In the last chapter of our retail business guide, we discussed pricing strategies, exploring how to set the correct prices. In this chapter, we’re diving into something equally important: customer service.

Customer service might not always get the attention it deserves, but improving how you treat your customers can make a big difference. According to McKinsey research, it could boost your sales by 2-7% and your profits by 1-2%. Customer service isn’t just about transactions; it’s about fostering lasting connections. It’s about building loyalty and getting good reviews that attract new customers. 

In the upcoming sections, we’ve got six simple strategies to boost your customer service game. These steps will help you create an outstanding customer experience with personal care and an easy return process. Plus, we’ll show you how to train your staff to be more helpful and attentive to customers. 

Read more: Retail Inventory & Pricing: a Management Guide

What is customer service?

Customer service is how companies help their customers. It’s about giving support before, during, and after someone buys something. This help can involve guiding customers to make intelligent choices, solving problems, and ensuring people are happy with what they’ve bought.

Good customer service means being quick to help, being friendly, and making customers happy. A customer’s satisfaction is what pushes them to return. Businesses can give customer service in many ways, like in person, on the phone, through email, or on social media, depending on what customers like and what kind of business it is.

You may come across the term customer experience (CX). While businesses often use customer experience and customer service interchangeably, they have distinct meanings.

Customer service is when a company talks directly with its customers. On the flip side, customer experience is the whole journey a customer goes through when dealing with a company, from when they first hear about it to when they buy something and even afterward. 

CX includes everything a customer does with the company, not just getting help with questions or problems. It also covers things like how good the products are, how the company advertises, how easy the website is to use, and what visiting the store is like.

Critical components of good customer service

You’ve learned about customer service and its distinction from customer experience. Now, let’s explore the essential parts that make solid customer service.

Knowledgeable assistance

Customers want to feel like they’re talking to someone who knows what they’re talking about. They don’t want to stumble into uncertainty if they have a question or a problem. They want to trust that the person helping them is knowledgeable. 

For example, a customer enters a computer store looking for a new laptop. They ask the salesperson about the different models and which is best for your needs. They would feel a lot more confident in their store if the salesperson could explain each laptop’s features, benefits, and drawbacks. 

This knowledge fosters trust in the store and increases the likelihood of customers making a purchase. That’s why being well-informed and knowledgeable is essential in providing excellent customer service.

Convenience

Good customer service means being there for customers in ways that suit them best. Whether online, on the phone, via text, or through social media, people want to get help in a way that feels right. 

To make this happen, offer different ways to contact your business – like calling, emailing, chatting, or meeting face-to-face. And make sure that when they do reach out, it’s easy and hassle-free. This way, you’ll create a better experience for your customers.

Efficiency and speed

When you solve customer problems quickly, you show respect for their time and make them happy with your service. Fast responses let your customers know you’re listening and caring for their needs. 

Efficiently solving issues shows that you’re getting the job done. Whether you’re simply answering a common question or fully fixing a customer’s problem, how fast you act affects how responsive you appear.

Imagine a customer bought a product from your store, but it’s not working as expected. When they reach out to your customer service, how you handle this situation matters. If you respond quickly and provide clear instructions on how to return or replace the product, the customer will feel valued and heard. 

This quick response assures them that you’re there to help. Once they follow your guidance and receive a working replacement, your efficient resolution shows them you’re committed to solving their problem. It contributes to a positive customer experience, leading to loyalty and positive word-of-mouth.

Friendliness

When your customer service team approaches interactions with friendliness and empathy, it goes a long way in creating a positive connection with your customers. This approach is vital because it makes customers want to return to you for more and tell their friends about your business.

Imagine calling a company; the person on the other end is genuinely friendly and cares about your issue or question. It not only solves your problem but also makes you feel valued. This positive experience sticks with you, and you’re more likely to choose that company again when you need their products or services.

Security

In today’s digital age, data is a highly valued currency. Security matters significantly in customer service because it shows customers that their info is safe. When you keep their data and transactions secure, it builds trust and makes you more credible. 

Your customers want to feel that their personal and financial details are protected when dealing with you. It’s not just about rules; it’s about making your customers feel safe and confident about what you offer.

Read more: Choosing the Right Retail Location in 5 Steps

6 strategies to help improve the customer service of your business

Improving your business’s customer service involves using several vital strategies. When combined, these strategies create a smooth and customer-focused experience beyond customer expectations. Let’s explore the following six strategies in more detail.

1. Understanding your customers better

The first step to providing excellent customer service is getting to know your customers well. This strategy means finding out what they like and don’t like about your business. You can do this by:

• Talking to them and asking for their opinions.
• Paying attention to what they say on social media and in reviews.
• Looking at data about what they buy and how often they shop with you.

Understanding your customers helps you determine what your business wants and needs. This way, you can make sure your services are a good fit for them.

2. Training your staff

Your customer service team represents your business. To ensure they can help customers well, training them is crucial. This training should cover product knowledge, communication skills, problem-solving, and empathy. People like dealing with knowledgeable staff, so ensure your team knows your products and services. It will help them handle customer issues promptly and efficiently.

3. Personalize customer interactions

According to McKinsey, 71% of customers want personalized interactions from companies. When they don’t get it, 76% of them get frustrated. Personalization is a big deal in making customers happy. 

Every customer is different, so personalized service treats them as unique individuals with their quirks and likes. Call them by their names, remember what they liked before, and adapt to what they want. This personal touch helps you build stronger relationships with your customers. The more you know about them, the better you can keep them interested and engaged with your company.

4. Create a customer-focused culture

Creating a customer-centric culture puts customer happiness at the forefront of everything your company does. It means that everyone in your organization, from the top leaders to the newest employees, should be working towards providing fantastic customer service. Here’s how it works:

1. Leadership Sets the Tone: They should be the first ones to prioritize customer satisfaction. Through their actions and decisions, they need to show that customer happiness is a top priority.

2. Everyone’s Involved: It’s not just a task for the customer service department; it’s everyone’s job. Every business decision and action should prioritize be solving the customer’s problems.

3. Customer Satisfaction is the Goal: Your company’s ultimate goal should be to satisfy your customers. Building lasting customer relationships requires consistent, excellent service.

Read more: Customer Development Process: 4-Step Framework for Startups

5. Offer multichannel support

Today, customers like using different ways to connect with businesses, like calling, emailing, online chatting, or visiting in person. Statistics show that live chat is the most satisfying at 79%, email at 61%, and phone at 44%.

Multichannel customer service is the key. It means being there to help no matter where customers ask for it. When you offer help through all these different ways, it’s easier for them and shows you care. Various support channels boost customer satisfaction and keep them coming back to you when they need something else.

Imagine if you only let people call you and didn’t allow emails or online chats. If you don’t provide options, you might miss out on new customers and upset the ones you already have.

6. Set clear service standards

Creating clear service standards is crucial to ensure consistent and high-quality customer service. These standards specify how quickly you’ll respond to customers, what steps you’ll take to resolve their issues, and what key indicators you’ll track to improve your customer service.

1. Response Times: Decide how quickly your team should respond to customer inquiries. It could be within an hour, a day, or any time frame that fits your business. You should always meet this standard consistently.

2. Resolution Procedures: Define your team’s steps to solve customer problems. The steps could include troubleshooting, escalating issues to higher-level support, or offering refunds or replacements. Having a transparent process helps avoid confusion and ensures efficient issue resolution.

