What are customer needs?
Customer needs are to businesses what sweet tooth is for grocery stores. The latter parties exist to profit from the cravings of the former.
Customer needs are the reasons why your products sell. Customer needs are requirements that people crave in their everyday lives. They are the necessities that encourage consumers to purchase new stuff.
Your business is doomed to fail if there is a mismatch between your product offering and customer needs. You won’t make money for long if you make tamarind-lemon candy that nobody wants to eat. Why would people go to a business if it’s not catering to any of their needs? Every business runs to fulfill a set of customer needs. The bigger the customer needs, the better your scope of raking revenue.
Types of customer needs
It’s limiting to understand customer needs in such simplistic ways. Customer needs are not just about buying products that fulfill certain gaps. At a more subtle level, it’s about replenishing the customer expectations with fulfilling human experiences.
For example, your customer needs seldom stop at buying candy. What matters beyond that transactional experience is the consumers’ journey of going to the candy store, making decisions, closing the purchase, and eventually enjoying the candy.
To see your business flourish to new heights, you need to understand the basic customer needs. Customer needs can be as varied as the different types of customers of the market demographics. To make our understanding of customer needs easier, it’s okay to club them under two verticals, i.e., basic needs pertaining to the products and advanced set of needs that they crave for on an emotional level.
1. Product needs
Product needs are underlying and straightforward customer expectations such as price, features, design interface, performance, compatibility, and durability. Product needs are rudimentary; if your product doesn’t cater to these needs then a business potential is a non-starter.
2. Service needs
At a higher level, customers crave for emotional needs such as empathy, fairness, knowledge gain, convenience of choices, control over the product, and so on. Service needs are nice to have but not must-haves; consumers care more about product utility than their sentiments about it. However, it can give you a competitive edge to fulfill service needs.
4 ways to understand customer needs
Understanding customer needs can be a catalyst for your business to serve your consumers better, to develop a long-standing relationship with them, and to maintain a consistent revenue stream. There are many ways to understand customer needs; below, we will talk about four of the most important ones.
1. The customer needs analysis
The customer needs analysis is a means-end analysis applied in businesses. The latter is originally a famous problem-solving technique used commonly in artificial intelligence for limiting search in AI programs. The customer needs analysis can help your business understand what value can you create in your customers’ lives. You might have to carry out surveys, focus group interviews, or other forms of market research to understand the values your customers base their purchasing decisions on.
Many customers buy an iPhone for its features and functionality, while a few other customers might buy it for different reasons such as style and user-friendliness. When you apply the means-end analysis to understand what are the needs your customers are looking to fulfill in their lives, it’s easier for you to determine the best strategy, design suitable products/features, or offer the right options to your customers at the right time to fulfill their needs.
Let’s take the example of how Warby Parker disrupted eyewear marketing in the U.S. by assessing customer needs from a close range. One of the founders of the company, David Gilboa, was appalled to find that it cost him $500 more to buy a new pair of prescription glasses than fixing his broken iPhone. Gilboa was so taken aback by the costly experience that he started talking about it to everyone close to him and decided to do something about it.
Gilboa and his co-founders Neil Blumenthal and Jeff Raider analyzed the customer needs and found that the American consumers were craving for a fair choice in the monopolized eyeglass market. Long story short, Warby Parker is now a roaring success—valued at $1.75 billion in 2018—because they gauged their customer needs and came up with an online solution that was timely, refreshingly affordable, and convenient.
2. Follow-me-home approach
This is my favorite approach to understand customer needs because it advocates the understanding of customer needs and behavior in their natural habitat instead of creating artificial environment such as focus group interviews or controlled experiments. It’s a brilliant way to understand customer needs because—as demonstrated in the above example—a lot of times consumers themselves might not be aware of their needs.
Steve Jobs succinctly captured this sentiment in one of his advice to marketers when he said, “Get closer than ever to your customers. So close that you tell them what they need well before they realize it themselves.”
Intuit, the leading financial software company that helps individuals and businesses with their finance, accounting, and tax preparation needs, leverages the follow-me-home approach to sell their products better in the market. The company has dedicated field teams who visit their consumers’ homes and offices and just observe how they use Intuit products, such as QuickBooks and TurboTax.
