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Customer Discovery

Quick iteration with real users is critical to building a valuable consumer product. First, you need to understand if a real market pain exists by talking to real prospects and testing a prototype in realistic market conditions. Good foundational work in early product testing will help inform your MVP, build toward a successful product launch, and set you up for hypergrowth going forward.

This chapter will help you build a product that fills a real need in the marketplace and how to build product for long-term traction.

Chapter Authors

Sarah Leary
Sarah Leary
Josh Grau
Josh Grau

What You'll Get

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Iterating to MVP and beyond
Start module

Finding Product-Market Fit for Consumer Products

As Co-Founder of the hyper-local social network, Nextdoor, I’m often asked about the early days and how we came up with the idea. Was it like a bolt of lightning that struck unexpectedly, or the result of many failed attempts? When I’m talking with fellow entrepreneurs, they often ask a more pointed question: “How did you find product-market fit?”

Savvy entrepreneurs know that finding product-market fit is essential for building a successful business. I like to think of product market fit (PMF) as the unique product solution that addresses a missing gap in the market. The most attractive markets are large and hard for others to enter, creating an opportunity to build a meaningful and defensible business. The hardest part is finding the “fit” in a previously hard-to-solve space, but that's where the greatest business opportunities are found. 

While the “idea” and the product-market fit (PMF) for Nextdoor are not precisely the same, they both were shaped by the struggle to find product-market fit at Fanbase, an earlier company I co-founded. Fanbase’s failure led to a hard pivot and our team’s search for a better way of launching products. It was a two-year journey of frustration, but the lessons we learned eventually paved the way for the successful launch of Nextdoor. 

While each startup's journey is unique, I believe the PMF journey can broadly be broken down into five steps. The sequence matters, or you’ll find yourself doubling back again and again. Taking these steps early to validate the market appetite for your product can dramatically increase your odds of success. 

Here are the five steps that can help you build a transformative product for the market:

1. Validate your hypothesis

To start on the entrepreneurial journey, you need to have a unique insight about the market. Where is the gap? Put it into words. Force yourself to write it down. What has to be true for the market to want what you need? A good hypothesis should include the following: 

  • Who is the target customer?
  • What is the unmet need?
  • Why aren’t their needs being met today?

For Nextdoor, we believed that neighbors had lost touch with each other and wanted a more convenient way to connect with each other about what was happening in their neighborhood. 

Key takeaway: Writing down assumptions allows for clarity with yourself, your co-founders, and teammates. It’s important to write your hypothesis with clear who, what, and why statements. What’s the benefit for your target users? Follow-up by sharing your hypothesis with others and get their feedback. The feedback you’ll get is worth way more than the risk of someone stealing the idea. 

2. Test product assumptions with users

It’s so easy to get excited about an idea and want to just start building. You may feel competitive pressure or assume the market opportunity is fleeting. But that would be a mistake. As my Partner Andy Johns likes to say,

“It’s not first to market, but first to product-market fit that matters.”

First, you should test your product assumptions with users and validate if your proposed product resonates with users. Be humble enough to know that your product assumptions are not 100% right and that the smart move is testing your proposed solutions before you dive into building. 

These tests should be fast and cheap. You should be able to change directions within days, if not hours. Some example tests methods include: 

Never outsource the work or short-change the face-to-face interactions with customers. The personal interactions with customers are where the golden insights lie. I did nearly 100 interviews and 1:1 sessions with our early users at Nextdoor. Those meetings provided an endless number of product and Go-To-Market insights. Understand who likes your product and why. Where is the “Aha” moment where users get excited and can’t wait to use your product? Look for strong and clear signals. The most actionable feedback will not be subtle.

