Initially a potential customer asked us whether we can design product X with features ABC.
Now, we have built an alpha-stage product. We are ready for a demo of product X with feature ABC, but the customer suddenly become uninterested for an unknown reason. He didn't want to sit for a demo. So what should we do now? Should we go ahead and search for similar customers and enquire them? How should we approach/search for new clients, should we approach via the marketing team or sales team and suggest to demo our product? Thanks for any help.
There's a back story here which we don't know - learn as much as you can from it.
Have you asked the potential customer why he is not interested? Something significant may have happened in his business whilst you were developing it - without any contract - tough.
Now, depending on how specialised and unique to your customer your app is, you may have an MVP (Minimum Viable Product). You may be able to market it and gauge interest in the product. That could be as simple as throwing up a web page and driving some traffic via adwords to see if you can make a sale or three or get some email sign ups. You may have to do more traditional marketing (very much depending on target market and type of product).
As to whether you should, only you know how specific the product currently is, costs to make it suitable for a general market, and potential sales. Was it a week's work or months? So only you can say if it's worth taking further, or just to be written off to experience.
Have a google on "customer discovery" and a look at http://steveblank.com for some background reading.
Thank the previous customer and move on.
Depending on the cost of adding features upon request by potential customers, you should think about having the customer agree to a contract so you know that the development costs (or at least some portion) will be covered. What you did with this first customer who became interested is you worked for free, unless you're not telling the whole story.