3 Steps to Understanding Customer Needs

3 Steps to Understanding Customer Needs

The core of every business organisation’s mission is to answer customer needs.  In order to do so you must first identify and understand them.

Understanding your customers’ needs is essential but superficial knowledge is not enough to ensure your organisation’s profitability. To achieve product/market fit, the point where you answer needs better than your competitors, you must get to a deeper level of understanding of those needs.

Benefits of understanding customer needs

An added bonus to mastering customer needs (and providing a solution that fulfills them) is that every marketing dollar spent will yield higher returns than those of your competitors, who don’t have the same depth of knowledge.

A deeper level of understanding your customers’ needs will also ensure an overall better customer experience, which we already saw in a previous post on the customer experience journey, leads to higher profitability.

Ok, so now that you are convinced understanding customer needs is in your organisation’s best interest, the question you may be asking is how to go about mastering them.

First you have to identify the needs you will be fulfilling (hint; don’t stop at the needs attached directly to your product/service, also look at the ones surrounding the entire customer experience). Once you have zoomed in on the needs to fulfill, you must not only understand the needs but the whole story around them.[1] This process requires lots of effort, time and knowledge of data gathering techniques. It isn’t as straightforward as it may seem.

As a marketer a huge part of my role, aside from finding the right customers, is to identify and understand their needs. Over the years, I learned that there are three steps to any quest aiming to either identify or understand customers’ needs.

Those steps are; Listen, observe, and empathise

Listen

customer needs - Baker MarketingThe very first thing you should do when you have a business idea is to talk informally with potential customers. This mostly means listen to their answers.   It also helps you figure out who your early adopters are. If it’s not possible for you to talk directly to potential customers, find people who know your potential customers inside out, and talk with them.

Don’t forget to set objectives for your conversation. Examples of conversation objectives are; to see whether the needs you think exist actually do, how they are being filled and the relative importance of those needs. In order to maximise the amount of information you take in, not only do you have to limit how much talking you will do, but you need the proper mindset. Your mind should be open and devoid of as many filters as possible. Always remember that explaining your project in length and your view of the world is just taking time away from achieving your goal. Listen.

On a side note, many of the entrepreneurs I meet are worried that someone will steal their idea before they get a chance to develop it. Unless you have a truly patentable solution (very few are), and potential customers can either beat you to market (they already operate a company in the same field) or spill the beans (to an existing competitor), you have nothing to worry about. Honestly, initial business ideas are very rarely marketable. Even if they were, almost no one wants to put in the blood, sweat, tears and go through the hell that starting a new business entails. Furthermore, even if they did, they’d most likely end up with a completely different business than yours in the end. Lastly if the threat of theft is real, there are still ways to explore the needs of potential corporate customers without spilling your own beans.

Please do not let the fear of someone stealing your business idea prevent you from engaging with potential customers.

Observe

Customer needs - Baker MarketingObservation is essential to identify less obvious needs and understand all pertinent customer needs at a deeper level. Asking potential customers won’t yield the information you seek because people don’t or can’t always tell you the truth.

There are many categories of observation techniques.

 

Natural observation

Natural observation techniques allow you to observe your potential customers while they are naturally fulfilling the needs you want to address. Ideally, without them noticing you too much so their behaviours are not altered.

Such observation experiments will yield huge amounts of customer knowledge. Hence you need to ensure you set observation goals for your experiments. Your observation goals can pertain not only to your subjects’ actions but also their interactions, environments, and the tools they use.

You will most likely need to repeat such experiments many times to take in all the knowledge you will need. Alternatively, you can task multiple people to observe the same situation while giving them different observation goals.

Two of my favorite natural observation techniques are shadowing and A day in the life.[2]

Directed observation

These techniques are associated with a goal of understanding a specific thought process or behaviour in a given circumstance.

They require putting the customer in a specific situation or assigning him, or her, a task and then observing. This can be followed by a question period to help interpret what you observed. It can be done face to face, remotely with cameras or on the web (such as A/B testing).

Third person observation

This technique is used in addition to one of the previous ones where the observer is someone who has a vision of the world that is significantly different from you or anyone in your industry. This technique yields much richer interpretation/insights from the data you collect.

Empathise

Customer needs - Baker MarketingWhenever possible, put yourself in your customers’ shoes or, even better; take the time to get to know some of your favorite customers personally. This will enable a relationship of trust and maybe even friendship (personal bonus for you) to develop over time.

