business, and dilute the core value of your product into oblivion.

Take a step back. Customer development isn’t a magic button that you can just hit to solve all your problems.

Where customer development goes wrong

The problem that a lot of entrepreneurs fall into during the customer development phase is that they approach the process as a laundry lists of tasks. The right market and audience always seems just around the corner, out of reach—if they just follow the steps, they’ll find it.

The longer this process drags on, the more desperate and short-sighted they become.

Done this way, customer development is deadly. It will cripple your capacity to learn, and your product and your business in the process:

  • You grow desperate and overeager to look at signals and feedback in a positive light.
  • You use customer development to validate yourself, instead of your product.
  • Your product creates problems to solve, instead of solving existing problems.

You end up with faulty learning that at best is useless, and wastes your time. At worst, it puts your entire business in jeopardy.

Let’s walk through the four most common customer development pitfalls you need to avoid on the road to product-market fit and real growth.

1. Shotgun approach

When your product has early traction, you probably get positive signals from customers in diverse markets. Your product is versatile, with tons of different possible applications.

It’s good to go out and test these different verticals to see if one is particularly interested in your product. But don’t shoot blindly, and poke your head into every market that you can think of.

When you’re in the early stages of your startup, testing 60 different verticals at once is always a bad idea. Here’s why:

  1. You’ll learn fun and surprising things about new markets, but these learnings won’t actually drive business for you.
  2. You'll spread your time and resources too thin, while your business flounders.

For example, let’s say you’re building an inter-office communications platform. You’ve largely focused on the tech sector, but the competition’s too stiff. You think maybe healthcare, among others, would be a great vertical to pursue—you email a bunch of doctors, and find out that doctors don’t answer their own emails. Secretaries do.

This kind of entry-level learning does nothing for your business. You’re a total stranger to these markets, and you waste time trying to figure out the basics.

You’re at a disadvantage from the get-go, and while you learn interesting things, you hemorrhage cash that could be used to beef up your product, hire new talent, and serve your customers better.

Stack the deck. Double-down on markets you already know and have been a part of, or ones where you know a lot of insiders—where you have a competitive edge. You should be able to sit down with a friend and learn the basics of a specific vertical in a 30 minute conversation, rather than having to replicate those learning step by step over weeks and months.

Explore different verticals and markets, but don’t go overboard. Focus in on 5–10, biased heavily towards the ones you know like the back of your hand.

2. “Happy ears” trap

When you conduct customer development interviews, a big part of what you’re doing is figuring out what your product does right. You want to talk to customers, and figure out where your product succeeds so you can build on these areas for more traction and growth. But a lot of people take this too far, and fall into the “happy ears” trap during customer development.

You hear what you want to hear and filter out the rest. When a customer says, “I disagree”, it gets processed as “I don’t get it.” As Brant Cooper and Patrick Vlaskovits write in their book, The Entrepreneur’s Guide to Customer Development, “many entrepreneurs look to confirm hypotheses, rather than test them.”

Despite your best intentions, you let your ego get in the way. It’s only natural—your product is your baby, and you don’t like people calling it ugly. But you need to build the knowledge necessary for it to grow and survive.

Don’t necessarily start by saying, “Our product enables team collaboration. What do you do in that area? Let me show you what we’ve built, and you can tell us what you think.”

Your customer will respond with something like, “It sounds interesting, but I think it’d be better as a product management platform that does x, y and z—I’d definitely use it then.”

It’s too easy to take this kind of response at face value, and dismiss it out of hand—everyone and their mother has an opinion on new features, products, and solutions. Take a step back, and make it easy for yourself to be objective. Focus on behavior, instead of speculation.

Try a different approach. Ask:

  • “How do you work with other people?”
  • “What kinds of tools do you use to get work done?”
  • “What tools do you use to collaborate and communicate with your team?”

When you’re still trying to achieve product-market fit, you want to find existing problems that your product can solve and the pain points that it can relieve, instead of creating problems for your product to solve. Not only do you get around the “happy ears” trap, but you also start building a concrete, solid base of knowledge around your customers—insights that you can iterate back into setting your business and your product on the fast track to future growth.