At Nextdoor, we spent about six weeks doing online surveys, meeting with neighborhood leaders, and showing people crude wire-frames and mock-ups. Based on those interviews, we materially changed the focus of the product and narrowed the scope to the most essential features. This saved us months, if not years, of wasted work. It also helped us understand who the true believers and early champions of Nextdoor were going to be. These people were critical in building the Nextdoor community. When people saw the neighborhood map and understood who was on the network, there was a clear “Aha” moment and the whole concept came together for them.

Key takeaways: Spending extra time refining the idea with a small group of invested users will save you months of work. It can also lead to moments of insight based on user frustrations and hard-to-articulate needs that are more easily understood face-to-face. These insights often inspire nuanced solutions that can differentiate your product from others. It will also help you identify your true diehard users who will be the foundation of your business.

3. Prototype your MVP in the real world  

After weeks of high-touch research, resist the urge to start building the full-feature solution. You might have some good feedback, but you are still developing your concept. Instead, focus on validating your proposed product solution in more realistic market conditions by building a simple prototype. You'll iterate on it before you get it right, but you need the minimum viable product (MVP) to test your assumptions and continue learning. The goal is to get answers to a few key questions about the product before you decide to build a company around it. Often founders mistake the “Viable” in MVP as meaning the easiest version of the product for the engineers to build. Rather, the goal is to create the minimum product that sparks delight with users. MVP should really stand for Minimum Valuable Product. Why should the users care if there isn’t something delightful about it?

For Nextdoor, we built a simple prototype for one neighborhood to test the likelihood of neighbors to converse with each other. We stripped away functionality and tested one hypothesis at a time. At first, we just wanted to see if neighbors would have anything to talk about if we brought them together online. That first prototype we built was embarrassingly crude, but after only four weeks we had a working prototype. Within a few weeks of release in our test neighborhood, we knew that neighbors had a lot to say and share with each other. We then tested how neighbors would invite one another. From there, we moved on to test how they wanted to define their neighborhood. Once we tested those questions with one neighborhood, we expanded to five more neighborhoods and validated the initial feedback and the market potential.  

We continued this prototype and learning process for several months as we added a few new neighborhoods each week. We made a point of launching these neighborhoods across the country to get a broad set of feedback. I knew we were finding product-market fit one day when we had about twenty neighborhoods and took the service down for an hour to upgrade a database in the middle of the day. Within 10 minutes, I started getting emails and phone calls from concerned users who were unable to access the service. They needed Nextdoor—now!

At Nextdoor, we used user testing and customer support feedback to calibrate member delight and product-market fit. Over the years, people like growth leader Sean Ellis, have developed a simple survey designed to measure and track an objective score to measure and track product-market fit. I wish we had used something like this to calibrate our progress during this testing phase. It probably would have saved us time. 

Key takeaways: There is no substitute for real people using your product in real life scenarios. The key is to quickly prototype a MVP to validate your product assumptions and confirm user delight. Don’t throw more engineers at the problem. Instead, limit the scope to answering the 1-3 essential questions. If you have multiple questions to answer, isolate each variable and test them sequentially. In this area, I believe small, nimble teams have a big advantage—constraints force trade-offs and drive innovation faster. Find a way for the team to track progress with some objective measures. It will help keep the team aligned and motivated.

4. Codify your detailed personas

Just as products need in-market testing, I believe we must also test user segmentation and messaging. Fortunately, this usually can happen in parallel while the engineering team is building the initial product. 

For Nextdoor, the marketing team went to work testing messaging through surveys, interviews, and digital campaigns. Luckily, we also collected a lot of information about our Founding Members, the first users who started their own Nextdoor neighborhood and invited their fellow neighbors to join. As part of the product sign-up flow, we required each Founding Member to complete an application about why they wanted to start their own neighborhood. That information helped us understand our earliest users and develop our personas. It was an essential way to align our growing team and be precise about who we were targeting in the early days. 