Get involved in activities or causes your customers are passionate about. This will give you an even deeper understanding of their values and what is important to them.

Sharing your customers’ values is a requirement to attract them into your community.  If you are unsure of what I am referring to here, see this previous post on community marketing.

The 360 view of customer needs

Customer needs - Baker MarketingApplying all of these techniques to understand your customers’ needs is required to get a 360 degree view of them. Using many different perspectives to master your customers’ needs will yield rich and actionable information. It will also facilitate innovation in your organisation.

 

Customer Feedback Flow

Customer needs - Baker MarketingStriving to understand customer needs is a continuous process. Set up processes and assign resources in your organisation to make it an integral part of your business activities.

These processes can be as simple as a quick questionnaire you send out on a regular basis, or an automatic feedback one, after a certain task is completed.  Analytics reports, comments on social medias summaries or a managed (live or online) community feedback or observation reports are all valid continuous feedback processes that can yield precious information on your customers’ needs.

Be aware that this feedback is highly valuable to your organisation, if you act on it. Hence, reward your customers adequately (often a simple thank you is enough) for sharing their thoughts and concerns.

Mastering the understanding of customer needs is no small task.  Your rewards for listening, observing and empathising with your customers, will be a tighter product/market fit, greater customer satisfaction and higher profitability.

[1] Needs are always dependant other factors. E.g. The need for a given medicine will be dependant on experiencing specific symptoms at a level that requires relief and not being allergic or prone to adverse effects to said medicine.

[2] The following book describes these techniques : This is Service Design Thinking – M. Stickdorn, J. Schneider et al. – John Wiley & Son

The Three Golden Rules of B2B Product Development

The Three Golden Rules of B2B Product Development

In the middle of product development at this moment? Thinking about how well the market will receive it? Worried the realistic sales forecast in your initial feasibility study won’t materialise? Given the dismal success rates of new products in the market, you are right to worry.

I have spent the better part of my career in product development, mostly B2B technological products. With no modesty at all, I am proud to say that the vast majority of the products I was responsible to launch achieved success in the market.

There were many factors that explained the higher success rates I achieved. The teams I was lucky enough to work with are definitely a major one. Another one is my obsession with talking to potential customers (external and internal) constantly to validate ideas, even before starting the feasibility study on the future product. I am also convinced that an important piece of market knowledge I happened upon, at the beginning of my product management career, and applied throughout the years, also played a very significant role in launching profitable products.

About 15 years ago, while working at a major telco, I had access to the results of three very large studies which, combined, covered all segments of Canadian businesses. The studies were conducted with the employees or owners (who held the purchasing decision power) of over 5000 businesses of all sizes, in all sectors. One of the objectives was to figure out what the folks who had purchasing responsibilities in Canadian businesses wanted most.

Each of these studies, conducted in a different size segment, came to somewhat different conclusions. When I put the dozens of answer trends (groupings of multiple answers with a similar pattern) of all three studies together however, I eventually picked up on three mega-trends. These mega-trends were the same across all business segments. They also seem to hold true across time. Most of the highly profitable business products in the market today still follow them.

These mega-trends became my acid test that every single product I ever created had to pass before I sent it out in the market. I also call them my 3 golden rules. These rules are not mutually exclusive. They can also be applied to B2C products which are purchased based on rational (vs. emotional) decisions.

So what are these three golden rules that will woo your B2B customers?

Efficiency, Simplicity and Control

Before I explain each of these rules, I want to point out that I define a product not only as being the product or service itself but also the entire purchasing, usage, maintenance and support experience that surround it. I refer to this package as the solution.

New product development - Efficiency - Baker MarketingEfficiency

Efficiency refers to your customers being able to do the same amount of work with fewer resources, or more work with the same amount or fewer resources. In B2B, efficiency can be approximated by the total cost of ownership (TCO). As a provider, if you can show that your solution’s (not your product) TCO is lower than all of your competitors, you are almost assured of a sale.

Product Development - Simplicity - Baker MarketingSimplicity

Let’s face it; we are all swamped at work. Complicated or complex solutions require more of our time than simple ones. Not to mention, that some folks just don’t want or can’t extend the brain power to wrap their heads around complicated or complex solutions. Making things simple for everyone at your customers’ involved in your purchasing, usage, maintenance and support chain will become some of your most powerful sales arguments. These arguments won’t require any of your sales reps uttering even a single word.

