8 Tips for Startups to Truly Understand Their Customers’ Needs

This article originally appeared in The Marker.

Customer development is one of the most crucial steps for getting your budding startup off the ground.

Understanding your customers and their real pain is the key to focusing your limited resources on solving a genuine market need. This will lead to higher revenues, more funding for less equity and better feedback to improve your product. But far too many startups put customer development way down on their priority list.

So how do you get this critical information? As many startups have discovered, it's not always so easy. The customer development process is often counter-intuitive and in many cases requires overcoming some real misconceptions about your market.

Here are a few tips to help you understand your customers'; pains, which will help improve every other area of your startup as well.

  1. Start with a clear hypothesis that if proven – or disproven – will help you better understand your market. For example, one of the startups in our accelerator, Knowmail, set out to solve a common problem – endless number of emails in our inboxes. They assumed that enterprises would like to find a solution to this problem in order to measure the productivity of their employees and the entire organization. But is this assumption true?
  2. Check your hypothesis with real customers. First, decide what feedback will prove your hypothesis and what will disprove it. Knowmail decided to talk with CIOs and HR managers in enterprises to find out whether their assumption was correct. Apparently, they were met with a lot of enthusiasm from the HR managers which explained that the positive effect on their employees is important. They were surprised to hear from the CIOs that productivity is not a top priority for them.
  3. When approaching customers, do not start with a sales pitch. So for example, you may want to begin by saying: “We’d like to get a sense of how you and your employees are coping with the large amount of emails that they receive and if you believe it’s a big problem for them,” as opposed to: “Hi. We’ve got this great solution we think you’re going to love…”
  4. Note which approaches work and which do not. This will help you increase your cooperation rate as you proceed.
  5. Approach at least 40 customers. Anything less is not statistically meaningful and will only perpetuate your misconceptions.
  6. Don’t shun the complainers. People usually complain about something they really care about, helping you identify points of pain in the market. In Knowmail’s case, the CIOs often complained that they were already looking for solutions to this problem but all existing ones have many security leaks and are hard to deploy. This allowed the startup to focus their solution on ease of deployment and on making sure the critical information of the organization stays secure, rather than build another productivity feature. If people are indifferent, that’s a sure sign your solution doesn’t really interest them. And let the conversation flow. Customers will often give you your best feedback when they’re allowed to freely associate, as their needs will probably be very different than what your questions assume.
  7. Don’t bail out too early. Though the process may be frustrating and may seem to lead down rabbit trails, you need to persevere for at least 3-4 months in order to gain meaningful knowledge about your customers’ pains. If you don’t reach any conclusions by then, it’s time to look for a different direction. Failing this process quickly is a successful outcome, allowing you to pivot before it’s too late.
  8. Try not to get discouraged. Learning about the market via real customers is what will bring you to that perfect sweet spot where pain meets solution. Continue the process until you see the light at the end of the tunnel. It’s a sure-fire answer to the tunnel-vision with which most startups usually start.

Hanan Lavy is Director of Microsoft Ventures Accelerator in Tel Aviv. Hanan is a serial entrepreneur with 25+ years of experience, including leadership roles in both startups and corporations. He sold his first software when he was 12 years old.