Customer Development versus Sales

Customer Development versus Sales

Companies execute known and tested business models. They know their customers. They know their competition. Etc. In contrast, startups are temporary organizations designed to search for a repeatable and scalable business model. Executing and searching are the key differences between the two organizations. Based on uncertainty and unknowns, customer development is the process of searching for a repeatable and scalable business model. Startups generally fail when they hire a VP of Sales, an executor, too soon; i.e., before the business model is established.

The customer development process consists of four steps. Steps one and two deal with searching for a business model. Steps three and four deal with executing a business model. The four steps are:

  • Customer Discovery – Does your product or service solve a business problem that customers will pay for? Validate your hypothesis with actual customers, not educated guesses. Get outside of the building.
  • Customer Validation – Can you develop a repeatable sales process? Who is the buyer? What is the sales cycle (e.g., ROI, timeline, etc.)? Does the financial model make sense; i.e., is it profitable?
  • Customer Creation – Are customers buying your product or service? Are you generating demand in the market? Are you growing your customer base from several to many?
  • Company Building – Does your team match the company’s searching and execution needs? Founders are builders and executives are operators. They are different skills-sets.

How is customer development different from sales? Companies execute a repeatable sales process. They know their customers and competitors. Their products and services solve business problems that customers will pay for. Startups use customer development to search for a repeatable business model. Customer development involves validating a business hypothesis by running experiments and iterating. Customer development and sales are different skills-sets. Ensure the right people are in the right positions by asking, is the company searching or executing?

All contents copyright © 2012, Josh Lowry. All rights reserved.


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