Control150BControl

This criterion can be straight forward but often is not. It can be an indirect effect of a solution characteristic. When designing your solution (again, not just your product), be mindful of giving more control to your buyer over the work he/she is paid to do. An example of this would be the power tool manufacturers who started offering leasing as an option to their customers. When contractors responsible for planning large projects were not sure how many tools they would need, or when they would need them, their only option was to buy them ‘’in case’’ or risk delaying the project if they didn’t buy them. Leasing, aside from lowering their costs, helped the contractors feel like they had more control over their planning.
Unlike giving control at the purchasing stage, extending control throughout usage, maintenance and support of your solution will not increase your initial sales. It will however increase your customer satisfaction rates and repeat purchasing rates greatly.

Here you have them, my three golden rules for product development that ensure new product success in the market.
All three rules do not have to be followed for a solution to be successful. The more of these three rules are followed by a solution, the higher the probability of success it will have in the market.

Sales of new products are not the only ones that will benefit from following these three rules. Fixing your existing solutions so they follow them will also yield better sales (new and/or repeat). Existing solutions that don’t follow the three golden rules usually don’t present problems at the product level. Most often it’s one or several processes which include a customer touch point that is flawed. It could be your invoicing, contract, provisioning, customer service or other process that is not following one of the three golden rules.

Put your own solutions to the test. See which ones follow any of my three golden rules. I bet you’ll also be pointing to your most successful products.

The customer experience journey or walking a mile in your customers’ shoes

The customer experience journey or walking a mile in your customers’ shoes

When is the last time you took a good look at what your customers’ entire experience is like when they deal with your company? If your answer is: Never or not in the last couple of years, you may want to read on.

What is a customer experience journey?

A customer experience journey (aka customer experience map) is the detailed (or sometimes not so detailed) analysis of the experience a specific customer segment has when interacting with your organisation for its entire life cycle, either through one of your employees or any media content you issue. If you really want to dig down, mapping your customers’ interactions with third parties representing your brand (suppliers, distributors, etc.) can also be examined. This information is then presented either graphically or via tables. If a customer experience journey needs to be communicated quickly to a large group of people, a video is sometimes produced to get the information across.

How a customer experience journey is done

Sales pyramid - Baker MarketingThe customers’ experience is mapped from the top of the sales funnel all the way down to the last segment of the retention and propagation pyramid. Additionally, specific actions such as purchase, usage and customer loss will be broken down to reflect any potential customer touch points.
Organisations usually task marketing management to accomplish the mapping. Idealy, it should however be done by a team of the top managers of every department that has customer touch points.
If this is your first time at doing a customer experience journey, you can start with the areas where you think there are issues. These will generally yield the highest returns for your organisation. Once you get the hang of it, you can add customer touch points to your journey progressively until you cover the entire spectrum of your customers’ experience with your organisation.

Benefits of mapping the customer experience journey

Returns! Yes, I did write returns. If you have read this blog for a while, you know I would not recommend any costly marketing action unless it has the potential to be profitable for your organisation. Your first endeavors into mapping your customers journey will generally yield the highest results. Those results can have a dramatic effect on your bottom line.
Managers and owners are usually aware of certain ‘’glitches’’ in the experience they offer their customers. Seldom are they prepared for the results a first mapping produces. Their initial reaction is often one of shame and/or impressions that their organisation is bleeding money unnecessarily. Their second reaction is to start acting to resolve the issues brought to light by the mapping exercise.

Typically, a customer journey mapping exercise and the implementation of action plans to correct issues identified yield:

  •       Reduced rate of customer churn
  •       Reduced customer service costs
  •       Increased customer lifetime value
  •       Better propagation (referral and advocacy), leading to
  •       Better reputation
  •       A marked increase in internal innovations of all types (usually non disruptive)

Each of these benefits brings sub-benefits which also yield financial returns.

A large proportion of these returns usually go straight to the bottom line. It makes sense given that improving your customers’ experience is equivalent to making your organisation more efficient at fulfilling its mission, which boils down to satisfying your customers’ needs.

If you are looking for lasting ways to increase your profits at a higher rate than your costs, mapping your customers’ journey through your organisation may be your answer.