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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.[1] 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[2]

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[3]

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.


Meeting Customer Needs[4]

One can follow a simple, four-step procedure to meet the needs of customers.

  • Identify what your customers need from you through keyword research, focus groups, or social listening.
  • Distribute the information to relevant stakeholders in your organization.
  • Craft product features or create content that speaks to your customer’s needs.
  • Collect customer feedback on how your efforts meet their expectations.

How to meet customer needs
source: Conductor

After you've identified what your customer needs from you, take the data you've collected seriously. If customers (or potential customers) are asking for something, big or small, make sure you deliver. Businesses that have a developed methodology for how they collect and share customer insights within their org will have the best luck at meeting customer needs quickly. For some businesses, that could mean assigning a dedicated team to collect customer insights. Other businesses may be able to roll it into the responsibilities of existing departments. If you develop a strong system for how you discover, analyze and address customer needs, your organization will be set up for long-term success. So take the time and put in the legwork.


Customer Needs Analysis[5]

A customer needs analysis is used in product development and branding to provide an in-depth analysis of the customer to ensure that the product or message offers the benefits, attributes, and features needed to provide the customer with value. To conduct a customer needs analysis successfully, you need to do the following:

  • Customer Needs Analysis Survey: The customer needs analysis is typically conducted by running surveys that help companies figure out their position in their respective competitive markets how they stack up in terms of meeting their target customers' needs. The survey should primarily ask questions about your brand and competitors, as well as customers' product awareness and brand attitudes in general. Questions can include:
    • Questions about positive and negative word associations with your brand
    • Questions asking customers to group your brand in with similar and/or competing brands
    • Questions comparing and sorting brands according to their preferences for usage
  • Means-End Analysis: Once you've conducted the customer needs analysis survey, you can use the answers to get a fuller picture of the reasons why your customers purchase from you, and what makes your product or service stand apart from your competitors'. A means-end analysis analyzes those answers to determine the primary reasons why a customer would buy your product. Those buyer reasons can be divided into three main groups:
    • Features: A customer buys a product or service because of the features included in the purchase. If the customer were buying a computer, for example, they might buy it because it's smaller and more lightweight than other options.
    • Benefits: A customer buys a product or service because of a benefit, real or perceived, they believe it will offer them. The customer might also buy the computer because it syncs easily with their other devices wirelessly.
    • Values: A customer buys a product or service for unique, individual values, real or perceived, they believe it will help them fulfill. The customer might think the computer will help them to be more creative or artistic and unlock other personal or professional artistic opportunities.

As you might imagine, the reasons for purchasing something can vary from customer to customer, so it's important to conduct these customer surveys, collect the answers, and group them into these three categories. From there, you can identify which of the motivating factors you're solving for, and which you can improve on to make your product or service even more competitive in the market.


The Myths About Customer Needs[6]

Lance A. Bettencourt, of Texas Christian University, wrote a piece on giving customers the proper role in the innovation process by forming correct beliefs about their needs. “Vague, solution-tainted requirement statements have led practitioners and academics alike to believe several myths about the nature of customer needs. Based on our experiences with companies across a variety of industries, my colleagues and I have identified five myths that have a particularly pernicious effect. Like all myths, they have a basis in reality, but their unquestioned acceptance as truth is leading many companies astray—leading to wasted resources, disjointed innovation executions, missed growth opportunities, and product concepts that miss the mark with customers. It’s time to expose each myth and reestablish a proper valuation of customer needs in the strategy and innovation process.”


The Myths about Customer Needs
source: StrategyN


Managers and employees in nearly every company hold some of these mistaken beliefs about identifying customer needs. These beliefs are a key reason why companies struggle to innovate. These myths have survived for decades because companies commonly confuse customer needs with solutions. The key point to remember is that a customer need is not a solution, product feature, or idea. The truth is customers don’t know what solutions will help them get their job done best, nor should they. Customers are not engineers, scientists and materials experts. It’s up to the company to come up with the best solutions once the customer’s needs, or desired outcomes, are known. If you still believe that any one of these myths are indeed true, it is because you are falsely assuming a need can be a solution. This product-centric mindset is why traditional methods for identifying customer needs don’t work; and these myths seemingly offer an explanation as to why.


Customer Needs - Successful Innovation Example[7]

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 Perceived Value (CPV)
Customer Psychographics
Customer Service
Customer Service Management
Customer Relationship Management (CRM)
Stakeholder


References

  1. Defining Customer Needs Business Dictionary
  2. Components of Customer Needs Pragmatic Institute
  3. Understanding Customer Needs MBASkool
  4. How to Meet the Needs of Customers Conductor
  5. What is a customer needs analysis? Allie Breschi
  6. The Myths About Customer Needs Experienta
  7. Example of a successful innovation based on Customer Needs John C. Mitchell


Further Reading