3. Key Performance Indicators (KPIs): Identify specific metrics to measure the quality of your customer service. These could be customer satisfaction scores, response times, resolution rates, or any other data that helps you understand how well you serve your customers. Regularly monitor and use these KPIs to improve your service.

Training your staff to offer better customer service

To offer top-notch customer service, you need to train your staff correctly. This way, they can meet and even beat customer expectations. Let’s get into the key steps to improve your team’s customer care.

1. Assess your team’s skills and knowledge

To begin, take a good look at your staff’s abilities and what they already know. This evaluation is crucial because it helps you determine where they need to improve. Once you understand their strengths and weaknesses, you can create training that addresses these areas. This way, your training efforts will be more effective and on target.

2. Boost onboarding efforts

After evaluating your team, if you need to replace inexperienced employees, focus on improving your onboarding process. Ensure new hires get the skills and knowledge they need immediately. They should have access to thorough training, resources, and mentors before starting their responsibilities.

Good customer service often comes down to knowing who to contact or talk to within the company. Top-notch customer service agents have a firm grasp of the company’s workings. A great way to begin passing on this company knowledge is during onboarding. Use this time to encourage your customer support team to gain a deep understanding of your company.

3. Train for active listening

Once you’ve checked your staff’s skills, begin training them in active listening. Active listening means listening and responding in a way that helps both parties understand each other better.

Tell your staff to let the customer finish talking before they reply. Also, suggest repeating what the customer said about their issue. This soft skill makes customers feel heard and understood. When training your team, emphasize these active listening methods for a better customer experience.

4. Emphasize empathy among your staff

Customer service is all about understanding and caring for your customers. Sometimes, your staff might be unable to give customers exactly what they want. However, that doesn’t mean they should say “no” without trying to find a compromise.

Help your employees learn to be patient and show empathy. Teach them phrases like, “Let me check with my manager to see if we can find a solution.” Taking a few minutes to talk to a customer and building a connection can make it easier for them if we can’t fulfill their request.

To make empathy work, it has to be authentic. So, you need to lead by example in dealing with your employees. Show them the same patience and empathy you want them to show customers. Also, choosing the right people for customer service roles is essential. Not everyone is suited for customer interactions.

5. Involve top performers in training

Find your top customer service representatives and get them in on the training. They can be mentors, share their tips, and give helpful advice to new team members. 

By involving them, you’re not only rewarding and motivating them, but you’re also setting a high bar for the rest of the team. Everyone will find inspiration to elevate their performance and reach the level of top performers. Additionally, you’re tapping into the wisdom of those who’ve been there and done that.

6. Provide regular feedback

Finally, set up a feedback system to keep track of your team’s performance. Regular feedback sessions are essential because they help employees see what they’re good at and where they can get better. Constructive feedback guides your staff in improving their customer service skills as time goes on. This way, everyone can keep getting better at what they do.

Examples of good customer service from major companies

Many major companies are famous for providing excellent customer service. They set a high standard for the industry and are known for their exceptional service. Here’s how they do it:

Apple

Apple provides excellent customer service through its personalized support. The Apple Support app offers a knowledge base, live chat, and the option to schedule a call with an Apple expert. Customers can also visit the Genius Bar in Apple stores for in-person help. They make sure to address your concerns quickly and in a way that makes you feel valued and supported.

Amazon

Amazon’s success isn’t just by chance; they’re good at making returns and refunds easy for their customers. They always think about what the customer needs. When customers buy something, they can get it delivered quickly. When they have any questions or problems, Amazon gives an immediate reply. They offer helpful chat and phone support. Amazon makes sure that returning things is easy. Dealing with Amazon is easy, thanks to their commitment to customer satisfaction. They’re great at making their customers happy.

Ritz-Carlton

The Ritz-Carlton stands out for its exceptional customer service. Their employees are empowered to go above and beyond to ensure guests have a memorable stay. Ritz-Carlton staff undergo extensive training to pay attention to minor details, ensuring that guests’ preferences and requirements are effortlessly met.

Summary

Improving your customer service is essential for the success of your business. Customer service extends beyond mere transactions; it involves cultivating robust relationships, fostering loyalty, and garnering positive reviews to entice fresh customers.

By using the six strategies we’ve talked about, you can create a great customer experience. It means caring, training your staff, and setting clear service standards. Remember, good customer service keeps customers happy and coming back for more.

In our upcoming chapter, we’ll delve into the world of branding, investigating how a strong brand identity can draw in more customers and set you apart from your competition.

In the previous chapter, we discussed the “Customer Development Manifesto.” It contains 14 critical ideas that startups use in the Customer Development Process. These ideas have been beneficial to many entrepreneurs in building successful businesses. Now, let’s shift our focus to another crucial aspect of entrepreneurship: creating a successful web startup.

In today’s digital world, web startups are becoming increasingly important. But what exactly is a web startup, and how can you start one successfully?

This article isn’t just about explaining a web startup; it’s a practical guide to help you turn your ideas into a real business. We’ve taken many insights from “The Startup Owner’s Manual” by Steve Blank and Bob Dorf to provide you with tailored advice on how to take concrete steps toward making your dreams a reality.

Keep reading this article to learn the ten essential steps to guide you through this exciting business journey. Whether you’re an experienced entrepreneur or just starting your first startup adventure, this chapter will help you understand and master the art of building a web startup.

What is a web startup?

In our first chapter, we looked at Steve Blank’s definition of a startup. He describes a startup as a temporary organization trying to find a business idea with a repeatable and scalable business model.

Now, let’s focus on web startups. These are a special kind of startup that mainly works online. They’re different from regular startups that might sell physical products. Web startups offer digital services or products. They use the internet to connect with customers, provide services, and generate revenue.

Here’s how web startups differ from regular startups:

• Online presence: A web startup’s core operations and customer interactions occur online. Customers can access their products or services through websites, web applications, or mobile apps. Traditional startups may include physical components or provide offline services.

• Global reach: Startups that use the internet can quickly have customers from all around the world. Regular startups usually start by trying to get customers in their local area or nearby places.

• Low barrier to entry: Starting an online business usually costs less than starting a traditional one. You don’t have to worry about renting a physical store or building factories or warehouses. 

• Rapid scalability: Web-based businesses can grow fast because digital products are easy to replicate and share. Regular startups can have a more challenging time growing because they might need physical products that are difficult to get.

• Tech-centric: A fully online business Web relies heavily on technology. They need manpower with technology skills to create and maintain their digital operations. Regular startups might not need as much tech know-how.

Read more: Startup Essentials: Key Definition and 9 Mistakes to Avoid

Why are most companies going online?

Many companies are moving their operations online, and some are even starting their businesses online. This shift isn’t always a choice; often, it’s a necessity.

As we all know, the Covid-19 pandemic in 2020 significantly changed how we conduct business. Many companies were caught off guard by the new restrictions and shutdowns. However, many businesses could adjust and persevere — by going online.

Financial experts at Gartner, Inc. found that Chinese companies that did best during the pandemic were those that teamed up with trusted online service partners and used automation in their business plans.

In addition to changing habits, customers are also the driving force of this shift. Today, more people than ever are turning to the internet for their shopping needs.

By 2025, e-commerce businesses will generate a staggering $7.4 trillion in sales. Even though you might think big online stores rule everything, there’s still room for online shops focusing on unique interests and making customers happy.