These personas guided our product strategy, helped us build the roadmap, develop marketing messages, prioritize partnerships, and optimize sign-up flows. Most importantly, it empowered everyone in the company to prioritize and say no to work that didn’t directly help our selected personas be successful on Nextdoor. Avoid trying to please everyone with too many personas. Personas are another way of saying: "Here are all of the people that we are NOT going to serve.”

Some founders try to optimize for multiple personas to expand their market opportunity. However, this is a big mistake. This is also common among first-time founders who think this is what investors want to see. It is not. It’s much more powerful to have a narrower set of users who love your product vs. a broader set of users who kind of like it. Successful companies are built on products that have a diehard group of users who love a product so much that they will tell others about it. Don’t be afraid to narrow your focus and deliver an exceptional product. You can build on that success later.

Key takeaways: Personas are a handy way to get everyone in the organization aligned around who the target audience is. The more specific you are with your defined personas (name, background, photo, description of usage), the more helpful they will be. Focus on a few personas and over-deliver in terms of a great product for those users.

5. Launch and learn! 

With each step of the process, you should be gaining confidence that you are on to something special based on the feedback from your target users (i.e. your die-hard fans). Ideally, you are measuring the level of enthusiasm for your product in the market. Still, there is no bright line that will tell you that you are ready to launch. Even after months of testing, many founders hesitate to launch. There is always a long list of things that haven't been built yet, but don’t let perfect be the enemy of the good. There comes a point where broader usage is necessary to continue learning. If fact, if you have followed these steps, launching might be the best way to continue to learn. 

One signal that can help you know that you are ready to launch is when customers are clamoring for the product and want to tell others about it. If you have been successful in finding product-market fit, there should be demand from the market asking for the product and wanting broader usage. In fact, your users should need the product and be demanding that you launch it. And if you have gone a step further and quantified the level of interest, then you should see a strong base of users (40% or more, according to Sean Ellis' research) who can’t live without your product. 

For Nextdoor, the clear sign to launch was when friends of friends started asking if they could bring Nextdoor to their neighborhood. Not only did these users depend on Nextdoor, but when they told others about it they wanted it too. That was a strong signal that we were a product people wanted and needed. 

With that support, we picked a date and ran furiously to get everything ready for a big press launch and broader usage. But three weeks before launch, we kept hearing feedback about needing faster methods for new users to verify their address. We debated adding the functionality after launch, but ultimately decided to delay launch by three weeks to add a phone-based method for address verification. We felt like we needed the best registration flow possible to make the most of the one-time launch event. With more than twenty national press articles, we were glad we took the three weeks to implement the change and help us leverage our national launch to accelerate growth.

Key takeaways: When users are clamoring to share your product with others, it’s time to launch into the market. Even if there are shortcomings in your product, you need to pick a date and go for it. The launch will galvanize a team to work towards an explicit date. But don’t be foolish and rush the process if market feedback suggests you need to build something to make the most of the launch. Recognize that the launch event is just another step in your refinement of the product. If you’ve targeted a big market, you will have many product-market fit moments ahead of you. This process can and should be used continuously to gather feedback and hone the product.

I put together this Core Hypothesis and Personas Worksheet, which you can use to kickstart your own process.

The overarching mindset I encourage founders to embrace on this journey is to have “bold opinions, weakly held” at the start. Great entrepreneurs have an insight (or “opinion”) about how the world should work better and then must go out to the market to pressure test that opinion until they get it right. To do that, an entrepreneur needs to be confident enough to form a new opinion, but also humble enough to know they have blind spots that they must uncover and address in order to build something valuable.

There will always be the risk of failure when launching something new to the market. The beauty of this quest for product-market fit is that you can dramatically improve your chances of success with these pre-launch steps that help uncover the nuanced needs of the market. And that can make all the difference between success and failure.

Start module

Positioning Your Startup

It’s every founder’s dream: building the next great brand. So to achieve that all you have to do is design a killer logo and drum up a catchy tagline and you’re on your way, right? 