3. Free product peril

“Customer Validation proves that you have found a set of customers and a market who react positively to the product: by relieving those customers of some of their money.”— Steve Blank

As you’re still struggling to build traction for your product and find that market sweet spot, you’ll be tempted to give your product away for free to increase adoption and spread usage of your product. Steer clear from this trap.

It’s never too early to charge money for your product. Always put a price tag on everything you do to validate the signals and feedback you get from customer development.

Let the money vote

We all like free stuff—but free isn’t going to grow your company or your business. Money’s the best and most powerful way to validate your product:

  1. It’s easy for people to endorse a product when it’s free—they have absolutely nothing to lose.
  2. The most valuable feedback and insight you get is from people who actually care enough about your product to pay for it.
  3. More money ≠ more problems.

If there’s four different verticals interested in your product, how do you decide which to focus on?

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Money. The answer is always money. Actions speak louder than words, and spending hard-earned cash for your product is the most powerful kind of action a customer can take on behalf of your product. Always look at the vertical willing to pay you the most money. They see the most value in your product—focus on these groups.

Don’t compete with the big fish on price

If a customer tells you, “I found out that Microsoft makes a solution similar to yours. Honestly, between Microsoft and you, I don’t even care—I’ll just go with the cheaper solution.”

Nod your head politely, listen to their concerns, and tuck them away. Don’t give your product away for free. A customer who’s sticking point is price is not the kind of customer you should be pursuing.

Trying to compete with a company like Microsoft on price is a surefire way to kill your startup—you’ll get rapidly priced out. What you want to do is establish more value, build a more customizable product, and solve the problem in a more powerful and effective way.

And as Chris Savage, founder and CEO of Wistia points out, “Having few, paying customers forces [you] to focus 100% on what those customers need,” instead of being overwhelmed by a mass of data-points and free-signups. By showering a small segment of paying customers with time and attention, you gain valuable, actionable lessons on how to build a product that future customers need, rather than one they’d like.

This is the kind of response you should be striving for: “Microsoft’s solution is cool and cheap, but too complicated and hard to use. When I look at your solution, your company might be smaller, but your product is lighter, cleaner, and more responsive. It does what I want to do a lot better.”

It’s the validation you need.

4. Feature creep

Let’s say you bump into Elon Musk on the street, and you pitch him your product. He goes, “It’s cool. But I think you could make your product amazing by integrating cross-platform analytics, building a 3D data visualization grid, and revamping the UI.” Elon Musk thinks your product could be amazing! You’ve got your pen in hand, and you’re ready to get cracking.

But the fastest way for you to fail is to actually cater to one potential customer’s needs. You end up with a haphazard product bloated by feature creep, instead of a unified, cohesive product that makes sense.

As you go through customer development, oftentimes you’ll talk to someone more successful and experienced than you about your product. They’ll be persuasive, and make a compelling case for the feedback they give. You’ll be tempted to bow down to their superior wisdom, get excited and start cranking out features that no one cares about.

Be careful and cautions with the feedback you implement into your product. One person’s opinion should never push you into messing around with your product and tinkering with code.

Listen to 100 people instead of 1. Extract trends and patterns from the breadth of feedback and insight you receive throughout customer development—shared pains and problems that your product can solve.

Kill your darlings

“Follow your heart, but check it with your head.” — Steve Jobs

Startup founders are defined by their passion, vision, and boldness. It’s the fuel for the fire that keeps them working thankless hours, building amazing things, and striking out for greater heights on the horizon.

In a lot of ways, customer development feels counterintuitive to this drive that keeps you going as an entrepreneur. You have to be dispassionate and re-evaluate your product with a cold eye, challenging the core assumptions that ground your entire company.

It takes a different kind of daring, and it’s not easy. But by taking off your rose-colored glasses, you exercise the objectivity and judgement you need to extract the right learnings from the process, building insight that will unlock the true growth potential of your business.