10 steps to create a web startup

Starting a web startup can be an exciting but challenging journey. To guide you through this process, we’ll follow the proven steps outlined by Steve Blank. These ten steps will help you set up your web startup from scratch and increase your chances of success.

1. Set up the logistics to manage your team

First, ensure your team is ready, and you’re on the right track with your startup. Start by understanding the Customer Development Model, which helps you know your customers better.

Create a WordPress Blog to document everything you learn about your customers. This blog will be like your startup’s diary, helping your team stay on the same page and keep track of your progress.

To chat with your team, use Skype and Zoom. They’re great for team talks and meetings, especially if your team members are in different places. Good communication is critical to making your startup work, and these tools will help you chat, share ideas, and make decisions together.

2. Craft your company’s hypothesis

The next step in creating a web-based startup is to craft your company hypothesis. This step involves laying the foundation for your business by defining your strategy, understanding your market, and outlining your initial product offerings. Here are key points to consider during this phase:

Business model canvas

Start by creating a comprehensive Business Model Canvas that outlines your business’s core components. This model should include hypotheses about your value proposition, customer segments, channels, customer relationships, revenue streams, essential resources, key activities, key partnerships, and cost structure. These ideas will be like the building blocks for your startup’s strategy and help you choose what to do next.

Minimal Viable Product (MVP) features

Identify the key features that are essential for your MVP. Focus on the minimum set of functionalities that will allow you to test your hypotheses and gather valuable user feedback. These features should address your target audience’s most pressing needs and pain points while keeping development costs and timeframes in check.

Check the market

Use tools like Google Trends, Google Insights, and Facebook ads to see if enough people are interested in your business idea. Look for signs that the market is growing. Also, look at what other companies are doing in the same space.

Study your competitors

Use Crunchbase and other relevant tools to research your competitors. Understand their strengths, weaknesses, market positioning, and customer base. This analysis will help you identify gaps in the market that your startup can exploit and determine how your product or service can stand out.

Total Available Market (TAM) and customer value

Calculate the Total Available Market by estimating the total number of potential customers in your chosen market segment. Consider age, location, and other factors that define your target customers. Also, consider how much each customer might be worth to your business over time.

Market type selection

Determine the market type your startup is entering, which could be one of the following:

• Existing Market: Entering a market with established competitors, where you aim to offer a better solution or differentiate in some way.
• New Market: Creating a market that doesn’t exist by introducing a novel product or service.
• Resegmented Market: Identifying and serving an underserved or overlooked segment within an existing market.

Selecting the right market type is crucial as it influences your go-to-market strategy, competitive positioning, and marketing approach.

Read also: Customer Development Process: 4-Step Framework for Startups

3. Create a clear value proposition statement

Next, it’s time to formulate a concise and easy-to-understand description of your company. This statement should explain why your business exists in an easy-to-understand way. You can use a format like “We help X do Y by doing Z” to make it straightforward.

After you’ve written this statement, ask a few people (even if they’re not your exact customers) if they understand your business. If they’re confused, explain your startup in more detail and ask them for feedback.

Others can give you helpful ideas and suggestions to improve your value proposition, making it more understandable and appealing. Their fresh perspective can help you create a statement that connects with your target audience, sparks their interest, and makes them want to learn more about your web startup. Remember that a well-defined value proposition is the cornerstone of a successful business.

4. Set up the website logistics

The next step for your web startup is setting up the website logistics, which is crucial for your online presence. Here’s what you need to do:

1. Get a Domain Name: Choose a name for your company’s website. This is your online address, so it should represent your business well. Consider buying multiple domain names, including variations of your brand name.

2. Register Your Domain: Use services like GoDaddy or Namecheap to register your chosen domain name. They make it easy to see if your domain is available and complete the registration process.

3. Set Up Google Apps: If you want professional email addresses (like yourname@yourcompany.com) and tools like calendars, Google Apps is a great option. You can often get essential services for free.

However, you can set up a web host if you know how to code.

4. Web Hosting (for Coders): If you know how to code, you’ll need a web host. Consider using Virtual Private Servers (VPS). With a VPS, you can run your web servers like Apache or Nginx and even set up a MySQL database. This gives you more control over your hosting.

5. Platform as a Service (PaaS): If you’re building a complex web app, you might find using a PaaS like Heroku or AWS easier. They manage the server stuff for you so you can focus on coding and improving your product.

 5. Build a “low-fidelity” website

Setting up the logistics of your website is just the beginning. Creating a simple website is part of the next step. This website should tell people what your product or service is and what they can benefit from. It should encourage them to take action, like learning more, filling out a survey, or pre-ordering.

For non-tech experts:

1. Use user-friendly tools like PowerPoint, Keynote, Google Sites, Weebly, GoDaddy, WordPress, or Yola.
2. Utilize templates and drag-and-drop features.
3. Embed forms from Wufoo or Google Forms for user data.

For coders:

1. Choose a wireframe tool for website structure.
2. Host a design contest for affordable graphics.
3. Create a basic website using HTML and CSS.
4. Test user interest with a fake sign-up or order form.
5. Add engaging elements like slideshows or video tours.
6. Perform user interface testing for usability improvements.

6. Get customers to the site

After creating the website for your startup, your task is to get people to visit your website. After all, your brilliant idea and well-designed Minimal Viable Product (MVP) won’t mean much if no one knows or uses it. You need to employ a multifaceted approach to draw potential users to your site and begin validating your customer segment and value proposition.

• Use Paid Ads: You can pay for ads on platforms like Google AdWords and Facebook. These ads will help you reach a bigger audience. You can target specific groups of people likely to be interested in your product.

• Improve Your Website’s Search Ranking: You should also improve your website’s ranking on search engines by using Search Engine Optimization (SEO). When your website shows up higher in search results organically, more people will find it without you having to pay for ads.

• Leverage Your Network: Don’t forget to ask your friends and contacts for help. You can ask them if they know anyone who needs your product. If they do, ask them to pass on information about your site. Personal recommendations can be efficient.

• Use Email Marketing: Sending out emails is another helpful strategy. You can use tools like Mailchimp or Google Groups to simultaneously send emails to many people. Regular updates and newsletters can keep people interested in your site.

• Create Surveys: To understand your customers better, make online surveys. These surveys will help you get feedback on your website and your product.

In short, to get customers to your web startup, you need a mix of paid ads, SEO, networking, email marketing, and surveys. These methods will bring visitors to your site, and their feedback will help you improve your product and attract more customers.

Read more: Social Media Marketing: A Guide & 3 Strategies for Success

 7. Build a more complete solution

The next step for your web startup is to connect your user interface (UI) to a web application framework. First, pick the proper framework based on your needs and your team’s skills. Some popular options include Node.js, Ruby on Rails, and Django.

After selecting a framework, it’s time to integrate it with your user interface (UI) by transforming your design into functional code. This connection is crucial for making your startup operational. Begin building the essential components of your startup, such as user registration, backend logic, and databases. It’s vital to ensure that your application functions well and can accommodate a large user base.

Don’t forget to test and fix any problems you find. User feedback helps make your app better. Also, use analytics to understand how people use your app. This information enables you to make more improvements.