No matter how creative and emotion-triggering the messaging, those efforts will be for naught if you don’t focus on branding’s less sexy, more rational alter-ego: positioning. 

Positioning, simply put, is defining who you are as a company and why you matter in the world. Determining the answers to those questions (aka developing your  positioning statement) should be an early exercise that every founder takes part in with his or her leadership team—well ahead of any efforts (or investment) you put into branding.

Don’t get me wrong, branding matters...eventually. It’s the emotional expression of a brand that gets attention and tells a compelling story (it also wins ad agencies a lot of awards, which they love). But nailing positioning in the early innings of a company’s life will pay dividends over the long-term. 

If You Build It...

Think of your company as the dream house you want to build. Your plans can be beautiful and your vision for the space inspiring, but without a solid foundation the house will (quite literally) not get off the ground. The custom paint, the Juliet balcony, the terracotta roof—that’s all branding, which gives your brand important curb appeal. But if your foundation is uneven—or worse, nonexistent—even the most beautiful looking structure will eventually crumble. That’s why positioning is so critical.

So how do you ensure you’re building the right foundation for your business? You first need to understand a number of critical variables, including your category, your customers (specifically, who they are and what their pain points are), and your competition. By going through this process you’ll emerge with a better understanding of your differentiated role and relevance in a given market. In other words, you’ll answer those two important positioning questions: who are you and why do you matter. 

The DNA Test 

For many, sitting down to write a positioning statement is hard. However, the process becomes much easier when you can narrow in on who your company is at its core. One of the premier gurus on positioning, Andy Cunningham, created the concept of “corporate DNA” to do just that. In her book Get to Aha!, she posits that just as people are distinct from each other due to their unique DNA makeup, companies (made up of people!) are distinguishable in a similar way. According to her, there are three types of companies in the world, each with their own unique “DNA”: mothers, mechanics, and missionaries. Mothers are customer-oriented companies, mechanics are product-oriented, and missionaries are concept-oriented companies. Here are a few examples:

  • Nordstrom is a classic example of a mother. From their hassle-free return policy to small details like walking your bagged purchase around the counter to you, they are all about creating customer delight at every touch point. The same is true of Disney. From their theme parks to their cruises to their content, everything is designed to make customers feel not just happy, but “magical”. 
  • Often mechanics are assumed to be tech companies, like Microsoft, who are laser-focused on building the best products and features. However, Walmart, the second largest retailer in the world (recently surpassed by Amazon) is also a mechanic. While you might initially consider them a mother thanks to their charming in-store greeters, their number one goal is ensuring they can deliver everyday low prices. As a result, they have become masters of supply chain management, which allows them to consistently delight their customers with the lowest prices on their products.
  • Meanwhile, Tesla is a fairly obvious missionary, as they have disrupted how we think about driving and have transformed themselves from a niche concept to the world’s most valuable automaker. Their meteoric rise is due in large part to their great visionary C.E.O., Elon Musk, and the cult of personality that has developed around him. Other missionaries include the Virgin Group (under the leadership of celebrity C.E.O. Sir Richard Branson), as well as San Francisco-based Philz Coffee. Philz might feel out of place next to two leaders racing to get people into space, but they have transformed the coffee experience established by Starbucks from a “fast food” model (that is comically error prone) to one that is artisan and highly custom. In their case, the product and quirky process have created a cult of personality around the brand.

Now, just because you’re a mother company doesn’t mean you don’t care about products or aren’t building the next great concept (and likewise for mechanics and missionaries). It just means that being customer-centric is your primary DNA type. Brands can’t be everything to everyone, so the DNA approach provides a critical anchoring point that can help you shape all aspects of your organization.


Are You My Mother? Or Mechanic? Or Missionary?

