For a start-up company, having a launching customer is one of the nicest things to have and an important KSF. There are a variety of definitions for launching customer, ranging from the ‘first (significant) buyer’ or ‘first customer that takes part in the development of the product’ to ‘trophy customer, a big-name customer that creates interest’. All these types of launching customers can be important; any customer is important for the business and the first customer, even a small one, represents a milestone. But the key aspect of a launching customer for a start-up company is ‘commitment before the launch’. A launching customer is important for three reasons:
- 1. Investors love launching customers. When customers sign up for the product, investors will follow. A launching customer provides evidence that the product makes sense and gives the investor confidence that his investments will be successful. If an innovation project is stuck in the Valley, finding a launching customer is a very attractive option for getting out of it. Having a Letter of Intent stating that a client will buy the product once it is ready and meets certain agreed standards provides VIP status in investor land for new companies.
- 2. A launching customer can give important information about the relevant product features and in this way improve the product and ensure that it is fit for purpose before the launch. Feedback on the product will also assist in adjusting the product launch and the business model. Few business models are spot-on in the design phase and knowledge on how customers will use and value the product can fine-tune the product offering, the supply chain, and the revenue model. A business model needs continuous refinement on the basis of feedback from the market.
- 3. A launching customer attracts other customers for the same logic as it attracts investors. It brings confidence that the product will work. And the more reputable the launching customer is, the more impact it has.
It is important to have the right launching customer; a customer with standing in the industry, a customer that is trustworthy and that represents the same values and qualities as the product. In certain industries such as the aircraft industry, product development will not proceed very far without an adequate number of customers and in that industry there can be competition for being the launching customer. Interest can be based on the opportunity of being first in the market, but also for steering the development of the airplane in a way that is optimal for the business model of the launching customer. For instance, Southwest Airlines used its status as launching customer to guide the development of Boeings’ 737 Max. A key element in Southwest’s business model is low operational cost, and as a consequence, their objective in the development was improved efficiency and productivity. This was combined with a minimum of changes compared to the existing model for optimizing the operational processes with the existing fleet. Fortunately, these objectives were in line with the objectives of Boeing.
This example can also serve to illustrate a potential negative side of close cooperation with a launching customer. If the development becomes too specific and creates a competitive advantage for the launching customer, the product may become less attractive for companies with a different business model and consequently for the market at large. Other disadvantages can result when the cooperation is not successful or leads to delays and a serious setback for the product development process can result if the cooperation is discontinued.
Sometimes governments are interested to be the launching customer in order to stimulate desirable innovations in certain selected areas. Well-known areas in which this may happen in many countries are renewable energy and sustainable mobility. Many companies in the area of solar energy, biofuels, electric vehicles, or traffic control benefit not only from subsidies but also from having local or national governments as early customers. Although governments may not have the highest convincing image for commercial customers, they can still be of significant value as an early customer.