8. Test the “problem” with customer data

The next stage of creating a web-based business is to test the identified “problem” with the data you get from customers. This phase is about deeply understanding your target audience, their needs, and how your product or service can address those needs effectively. Here are some key points to consider during this step:

Use web analytics 

To understand how people use your website, you need web analytics tools. Google Analytics is a good start. It tells you how many people visit your site, how long they stay, and where they come from. This info helps you know if people like your site and which marketing works best. Later, when your startup grows, you can check out more advanced analytics tools for better insights and options.

Get user feedback

Set up accounts on user feedback websites. These sites let users share their thoughts, problems, and ideas directly. This approach shows them you care about making their experience better.

When you ask users specific questions, you get better feedback. For example, ask, “Is there something stopping you from signing up?” or “What more info would make you like this solution?” These questions make users share their issues and hopes so you can make your product even better.

Collect email addresses

Ask users for their email addresses; it lets you communicate with them personally. You can check back with users who shared feedback to learn more, have chats with them, or even give them early access to new stuff to say thanks. Having their email helps you stay in touch and understand them better.

9. Build the “high fidelity” website to test the “solution”

It’s time to test your startup idea by creating a polished website. Here’s what you need to do:

1. Update Your Website: Use the information you gathered from steps 5 to 8 to improve your website. Fix design issues, add missing features, and improve the content based on your learning.

2. Focus on High Quality, Not Perfection: Your goal is to make your website look professional and trustworthy, but it doesn’t have to be perfect. Keep it simple and focused on what matters most to your users.

3. Keep Collecting Data: Pay attention to how people use your website. Are they clicking where you want them to? Are they staying on your site? Use tools to gather this information to make your site even better.

4. Listen for Feedback: You want to hear users say, “This is great, but when are you going to add X?” This means they like what you’re doing and want more. Use this feedback to guide your next steps.

10. Ask for money

The last step in launching your online startup is receiving payment. Here’s how you can do it:

1. Pre-order Form: Even before you’re fully ready to make money or have a complete product, put a “pre-order” form on your website. This form helps you collect billing information from interested potential customers. It builds trust, but be clear about the product’s status and possible delays.

2. Find a Billing Provider: When you’re ready to start charging customers, which might be sooner than you think, you need a way to collect payments. Look for a reliable billing provider like Recurly, Chargify, or PayPal. They make it easy to handle fees and subscriptions securely.

Picking the right billing provider is crucial. Ensure they fit your business model, have reasonable pricing, and offer good customer support. Also, set up your billing processes properly, like deciding on prices, managing discounts, and handling any issues that might come up during transactions.

Summary

We’ve covered some important information about web startups in this article. These startups differ from regular ones because they offer digital products or services and use the internet to connect with customers exclusively. They can reach people worldwide, cost less, and scale faster.

We have provided you with a ten-step roadmap based on Steve Blank’s advice to help you launch your web startup. These steps will guide you in setting up your business from scratch and seeking funding at the right time.

The upcoming chapter will delve into the business model canvas – a crucial tool for developing your startup. We will examine all of its nine components.

References

Blank, Steve, and Bob Dorf. The Startup Owner’s Manual: The Step-By-Step Guide for Building a Great Company. 2020.

A wholesaler is a person or company that purchases bulk products and resells them at a lower price. They take an essential role in the supply chain in fulfilling consumer demands.

The parties involved in this process include manufacturers, wholesalers, retailers, and others that can distribute goods directly to consumers.

Wholesalers differ from distributors. They do not have a binding relationship with manufacturers, which means they can sell similar products from different brands. Through this process, all parties can experience benefits from various aspects.

Besides being beneficial to those parties, the wholesale industry is vital to Indonesia’s economy.

According to a 2022 report Central Bureau of Statistics (BPS), the retail industry, particularly food and beverage (F&B), has become one of the most significant contributors to Indonesia’s GDP — 34.44% or Rp302.28 trillion.

The report also shows a 5.44% (YOY) growth in retail business in September. The statistic indicates wholesalers are vital to the nation’s economy when they supply retailers.

Are you interested in learning more about wholesalers? Read through the article below for a more comprehensive look.

What is a wholesaler?

Wholesale is the process of buying large amounts of goods from manufacturers, then selling them back in small quantities at a higher price to consumers. The consumers here may refer to retailers, commercial businesses, institutions, and other wholesalers. Sales proceeds and manufacturer discounts are the sources of a wholesaler’s revenue.

A wholesaler acts as a go-between for manufacturers and consumers to distribute products. Manufacturers need wholesalers to market their products, and consumers need wholesalers to obtain the products they want. Therefore, wholesalers play an essential role in the supply chain.

How do wholesalers work?

Wholesalers are responsible for acquiring, managing, and preparing small amounts of products for retailers. They can run well if business owners understand customer needs, market trends, and product prices to build strong relationships with business partners. Wholesalers must build a solid upstream relationship with manufacturers and be trusted by downstream consumers, such as retailers and other businesses.

Simply put, wholesalers deal with two important parties — manufacturers as product owners and retailers as customers that buy the product. It is important for wholesalers to find the right products, according to consumer demand, at a lower price that is high in quality.

Types of wholesalers

Source image: Netsuite; What is Wholesale Distribution? Benefits, Examples & Tips

Companies from a specific market or industry can be involved in wholesale. Each business that is engaged has different business models. This difference makes wholesalers vary. Here are some of them:

Manufacturers

Few manufacturers not only sell their products to wholesalers but also directly to retailers. In this case, the manufacturer will wholesale without a middleman. An example of this is boutique manufacturers that sell straight to customers.

Prices received by retailers can be cheaper because there are no go-betweens. However, manufacturers will face competition from traditional distributors already active in the market.

Dedicated distributors

Some distributors are sole sellers for certain manufacturers. In addition to making sales, they will conduct analyses related to the market, marketing, and product sales.

Regional distributors

When manufacturers aim to sell their products, they first analyze the different regions to identify product opportunities. This involves studying the customers, languages, trends, regulations, and import procedures of specific countries or regions.

Based on the results, the manufacturers work with regional distributors to sell their products. The analysis helps them understand which products will likely sell well in a particular region and how best to reach the customers in that region.

Wholesalers

Several industry sectors distinguish wholesalers and distributors. In wholesale, they buy products in large quantities from various manufacturers and distributors and sell them in smaller amounts. Besides selling, a wholesaler has to set prices, provide storage, and compete for retail needs with their competitors.

Agents & brokers

Agents and brokers are people who help wholesalers to find official manufacturers with the best quality and price. They do not own or sell their products directly but will focus on finding customers and selling products on behalf of the manufacturer. Unlike drop shipping, agents and brokers can manage products prepared by manufacturers.

Workers

Agents and brokers are people who help wholesalers to find official manufacturers with the best quality and price. They do not own or sell their products directly but will focus on finding customers and selling products on behalf of the manufacturer. Unlike drop shipping, agents and brokers can manage products prepared by manufacturers.

Benefits of wholesalers for businesses

Businesses involved in the supply chain can reap the many advantages wholesalers provide. The benefits include:

Expands reach

Manufacturers will spend less investment on expanding their market. By utilizing wholesalers, products can reach consumers without employing extra energy that is more costly. Wholesalers are responsible for distributing products to retailers that are difficult to get.

Streamlines operations

Wholesaling can simplify business operations for distributors, wholesalers, retailers, and consumers. Manufacturers can work with fewer wholesalers to fill large orders. As for retailers, they can get supplies from a variety of different wholesalers as opposed to just one manufacturer.