Just to clarify further, these teams don’t stalk their customers; they carry out the whole process with explicit permission from the customers and yet, keep it very non-invasive. They don’t conduct interviews or interfere with consumers while they use their software—they just become mute spectators and take good notes of how they use Intuit products. They later aggregate the data to develop features or services that maps back to the different customer needs.
Follow-me-home is a great approach for every business to apply, but not all companies have the bandwidth to do what Intuit does on-site. Your options are especially limited if you are an up and coming SMB business. But here is a neat trick; you can use Freshchat to monitor your website visitors’ real-time activities such as who they are, their navigation path, their user behavior, and so on. You can also observe the events they prefer to go through in their natural setting over a time period, collate this intelligence, and automate contextual chat correspondence to serve them better.
For example, if a customer comes to your website and visits your pricing page multiple times, you can trigger a chat conversation nudging them to ask questions you can answer. Or you can pop a chat message to let users know about your FAQs where they can find answers to most of their queries.
3. Jobs to be done analysis
In my opinion, jobs to be done is the most simplistic way to understand a customer’s needs. Jobs to be done, often known as JTBD, has its application across the board ranging from innovation, growth, and reengineering the status quo. The approach, when applied to understand customer needs, is as straightforward as finding the answer to the question—what is the task that customers want to accomplish with this product?
Most companies segment their markets by customer demographics or product characteristics and differentiate their offerings by adding features and functions. But the consumer has a different view of the marketplace. He simply has a job to be done and is seeking to ‘hire’ the best product or service to do it.
— Clayton Christensen, Professor, Harvard Business School
Many disruptive tech companies such as Airbnb and Uber are successful because they have mastered the JTBD concept. They figure out what is the job—the core customer needs—their buyers are looking to do and help them do that by minimizing friction. Uber, for example, displaced the traditional cab-hailing business because it made booking cabs a much convenient process:
You can do the jobs to be done analysis to understand a customer’s needs for your business by asking a series of exploratory open-ended questions, avoiding leading questions, and exercising active/passive listening when needed. Here’s a script to help you interview your customers on their JTBD.
4. Competitive analysis
Consider competitive analysis as an add-on process to understand customer needs on top of all other steps discussed above. This is the only analysis where, instead of directly talking to your customers, you investigate the playing field that your business operates in to better understand customers’ needs. Running a competitive analysis can give you answers on who are you competing against, what are the threats and opportunities in front of you, and what’s the value proposition that can give you a competitive edge in the market.
Competitive analysis is a long-winded process that merits a detailed post on its own. Without getting into the details of the process complexity, here is a quick overview of how to run a competitive analysis for your business to understand customer needs.
- Identify your top five competitors
- Place them in strategic groups
- Weigh on their strengths/weaknesses
- Cater to the unfulfilled customers’ needs
Freshchat is emerging as a strong player in the customer engagement landscape because we ran a series of competitive analysis tests during our launch phase to play to our strengths. We identified the existing players such as LiveChat, Intercom, and Drift in the live chat domain and we noticed the different strategic positions (legacy, premium pricing, marketing-only offerings, etc.) that they had taken individually. But we also noticed that many companies—customers, in this case—were craving for a seamless consumer messaging experience that these players failed to deliver. Therefore, we built Freshchat that offers a wholesome customer engagement experience for businesses at a reasonable price.
You need to ask a different set of questions to yourself and the market in order to find answers to each of the above steps. But it’s a worthwhile effort because it will reveal answers to questions that can lead you to identify opportunities in relation to unaddressed customer needs.
The more you know…
Customer need is the reason why your business exists in the world, so it’s worthwhile to understand what their expectations are and align your offerings towards it. Understanding what customers need is an opportunity for your business to serve them better and grow along the way.
The approaches outlined above are the easiest ways for you to bridge the gap between your business offering and fulfilling customer needs. And the surefire way to do that is to increase the frequency of your interactions with customers, because the more you interact, the better you know them.
(Thanks Sudheesh Chandran for the feature illustration)