You probably are pretty confident in what your company’s DNA type is, especially if you’re a founder. However, you’d be surprised how revealing the exercise can be, even for the person or persons who created the business from scratch. But it shouldn’t be just the founders who come up with your company’s positioning. This is a critical exercise that should include key stakeholders across various departments. And if you get varied results, that’s okay! Having different opinions on who you are and why you matter is perfectly natural—healthy, even. In fact, in my last course on positioning for Unusual Academy, I took early-stage founders through a simple exercise to determine their DNA type.

Download Andy Cunningham’s Get to Aha! DNA test here and try it for yourself.

In a few instances, co-founders of the same startup went through the DNA exercise and came up with different DNA types for their company. 

Now, does that mean they shouldn’t work together or that their business is doomed? Absolutely not! If anything, it gave them a starting point for a really important discussion. At the same time, too much variation can be a cause for concern, so there should be at least 60% alignment among a larger group of leaders participating in the exercise. But—and this is critical—once the DNA type is agreed upon there needs to be 100% buy-in. This will allow you to more effectively build and manage your organization. For instance, if you assumed you were a mechanic (or product-focused company), then discovered through the DNA test and further discussion that you’re actually a mother (or customer-focused) you might decide to invest in building out a sales or customer service team rather than hire more product managers or designers.

A Tiger Can Change Its Stripes 

A positioning exercise isn’t something you go through once then put it into a drawer to collect dust. The boundaries of a given market are constantly changing, and your positioning will undoubtedly need a refresh over time. To keep the house metaphor going (because, why not?), that’s akin to investing in a seismic retrofitting to ensure you’re protecting your structure from vulnerability. By updating your positioning you are fortifying your company so it can take on new market conditions and disruptors (due to new competition, new technology, new consumer preferences, new regulations, etc.). At the same time, you don’t want to abandon your DNA type because of something opportunistic. Remember: you need permits before you totally remodel your house!

At my current company, Yext, we repositioned in early 2019 from a mechanic/product-focused company that offered a search listings product relevant to only a few key verticals, to a missionary/concept-focused company with a much wider reach. Now positioned as the “next big thing in search”, we have set our sights on becoming the #2 search engine in the world thanks to the development of a new product, Answers, which transforms any business website’s site search functionality into a Google-like experience. Once the new positioning was in place, we then went through a rebranding exercise and launched our first brand commercial. But that was the collective cart. The horse was very much focused on identifying who we were and why we mattered in this new context.

And while Yext’s repositioning was an intentional, strategic decision, some companies reposition themselves due to conditions out of their control. For decades Apple was very much a missionary thanks to their visionary co-founder, Steve Jobs. Under his watch, the company fundamentally changed the music industry with the invention of the iPod and iTunes platform, and the mobile phone industry with creation of the iPhone and the App Store. However, when Jobs died of cancer in 2011 the company’s DNA changed almost immediately. But that didn’t mean they would no longer be successful. On the contrary, they have become the world’s most valuable company under the leadership of C.E.O. Tim Cook. There haven’t been any ground-breaking new concepts under his leadership, but they have become the first trillion dollar publicly traded company as a mechanic. 

New Brand, Who Dis?

Not every brand will become a billion (or trillion) dollar unicorn, but you can achieve remarkable success if you focus on your core first and foremost. Not only does it help your company from collapsing into a branding sinkhole, positioning helps create better alignment at the top and informs better decisions about the types of people to hire, what initiatives to prioritize, and where to allocate budget. It might not be sexy, but it is stable. And these days, every inch of solid ground matters.

Josh is the Chief Brand Officer at Yext, and is also on faculty at the Northwestern University Medill School of Integrated Marketing Communications and is a Master Practitioner for Unusual Academy. He previously held executive and marketing leadership roles at Wealthfront, Twitter, YouTube and ESPN. You can follow him on Twitter @grauface (where he's especially colorful these days).

Hypothesis & Personas Exercise

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Customer Discovery

Let’s get going

Everything starts with understanding your audience and building an MVP to match. Start with our guide for honing in on a hypothesis and iterating toward launch: Finding product-market fit.