Lowers business cost

Simplifying business operations can reduce the costs incurred by manufacturers and wholesalers. Retailers will find products cheaper if they buy from wholesalers, as there is no need to purchase large quantities of multiple products.

Storage capabilities

Wholesalers usually own large warehouses to accommodate products and inventory items. The ability to store items can free manufacturers and retailers from the cost of maintaining large stocks of products.

Supply chain stability and risk mitigation

Through inventory maintenance, wholesalers help maintain a stable supply of products. Wholesalers also reduce the risk of shortages for businesses involved in the supply chain.

Challenges faced by wholesalers

Many wholesalers operate across various industries in Indonesia, resulting in intense market competition. As a result, these wholesalers are facing several challenges, including:

A new challenge

Wholesalers must be ready to compete with online businesses, as many retailers are shifting to B2B online sales. This means that customers can enjoy the convenience of shopping for lower-priced products with transparent pricing and faster delivery. Additionally, online platforms enable suppliers to sell their products internationally, creating even more competition.

Technological advancement forced us to adapt to the changing times. You can digitally transform to reach a broader range of customers. This digitalization process can start with social media and online marketing. This method helps customers choose and view products that are being sold. You can improve digital marketing by harnessing Google’s algorithms, such as SEO, SEM, etc.

Read more: 8 Best Wholesale Distribution Software Recommendations 2023

Manufacturers directly selling products

A competitive market has resulted in many manufacturers selling directly to consumers. Wholesalers will face challenges as this undermines market prices since manufacturers sell at a much lower price.

Checking how well the manufacturer performs first is a good idea to ensure you get good quality products. This way, you can also make sure they’re not selling directly to consumers or in the same area as you.

Consumer expectations

The expectations of consumers have risen due to the emergence of online entities, such as fast delivery, real-time visibility of orders, and 24/7 customer service. As such, wholesalers must work extra hard to meet consumer expectations. A solution would be providing other services that online entities do not have, like being able to choose and try products at will.

CRM (Customer Relationship Management) can help manage relationships with consumers. Impact CRM lets you quickly know customer data from the most bought, satisfaction levels, and contact details. With Impact, you can improve customer retention and service, indirectly increasing sales.

Margin depreciation

In the era of globalization, the downward pressure on prices — especially for commodities — is enormous. Shrinking margins will force wholesalers to increase their efficiency, leading to other forms of stress. There is competition for prices between wholesalers, so it is not uncommon for them to lower costs, resulting in reduced profits.

In cases like this, you could keep a list of prices that vary based on the number of items sold, the location, and the type of customer. You will know what’s the lowest profit you can accept. You can also use volume pricing to encourage customers to purchase more products.

The wholesale industry

Wholesalers often work in a particular industry that sells certain products. This lets distributors focus on meeting specific product demands and facing regulation within the sector. Here are the four most significant sectors in the wholesale industry:

Food and beverage (F&B)

In Indonesia, the F&B industry is still in high demand by businesses because of the potential of its continuous growth. Despite F&B’s decline during the Covid-19 pandemic, the growth rate has continued to increase. According to BPS, the F&B’s growth rate fell to 1.58% in 2020 but rose in 2021 to 2.549%, and in the second quarter of 2022, it increased further to 3.68%.

This positive trend shows that the F&B industry has prospects that will continue to proliferate. This sector’s growth has impacted retail and wholesale growth, which is increasing to meet customer demands. This industry requires wholesalers to provide raw materials that meet proper hygiene, freshness, storage, and distribution standards.

Healthcare

The healthcare sector has contributed significantly to national economic growth following the Covid-19 pandemic. Despite not having a significant share in the national economy, healthcare continued its surge to reach 10.46% in 2021. This figure is much larger than other sectors dominating Indonesia’s GDP.

The ongoing expansion of healthcare impacts retail and wholesale businesses that supply raw materials and equipment. Wholesale distributors are critical in providing medicines, medical equipment, and other supplies to state-run hospitals and clinics. As a result, it is essential to understand the regulations and procedures involved in handling medical goods for distribution.

Technology

Another sector that improved during the pandemic was the information and communication sector. When the economic growth rate declined, this sector increased to 10.61% in 2020. This number even reached 7.14% in the first quarter of 2022. A significant factor of this growth is the emergence of new habits such as working and studying from home.

The need for technology products is growing in Indonesia, affecting the number of wholesalers. Wholesalers not only need to supply everyday technology, but they also have to fulfill orders for advanced electronic products. Keeping up with technology trends and retail meeting demand will be challenging for wholesalers.

Industrial

A wholesaler is a supplier that deals with many products for B2B businesses and retail customers. They buy products in bulk from manufacturers and sell them in smaller quantities to businesses for resale.

Conclusion

The industrial sector still holds the position of being the most significant contributor to Indonesia’s GDP. However, to get their products to the consumers, the industry requires a middleman to distribute them from the manufacturer to end-users. This is where wholesalers come in.

Wholesalers purchase products from producers in large quantities and then resell them in smaller amounts to retailers at a higher price. The process of wholesaling can benefit producers, retailers, and consumers. To market their products efficiently, many industrial sectors rely on the presence of wholesalers.

Wholesaling involves various parties, and operational activities must be carried out effectively. Data integration and business process automation can help wholesale companies to generate more revenue as the company’s productivity increases.

Impact wholesale distribution can help you automate business processes such as sales, inventory, accounting, and others. It is time to undergo digital transformation. So, take the first step by starting a free demo with Impact.

The last chapter explored the customer development process, a framework mentioned in “The Startup Owner’s Manual” by Steve Blank and Bob Dorf. This method is all about understanding what customers want and need.

The model follows four steps:

• Customer Discovery
• Customer Validation
• Customer Creation
• Company Building

In this chapter, we’ll get down to business and see how to apply this idea to building a company. We’ll look at the practical steps to make your startup connect with your customers better.

We’ll also dive into the Customer Development Manifesto, which has 14 principles to guide startups like yours. These principles will help you stay focused on your customers and set you up for success.

Read more: Startup Essentials: Key Definition and 9 Mistakes to Avoid

Building a company using the customer development process 

The customer development process allows entrepreneurs to test their ideas before going all-in when building a company. It helps them determine if their products solve a problem for their potential customers. 

Instead of mindlessly investing time and money, entrepreneurs follow a systematic four-step approach to validate their ideas. Here’s a simple step-by-step guide to implementing the customer development process:

1. Customer discovery

Starting a startup begins with your idea for a new product or service that meets your customer’s needs and how you plan to reach many customers. Customer discovery helps you avoid wasting money and getting nothing in return. Your primary objective is to turn your initial ideas about the market and customers into solid facts.

Formulate the hypothesis

To get started, have a clear vision and assumptions in mind. Understand the problem thoroughly before finding a solution. Identify the target audience you want to help and develop different potential solutions. Use your research and market knowledge to create these hypotheses.

Identify the problem

To start a successful startup, first, find a big problem or something people need but don’t have yet. This problem should be substantial enough that people want a solution for it.

