In a competitive market where new product introductions often face significant hurdles, experts estimate that around half of them fail each year. To address this challenge and improve the odds of success, founders need to analyze the underlying causes of product failures. Whether we’re talking about the failure of Quibi, Google Glass, Amazon Fire Phone, or any number of other product failures, in my experience, there are three key areas of failure when it comes to new product launches: customer failure, product failure, and business model failure.

In this article, we’ll dig a little deeper into the first of these areas of failure: customer failure.

Ultimately, customers are why your business exists. If you don’t have customers, then you don’t have a business. It’s up to you to understand, serve, and delight customers, and for any business, getting your customers right and avoiding customer failure is Job One.

When you’re considering a new product offering, ask if it’s going to be a painkiller or a vitamin for your customers. In other words, is the pain your customers feel so great that they will pay the price you are asking for your painkiller product? Or, is your product a vitamin—something that may be nice to have but doesn’t relieve the pain they are feeling? Remember: your customers can stop buying “vitamins” and nothing material will change in their businesses, but if they stop buying “painkillers,” they’ll end up with a big headache.

I am reminded of the words of Steve Blank, the Silicon Valley entrepreneur and academic whose work inspired the lean startup movement. I had the good fortune to meet Steve early in my venture career when he served on the board of IMVU, a company that my firm invested in. Says Steve in his book, The Four Steps to the Epiphany, “startups don’t fail because they lack a product; they fail because they lack customers and a proven financial model.”

According to Steve, the reason why so many new products failed is because the companies that built them embraced the Product Development model—a model that dominated business for much of the last century.

As the diagram shows, the Product Development model starts with a concept—a set of key ideas—which according to Steve, “quickly becomes a business plan.” In the next step, the new product or service is defined, features and benefits are explored, and it is determined whether the offering is technically feasible. It’s not until the third step—testing—that customers are considered: who are they, where are they? The last step is launch.

According to Steve, this approach is all wrong.

Instead, he suggests that companies adopt the Customer Development model, which focuses first and foremost on the customer—discovering markets, finding the first customers, validating assumptions, and growing the business. 

The four steps to Customer Development:

  • Step 1: Customer discovery. Determine who the customers are for your new product and whether the problem you are trying to solve with it is actually important to them.
  • Step 2: Customer validation. Prove that you have located customers who will buy your product and that a market exists, then create a sales road map—a field-tested sales process playbook.
  • Step 3: Customer creation. Build on your initial sales, creating end-user demand and then driving that demand into your company’s sales channel.
  • Step 4: Company building. Move the new product “from an informal, learning and discovery-oriented customer development team into formal departments,” such as Sales, Marketing, and Business Development.

When you apply the Customer Development model, you will quickly determine whether your new product offering is a painkiller or a vitamin. If it’s the former, then you’ll want to go all-in on bringing it to market. But if it’s the latter, then you have more work to do. You may find that there aren’t enough customers willing to pay for your solution, at a price that makes you a sustainable profit. If that’s the case, then it’s better to find out that your product is a vitamin and not a painkiller sooner than later.