Entrepreneurial Marketing: An Effectual Approach Prof. Dr. E.J. Nijssen, Eindhoven University of Technology Available from Routledge at: https://www.routledge.com/Entrepreneurial-Marketing-An-Effectual-Approach/Nijssen/p/book/9781138712911 Session 6: The customer development process

Objectives Discuss customer involvement in new product development; lead users’ role Explore customer development as a seperate process Review management issues involved Discover link with business model and business model optimization

Involving customers Customer involvement helps when developing better new products However, some customers may be better than others Bonner and Walker’s (2004) research suggests Using current customers will help incrementally new products New customers facilitate developing radical new products, bring new heterogeneous knowledge Startups should look for and involve venturous customers of the identified target segment Use experimentation to validate assumptions Develop prototype Act as ambassador to prospects

Lead Users Lead users are venturesome customers who Anticipate obtaining relatively high benefits from obtaining a solution to their needs, and Are at the leading edge of important trends in a marketplace. Willing to engage in cocreation effort with entrepreurial mind to develop prototype Their leading edge position regarding market trends and needs, make their experiences highly relevant to broader parts of the market tomorrow Rogers (1995) and Von Hippel (1986) 4

Lead user concept Entrepreneurs should identify and leverage these kinds of customers (see, e.g., Popovic and Fahrni, 2004)

Lead user involvement process Step II Identification of needs and trends Interviews with market and technology experts Scanning of literature, Internet, databases Selection of most attractive trends Step III Identification of lead users Networking based search for lead users Investigation of analogous markets Screening of first ideas and solutions generated by lead users Step IV Developing concepts; engage in experi- mentation Involvement of lead users in start-up’s NPD process; e.g., workshop to improve or generate product concept Evaluation and documentation of the concepts Create prototype Step I: Start of the customer development process (CDP) Building CDP team Defining the target market using effectual segmenting and targeting Defining the goals of the lead user involvement Drawing on Herstatt and von Hippel (1992); von Hippel et al. (2000); Lüthje and Herstatt (2004)

Move towards formal customer development rocess Customer discovery Customer validation Customer creation Company building Adapted from Blank (2006)

Dynamics of the customer-NPD development process New product development process Customer development process Information exchange Lead customer feedback Product concept Prototype Additional (technical) customer feedback customer feedback Wider commercial-lization Improvements Opportunity recognition Development Testing Commercialization Customer discovery Customer validation Customer creation Company building

Customer roles in customer development stages Customer development process stages Customer roles per NPD stage Customer discovery Customer validation Customer creation Company building Opportunity review Source of initial feedback ✔ Source of latent needs Customer-based funding Development buyer Early buyer Development and testing Technical advisor Co-developer Commercialization Reference Promoter Feedback Sounding board User and critic Adapted from Coviello and Joseph (2011)

Relationship between concepts CUSTOMER DEVELOPMENT PROCESS Customer discovery Customer validation Customer creation Company building Fine tune sales roadmap; address early adopters Develop hypotheses about market using Abell Co-develop with lead customer to test; experiment as necessary Scale up activities, with extended sales force

Marketing activities per stage Develop customer value and positioning Develop initial marketing mix Perform creative marketing Experiment and get customer feedback Support sales Build on the initial sales to create additional end-user demand and build a distribution channel Consider how to address pragmatists Step-up awareness-building Initial market description Initial buying behaviour analysis Initial target segmenting Define initial customer value Move toward traditional or “planned” marketing Begin differentiating between marketing and sales Continue asking for feedback Address the majority more and more Customer discovery Company building Customer creation Customer validation

Sales activities per stage Identify prospects Obtain feedback from customers of identified and other segments Establish problem recognition Expand sales hunting and begin maintaining and building accounts Expand sales force rapidly and systemise/routinise operations SALES ACTIVITIES Look for leading customers Explore preparedness to co-finance Begin developing sales roadmap including prospect list and sales approach Experiment Visit more customers and detail and fine tune sales message, etc. Begin up-scaling the sales effort finalising roadmap Educate customers, organize road shows/ demonstrations Customer discovery Company building Customer creation Customer validation

Team for customer developement Important and sensitive task So, involve the entrepreneur him/herself Add marketing experience to the team Ensure links to NPD team

Relationship of customer and product development with business model New product development process Customer development process Information exchange Business model development process Model identification Model optimisation

Lessons A start-up benefits from separate customer development process to complement new product development process Need to indentify and involve lead customers Be aware of different roles these customers play in subsequent stages of the development of your firm Co-finance, co-develop, help develop marketing roadmap and ramp up Begin shaping your marketing and sales activities in line with stages of the process