Don’t just sit inside and guess what customers want. Go out and talk to them about where they live. Spending ample time with your customers is crucial for profoundly understanding their needs. These are some actions that you can take at this stage:

• Conducting Surveys
• Interviews
• Observational Research
• Focus Groups

This process requires extended engagement, possibly lasting months. Remember, your product should be designed for a specific group of people, not for everyone. And don’t wait until you have customers to start building your product. Start building it early, even if you’re unsure if anyone will buy it yet.

Test the solution

To test your solution for the identified problem, you’ll need to develop a Minimum Viable Product (MVP) or a basic version of your solution that addresses the issue. The MVP should include your product, pricing, features, and other business model components.

Next, offer the MVP to a small group of early adopters. Early adopters are enthusiastic individuals who have a problem or need and understand they have one. They actively search for a solution and have a timetable for finding it. These early adopters might already have a temporary solution because the problem is bothering them significantly.

Observe how potential customers use your MVP and collect feedback. Early adopters can help promote your product through word-of-mouth. Compare their responses to determine success or areas for improvement.

Verify or pivot

In the final phase of customer discovery, you must verify and pivot as necessary. Look closely at the feedback you received from potential customers in both problem and solution testing stages. This feedback should have given you a good understanding of their needs, how much they’re willing to pay, and the potential customer base.

The key questions are whether there is enough demand for your product and whether your solution effectively addresses the problem. If the feedback is positive and supports your initial assumptions, you can move on to the customer validation phase. 

However, if the feedback indicates significant changes are needed, be open to pivoting your product strategy to better align with customer needs. Remember, adapting and refining your approach based on what you learn from potential customers is essential.

2. Customer validation

In customer validation, the goal is constantly testing the product’s potential. This phase involves a series of pass/fail tests to assess whether a match between the product and the market is strong enough. It is a crucial step to know if your business can scale. Like the customer discovery phase, customer validation also follows four essential steps.

Getting ready to sell

Prepare your product or service for the market using the insights from the Customer Discovery Phase. As you gear up to make sales, focus on these six critical activities as you move forward:

• Product Positioning: Communicate what makes your product unique and how it addresses customers’ needs compared to other options.
• Sales/Marketing Materials: Create materials such as brochures or presentations that can help you test your sales efforts.
• Hire a Sales Closer: Bring a skilled salesperson who can effectively close deals and turn potential customers into buyers.
• Distribution Channel Plan: Plan how to get your product to customers and consider the best distribution channels.
• Refine Sales Roadmap: Create a roadmap that outlines your sales strategy and goals, and be ready to adapt it based on customer feedback.
• Create an Advisory Board: Assemble a group of experienced advisors who can offer valuable guidance and support to your team.

By completing these activities, your team will be well-prepared to enter the market and effectively engage with potential customers, making your early-stage venture a strong contender in the industry.

Making sales

This step determines if your business model can work well in the real world. Startups use materials like brochures, PowerPoints, product demos, or mockups to gather valuable insights during meetings with potential customers.

Founders need to actively participate in selling to test their business model. The main objective is to determine if customers are interested in buying their product and if the value proposition is valid.

To do this, reach out to potential customers with your Minimal Viable Product (MVP). The feedback you receive from these interactions is essential for refining your product presentation, sales roadmap, and channel plans. This process helps you understand if your business can repeat, scale, and become profitable.

Develop positioning

In this step, you already have some orders and enough customer information to work with. It’s time to develop and refine your product and company positioning.

Test this positioning with industry experts, analysts, and a broader customer audience. Make sure to communicate the unique value of your product or service to potential customers. Highlight how your offering solves their specific problems and stands out from competitors.

Verify or pivot

Customer validation is confirmed when you see actual orders, users, or clicks—not just survey responses or casual chats. It shows that customers accept your minimum viable product and that there is a real market. You also figure out how to consistently reach these customers and create a scalable plan to sell your product to many more of them.

You can start enjoying the benefits once you’ve confirmed that customers like your idea. But before that, there are some challenges and work to ensure everything is verified and ready to move on to the Customer Creation phase. 

If things don’t go as expected, like in the Customer Discovery phase, you may need to make changes (pivot). It could mean adjusting the design, changing the messaging, or switching to an entirely new product.

3. Customer creation

Once you have confirmed that customers are interested in your idea, you move on to this step to implement your business plan. During the Customer Creation Phase, your main goal is scaling your startup. Here are the steps involved in this phase:

Sales and marketing strategy

During this step, your main goal is to create a well-planned strategy to reach more people and get potential customers interested in your product or service.

Identify the most effective channels to communicate why your product is unique and worth trying. These channels could include social media, online ads, content marketing, emails, or traditional methods like print ads or billboards.

Make sure your marketing messages connect with your target audience. Show them how your product can solve their problems and benefit them. 

Sales customer acquisition

Now that you have a marketing and sales plan, it’s time to implement it and reach a larger group of customers. Your goal is to attract more customers and grow your user base. 

To attract more customers and grow your business, focus on these steps:

• Increase marketing efforts and hire more salespeople.
• Explore new markets to reach a wider audience.
• Convert potential customers into paying users or buyers.
• Ensure a smooth and enjoyable experience from the first interaction to the purchase.

Track metrics

As you implement your marketing and sales plans, consider essential metrics (KPIs) to see how well you’re doing. Monitor metrics like customer acquisition cost, which tells you how much money you spend to get each new customer. 

By determining the effectiveness of your marketing and sales efforts, you can ensure the success of your business. With careful strategy implementation, you can expand your customer base and increase your chances of achieving growth.

Read more: Unlocking Growth: 19 Traction Channels for Business Success

4. Company building

Once your company successfully scales, you enter the Company Building phase. Here, your business transitions from a startup to a mature company. Some steps involved in this phase are as follows:

Team building

As your business grows, build a team that works well with your abilities and shares your company’s vision. Look for people who are enthusiastic about the product and dedicated to making it successful. Surround yourself with like-minded individuals to support and drive the company forward. A passionate and committed team will enhance your chances of achieving your goals and vision for the business.

Operational efficiency

To handle more customers effectively, improve your internal processes. Streamline your operations, manage resources efficiently, and provide excellent customer support. These changes will help you accommodate the growing customer base and deliver better service. By optimizing your internal processes, you can enhance your overall business performance and ensure customer satisfaction.

Encourage innovation

Create a culture where continuous improvement and innovation are valued. Encourage employees to try new things and learn from mistakes. This way, you can drive the growth and progress of your product and company.

By embracing a culture of learning and adaptability, your team can stay ahead in the market and find better ways to serve customers. Don’t be afraid to take risks and embrace change as opportunities for improvement. It will lead to better products, happier customers, and a more substantial business overall.

Customer development manifesto

Building a company using the Customer Development Model is not an easy task. It requires real effort, and you can’t pretend to do it. Changing the way to build a startup requires a serious commitment.

Steve Blank has 14 critical principles for startups using the Customer Development process. Think of these principles as rules that both small and big companies should follow when they embrace this approach. Remember these principles from the beginning and review them regularly as you build your business. 

Rule 1: facts are outside the building

Step outside your office to interact with potential customers directly. Avoid relying solely on internal assumptions; instead, validate your ideas and hypotheses by engaging with real customers in the field.

Rule 2: pair customer development with agile development

Combining customer development with agile development is a powerful way for startups to create products that customers love. Agile development involves building products in small, functional steps and making quick adjustments based on feedback.

This integration means startups get valuable insights from real customers throughout product development. The startup ensures the product meets their needs and preferences by involving potential customers.

