Customer Needs

Definition of Customer Needs

Business Dictionary defines Customer Needs as "problems that customers intend to solve with the purchase of a good or service. A customer need is a motive that prompts a customer to buy a product or service. Ultimately, the need is the driver of the customer's purchase decision. Companies often look at the customer need as an opportunity to resolve or contribute surplus value back to the original motive.

Components of Customer Needs

A need is an opportunity to deliver a benefit to a customer. This definition contains three components:

• A benefit that has value (the what)
• A customer who values the benefit (the who)
• A context that creates the opportunity to deliver the benefit (the when or where)

The Benefit
The first component is the what, a benefit that has value. A benefit could be tangible or functional. Perhaps it helps a person do something faster, easier or more accurately. It could be intangible or emotional, helping a person feel better or avoid feeling worse. Successful products deliver some combination of functional and emotional benefits. The mix varies by category. Some industrial products deliver almost entirely functional benefits, while some consumer products deliver entirely emotional benefits. We must assess the opportunity to deliver both functional and emotional benefits, no matter which market we are in. For example, the programmable thermostat is a common product. Its main product features are clear: It automatically controls your home’s heating and cooling system throughout the day, using a built-in clock and microprocessor. Some models offer variable programs for weekends and weekdays or for each day of the week. Others have lighted displays and touchscreen controls. The newest models use the internet to remotely connect to smartphone apps. These features are merely components of a solution, and a solution without a problem has no value. The features in your programmable thermostat deliver functional benefits like ensuring your home is a comfortable temperature when you arrive from work, preventing frozen pipes during cold days, regulating how much energy you consume and reducing system wear from excessive cycling on and off. They deliver emotional benefits such as helping you feel like a smart homeowner, perceiving yourself as environmentally responsible and signaling your environmental commitment to guests. You did not buy a programmable thermostat because it had a lighted screen; you bought it so that you could turn up the heat on a dark, cold night without turning on the lights and waking the infant you just spent an hour putting to bed.

The Customer
The second lens is the who, the customer who desires the benefit and is willing to exchange something valuable like money or information. A good understanding of needs means identifying and understanding the right customers. Sometimes, the customer is simple to spot. If you sell a consumer product, your customer is the end consumer, the primary shopper who purchases the product. However, if you sell to a business, your customer is often a combination of several individuals who may seek one or more different benefits from your product, or your competitors’ products, and they must reach a consensus on what to buy. Not all customers perceive equal value in a benefit. A hospital purchasing manager may not see much benefit in a premium lightbulb with a lifespan 20 times longer than a traditional bulb. However, a maintenance manager, whose budget pays union wages to the workers changing lightbulbs every day, may value the same benefit much more. Similarly, demographics, firmographics, behaviors and attitudes also vary by customer. Male consumers may differ from female consumers. Managers at small businesses differ from those at large businesses. And while one investor may be comfortable with a large amount of risk and volatility, another may prefer security and stability. Even two otherwise similar individuals may hold different opinions.

The Context
The third and final component of a need is the context, the when or where that a customer desires a benefit. Needs are never spontaneous; they are situational. A benefit only has value if it solves a problem for a customer at a given time or in a given place. Common contexts include: a physical place or setting such as at work, at home or in the car; an occasion, such as a dinner date or business meal; a daypart, such as morning, afternoon or evening; or even a life stage, such as getting an education, raising children or preparing to retire. Context helps us explain why a benefit has customer value and how that value may change as the context changes. Of course, not every context is relevant to every product category. As you might imagine, daypart or occasion contexts are more relevant to a foodservice or entertainment business, while life-stage contexts are more relevant to a financial-services business. In addition, contexts are rarely static, and customers regularly move across them. A business executive flying today for a meeting may be on the same plane next week for her family vacation. And she may be saving for her retirement at the same time she is saving to finance her children’s education. She may have dinner with her husband tonight but eat with a client at another restaurant tomorrow. In each case, she values the delivered benefits differently.

Understanding Customer Needs

In order to understand customer needs 10 things a seller should know about the customer:

• Who are your customers?: Information about the customers' gender, age, marital status and occupation. If the customer is an organization then find out what size and kind of business they are in.
• What they do: Understand the interests of the customer.
• Why they buy: In order to match their needs to the offerings, it is important to understand why they buy.
• When they buy: In order to increase the chances of sales, it is important to match their timings.
• How they buy: To increase the distribution channels
• How much money they have: matching your offering to what you know your customer can afford, led to better sales.
• What makes them feel good about buying: In order to serve them in the way they prefer, know what makes them tick
• What they expect of you: In order to gain repeat business, understand what the customers value your brand as.
• What they think about you: Know what they are in order to tackle them and keep them content for future sales.

Customer Needs - Successful Innovation Example

The drinking fountain is a fixture in most public buildings. Chances are, the one in your office hallway is indistinguishable from the one you encountered on your first day of kindergarten. You probably haven’t thought much about drinking fountains since then, unless you are a plumber or work at Elkay Manufacturing. In 2010, Elkay, a Chicago-based maker of sinks, faucets and other fixtures, launched its EZH20 drinking fountain and bottle-filler, revolutionizing what had been a mature, stable market. By studying drinking fountains—the people who use them, where people use them, and most important, what people use them for—the company found a huge opportunity to solve a market problem by developing a breakthrough new fountain. The new fountain provides not only a refreshing sip of water, but also an easy way to fill the reusable water bottles many consumers carry. As a private company, Elkay does not disclose sales, but its new fixtures can be found nearly everywhere: college dormitories, airports, hospitals, office buildings and shopping malls. In short, it’s a winner. Elkay’s case demonstrates what product developers and marketers know to be fundamental: Successful innovations must solve market problems. Yet before you can create a great solution to solve that market problem, you must first understand the customer need, and define them in clear, unambiguous language.

See Also

Customer
Customer Acquisition Cost (CAC)
Customer Centricity
Customer Churn
Customer Data Integration (CDI)
Customer Data Management (CDM)
Customer Demographics
Customer Due Diligence (CDD)
Customer Dynamics
Customer Effort Score (CES)
Customer Engagement
Customer Engagement Hub (CEH)
Customer Experience Management (CEM)
Customer Lifecycle
Customer Lifetime Value
Customer Loyalty
Customer Service
Customer Service Management
Customer Relationship Management (CRM)
Stakeholder