With customer development and agile working together, startups can be more responsive and adaptive to customers’ wants. This customer-centric approach leads to better products and happier customers in the end.

Rule 3: failure is integral to the search process

There’s an essential difference between existing companies in startups: startups often experience failures. But don’t worry; failures are learning opportunities. Not all initial assumptions will be correct, and that’s okay. Use failures to improve and find what works best.

Failures are a natural part of the startup learning process. You’ll run many tests; some will succeed, while others won’t. When things don’t work out, successful founders adapt to the new information, figure out what needs fixing, and take action decisively. So, embrace failure, learn from it, and keep moving forward.

Rule 4: make continuous iterations and pivots

Pivoting is a crucial part of the customer development process. It means making significant changes to your business model based on customer feedback. You continuously improve your product and strategies by listening to customers. You should be open to pivoting to meet customer needs, and market demands better if needed.

A pivot doesn’t always mean completely changing your entire company. Sometimes, it’s just about addressing one significant problem or changing a specific area. When to pivot depends on your startup’s situation. After reviewing your company’s current status and prospects, it should be a carefully considered decision, not a quick reaction.

While some startups have experienced great success after pivoting, it’s not a magical solution for all problems. It is advisable only to pivot when necessary and after exhausting all other alternatives. It’s a thoughtful and strategic decision to ensure your startup’s growth and success.

Rule 5: business plans don’t survive the first customer contact

The primary purpose of a business plan is often to appease investors who may request one. However, once you secure financing, the business plan loses its significance. Many entrepreneurs mistakenly treat the business plan as a rigid execution manual, failing to grasp that it primarily consists of unproven assumptions.

As you interact with customers and gain real-world experience, you will realize that your business plan needs to evolve. Startups should abandon the traditional business plan and embrace a more adaptable and flexible business model. Be prepared to make adjustments based on customer feedback and insights. Stay open to change and be willing to adapt your approach according to what you learn from your customers.

Rule 6: validate hypotheses through experiments and testing

A hypothesis is like a fancy word for a “guess.” To turn beliefs into facts, founders need to test them. Think of your business hypotheses as experiments that need validation. 

Design these experiments to confirm or challenge your assumptions. Use data-driven insights from the experiments to make informed decisions for your business. Using this approach, you can make informed decisions backed by evidence, thereby improving your chances of success.

Rule 7: agree on market type

Startups are not all the same. One significant difference is how a startup’s new product relates to the market. You must identify the type of market you are entering – it could be an existing market, a resegmented market, a new market, or a copy of a successful business. 

Understanding the market type will influence your strategies. Most startups fall into one of these four market types and must choose one to commit to. Making the wrong choice can have severe consequences during the customer creation stage.

Rule 8: startups have different metrics

Startups need to identify and track metrics that are relevant to their growth. In the past, startups used traditional financial tools like P&Ls, balance sheets, cash-flow forecasts, and other analyses because they didn’t know what else to measure.

However, metrics for startups should focus on tracking their progress in turning their assumptions and guesses into solid facts rather than just measuring the execution of a fixed plan. It’s crucial for both the board and management to continuously test and measure each assumption until the entire business model is ready to scale into a full-fledged company.

A startup board should also track a few critical financial metrics. These include the cash-burn rate (how quickly the startup spends cash), cash runway, short-term hiring plans, and break-even point timeline.

By tracking these metrics, startups can make informed decisions, stay financially healthy, and increase their chances of success.

Rule 9: fast decision-making

In startups, quick decision-making and action are crucial. Startups must respond swiftly to market feedback and seize opportunities. Speed is essential because startups face constant financial challenges, and time is of the essence.

Rule No. 4 talks about iterations and pivots but doesn’t specify how long they should take. The faster these learning, building, and pivoting cycles happen, the better the chance of finding a successful business model with available funds.

Speed is essential inside the company too. Making decisions for startups can be difficult due to uncertainty, and there may not always be a perfect solution. It’s important not to waste too much time trying to find the ideal answer and instead focus on making the best decision possible with the information available.

Rule 10: passion is everything

For a startup to succeed, it needs passionate individuals who embrace uncertainty and change. Founders and teams must be dedicated to their vision and ready to face challenges.

These people prioritize customer needs and work hard to deliver excellent products. They commit to the vision around the clock, not just during regular working hours. These passionate individuals are the driving force behind the startup’s high growth.

Rule 11: a startup’s job title is different

In startups, roles are flexible, and employees often have multiple responsibilities. Job titles are not rigid; everyone must contribute to the company’s success.

Startups need a different kind of leadership compared to big companies. They require leaders who are:

• Open to learning, curious, and creative.
• Able to find a repeatable and scalable business model.
• Agile and adaptable to handling changes without a clear plan.
• Willing to take on various roles.
• Comfortable with failure as a means of learning and growth.

Moreover, teams in startups must be able to:

• Listen to customer feedback on products, presentations, and pricing.
• Communicate with customers and engineers.
• Be confident in dealing with constant change.
• Empathize with customers, understanding their work and challenges.

Rule 12: preserve cash until needed

Managing your cash wisely and spending when needed is crucial in Customer Development. The main aim is not to avoid spending money altogether but to be careful with expenses while searching for a business model that can be repeated and scaled. Once you find that successful model, you can spend more confidently growing your business. It’s all about being smart with your resources until you find the right path to success.

Rule 13: communicate and share insights

Sharing everything learned outside the building with employees, co-founders, and investors is crucial to building a startup. It’s essential to emphasize learning from both successes and failures. Thanks to technology in the 21st century, we now have tools that make communication easier. We can share what we are learning in almost real-time with everyone who needs to know. This open and continuous communication helps the team stay informed and make better decisions to drive the startup’s success.

Rule 14: customer development success begins with buy-in

Customer Development’s approach to learning and discovery can be quite different from what many people in the business world are used to. If you’ve spent your career following a set plan, it can be disorienting. That’s why it’s crucial to have everyone involved in the project, from the top to the bottom, fully onboard and understanding that this process is fundamentally different.

This approach changes everything: how we behave, how we measure success, and how we perform. It’s not a linear process; it’s more like an ongoing search for a business model, sometimes taking years. So, everyone on the team must embrace and accept this unique way of working to ensure it succeeds.

Summary

The Customer Development Model is a powerful tool for entrepreneurs seeking to turn their ideas into successful businesses. It’s a systematic approach that allows you to test your concepts, ensuring that your product addresses a genuine need in the market before diving headfirst into the business world. Building a company with this model requires dedication and wholehearted commitment.

Steve Blank’s “The Customer Development Manifesto” offers 14 critical principles to guide both startups and established companies to adopt this approach effectively. These principles serve as the North Star, guiding you through building your business. 

So, as you embark on your entrepreneurial path, remember these principles from day one and revisit them regularly to ensure you stay on the right course. With determination and a commitment to these principles, you can increase your chances of building a successful and customer-centric company that stands the test of time. 

Our next chapter will delve into making a web startup as we move forward. We’ll explore the intricacies of creating an online presence, harnessing the power of technology, and reaching a global audience. So, stay tuned and keep these customer development principles close to heart as you embark on your journey to entrepreneurial success. It won’t be easy, but with the right tools and mindset, you can chart a course towards a promising future in the world of startups.

References

Blank, Steve, and Bob Dorf. The Startup Owner’s Manual: The Step-By-Step Guide for Building a Great Company. 2020.

In the previous chapter, we learned about startups and the common mistakes that can lead to their failure. One essential lesson is the need to understand your customers to succeed.

In “The Startup Owner’s Manual” by Steve Blank and Bob Dorf, they talk about how many startups struggle because they lack a structured way to test their ideas. The Customer Development model is like a helpful guide that assists startups in finding a business model they can repeat and scale successfully.

Now, let’s explore the different stages and components of the Customer Development process. This process helps startups search for a business model that works by understanding and validating the needs of their target market and customers. It’s a key to making your startup successful.

What is the customer development process?

In the 1990s, Steve Blank came up with the customer development process when he noticed that startups aren’t just smaller versions of big companies. He realized entrepreneurs need a structured way to find “repeatable and scalable business models.”

According to Blank, startups go through three stages before becoming big companies: search, build, and grow. 

The customer development process lies within the search and build stage.

There are four steps in the customer development process:

• Customer Discovery
• Customer Validation
• Customer Creation
• Company Building

The first two steps of the process are about finding a suitable business model (search). Once you have a model developed, tested, and proven in these initial steps, steps three and four are all about putting that model into action and making it work (build/execution).

In the Customer Development model, each step is like a circular track with arrows showing that we go through the steps repeatedly. In simpler terms, it means that startups can be unpredictable. We might face failures and make mistakes multiple times before figuring things out correctly.

Read more: Startup Essentials: Key Definition and 9 Mistakes to Avoid

The customer development process in detail

Now that you know what a customer development process is, let’s dive into what exactly happens in this process. We’ll break down the whole process into four stages and explain the steps involved in each phase.

Customer discovery: getting to know your market

In the customer development process, the first step is called customer discovery. Here, founders take their ideas for the company and turn them into hypotheses like educated guesses. Then, they create experiments to test these hypotheses.

Steve Blank stresses the value of leaving your workspace and engaging with people directly. This approach means going out and conversing with them to gain deeper insights. In the customer discovery process, there are two main components of “getting out of the building”:

1. Test how customers perceive a problem and if they genuinely need a solution – identifying their main pain points.
2. Show the product to customers for the first time, assuring them it can solve their problems. This step checks if the product/service works and if customers believe in it.

Once founders collect all the necessary information in this stage, they can move on to the next step, customer validation.

Customer validation: building a viable business model

During customer validation, startups check if their solution meets customers’ needs and their business idea can work. If everything looks good, they can get ready to sell the product and grow the business.

In this phase, startups test their scalability. They see if their business can handle more customers, find the right price, and reach them effectively. They also create a sales plan for future sales and marketing teams or see how well their online marketing works with early customers.

The first two steps of the Customer Development model are essential for improving and testing the business idea. The entrepreneur makes a minimum viable product (MVP) or a prototype with the most critical features. They show this MVP to potential customers and ask for their feedback. This feedback is valuable because it helps the entrepreneur improve the product using real-world insights.

After achieving sustainable growth, startups can shift their focus to the customer creation step. However, during this validation phase, startups may sometimes discover that their initial assumptions were off-base or that the market’s needs have shifted. In such cases, a pivot may be necessary. We will discuss pivoting in detail in upcoming chapters.

Read more: Unlocking Growth: 19 Traction Channels for Business Success

Customer creation: the start of the execution

Once startups have confirmed that customers are interested in their idea, they move on to the next step: customer creation. This step is where they put their business plan into action.

The main goal is to create a reliable system for attracting new customers and fueling business growth. During this stage, the team chooses their target market, sets clear goals, and fine-tunes their positioning strategy in preparation for the product launch.

At this point, startups have learned how to get customers without spending much money on marketing. They use the product/market fit they discovered earlier to develop effective marketing and sales strategies that reach a wider audience.

The way startups create customers can vary depending on their market. Some compete with established companies, while others explore new areas. Some use a combination of strategies by targeting a specific segment or finding a unique niche.

Company building: scaling and organizational development

In the customer development process, the final step is company building. At this stage, the business is no longer considered a startup and no longer focuses on searching for solutions.

Now, the main goal is to scale the business. Startups move their efforts from learning and exploring to taking action. They set up organized departments such as Sales, Marketing, and Business Development, each led by a Vice President (VP).

To succeed at scaling, the company must change its organizational structure. The changes could mean hiring new people with specific skills that the current team doesn’t have. It might also involve some team members leaving if their goals no longer match the company’s goals. And in some instances, the founder might not be the best person to lead a successful company anymore.

As the company grows, the team gets more prominent, and they make operations work even better. They might create new departments to help different areas communicate and work together more effectively.

Benefits of using a customer development process

Embracing the customer development process has many benefits for entrepreneurs. It helps them succeed and create thriving businesses that meet their customers’ real needs. Here are some of those advantages:

Reduced risk of failure

The harsh reality of startups is that 90% fail and some don’t even survive beyond their first year. A significant factor contributing to these failures is a lack of customer understanding. Many founders assume they know what customers want, but the truth is often different.

The customer development process helps you identify your potential customer’s pain points, preferences, and unmet needs. With this valuable knowledge, you can customize your product or service to address those issues directly. This targeted approach significantly boosts the chances of your offering gaining traction and success in the market. 

Adaptability to market changes

Startups can be chaotic, with constant changes happening all the time. Markets are constantly evolving, and what customers like can change quickly. Understanding your target customers and what they need to stay competitive is essential.

Customer development helps with this. It means talking and listening to your potential and current customers to get feedback and insights. This ongoing conversation enables you to keep up with new trends, shifts in demand, and changing customer preferences. With this valuable information, you can make intelligent changes to your products, services, or business strategies at the right time.

Faster Time-to-Market

With the validation process, you don’t need to aim for perfection immediately. Begin with a Minimum Viable Product (MVP) that satisfies early customers. Remember, the MVP isn’t the final version, but it helps you get feedback from real users.

Releasing the minimum viable product (MVP) can be advantageous. It allows you to enter the market swiftly, gain momentum faster, and begin generating revenue while refining your product.

Enhanced customer satisfaction

When you release the MVP to your target customers and ask for their feedback, you learn important things about your product. You discover what it does well, what needs improvement, and what’s missing. This feedback helps you make real-world improvements based on what customers like.

This development process helps you avoid spending too much on a fully developed product that might not match the market’s needs. Instead, you listen to customer feedback to guide your product’s growth, making it more aligned with what customers want. The constant refining based on customer input leads to a better user experience and happier customers, which can build loyalty and positive word-of-mouth.

Summary

Understanding and meeting customer needs is vital for startup success. As discussed in “The Startup Owner’s Manual” by Steve Blank and Bob Dorf, the Customer Development process offers a straightforward way for startups to find a winning business model. 

The process has four steps: Customer Discovery, Customer Validation, Customer Creation, and Company Building, which are like a circle that startups repeat. It’s normal to face failures and mistakes along the way. Still, startups can discover a sustainable business model through learning and adapting.

The next chapter will focus on building a company using the customer development manifesto. This manifesto provides 14 guiding principles for founders, ensuring a customer-focused approach. By embracing these principles, startups can create a strong foundation for growth and success. 

References

Blank, Steve, and Bob Dorf. The Startup Owner’s Manual: The Step-By-Step Guide for Building a Great Company. 2020.