Why do customer needs change all the time

The success of every company is based on the fact that it recognizes and satisfies relevant customer needs with its own product or service or that it significantly facilitates the everyday life of customers. Even if there are many different companies on the market with the same products or services, in the end only those whose offers best meet the needs of the customers win the favor of customers.

Today we deal with the analysis, identification and successful use of customer needs for your company and product development. We will first look at some methods and tools and then give specific tips on how you can use meaningful metrics to analyze these needs. Links to further literature round off the whole thing, so that you get an insight into the complex area of ​​customer needs.

The right analysis of customer needs - traditional vs. modern method

In the analysis of customer needs and product development, a distinction can be made between the classic and modern methods:

With the traditional method, which was mainly used until the beginning of the 2000s, a new product is first developed, which is then placed on the market with a large marketing budget. In the hope that target groups will be found who will buy the product and become loyal customers. There are many examples of failed product launches. These were developed for years, but the market was not successful.

In the modern product development, driven by the digital transformation of the Internet age and the possibility of getting access to information quickly and at any time, the problems and needs of potential customers are first analyzed before product development begins. It is also determined whether there will be any customers for the product or service at all. So at the beginning the focus is on the customer's problem and not directly on the solution. Companies that consistently pursue the latter strategy are also called customer-centered organizations.

The Lean Startup Approach

This type of analysis of customer needs is part of the Lean Startup method. This is based on the "build-measure-learn" cycle. First, the problem that is to be solved for the customer is analyzed and then a first prototype that can solve this problem is developed. This is then presented to potential customers and their feedback is obtained on whether and how they would use the product. The results of these feedback rounds are then used to further develop the product. The cycle then starts again until the product developers are of the opinion that they have collected enough customer feedback and that the product is ready for the market. Only then is the product placed on the market.


Build-Measure-Learn (Source: Steve Blank)

3 myths in customer needs analysis

Many companies still believe in myths when it comes to identifying and analyzing customer needs. We would like to take a closer look at the three most important ones and declare them null and void:

1. Our customers don't know what their needs are

One hears again and again from company representatives that the customers do not know what they want anyway as long as they do not know the finished product. This may be the case in a few exceptional cases, for example with the development of the iPhone. In most cases, however, customers know exactly what needs they have and want to meet. Therefore, as a company representative, you should not underestimate their opinion during product development and ideally obtain a lot of feedback from your potential target group during the process.

2. Our customers find it difficult to formulate their needs

Another customer myth is that they have a hard time articulating their needs. Customers may not always be precise in their statements, but at the latest when it comes to monetary expenditure, they formulate their needs by buying a product or not. Therefore, you should start earlier and actively motivate your customers to formulate their needs. This gives you valuable insight into the customer problems who feel like someone finally understands them. In addition, this approach opens up a valuable communication channel that will bring you a lot of knowledge.

3. The needs of our customers are constantly changing

The myth that customer needs are constantly changing is also widespread. Of course, customers and their needs change over the course of a lifetime, but new customers are added over time and then fall into the same target groups. In addition, people don't get rid of certain well-established habits that quickly. This also applies to the purchase of products.

The process of identifying customer needs

Steve Blank, who is one of the co-initiators of the Lean Startup Method, has created a blueprint for recognizing and using customer needs in his book “The Handbook for Startups”.

First of all, from his point of view, it is a matter of discovering customers and their problems (the so-called 'customer discovery'). In doing so, hypotheses are set up as to which solutions are relevant to the customer's problems.

It is then extremely important that the customer validation (the so-called "Customer Validation") is carried out. The customers are asked for their feedback on the hypotheses that have been made for problem solving. As soon as this has happened, the stage of creating a customer profile and a product prototype is reached (the so-called "Customer Creation"). Only then and after the process described has been run through (several times) does the stage of sustainable product development or the development of a business model come. First and foremost, it's not about a theoretical business plan that is then stoically executed, but about a customer-centered approach to product development:

"Customers don't behave like your business plan."
-Steve Blank, The Startup’s Owner Manual

In this process, speed and the hypotheses about the possible product play essential roles. What problem is the product supposed to solve? What would the actual production look like? Who will use the product and, most importantly, pay for it? These hypotheses then have to be validated or disqualified on the basis of direct customer surveys. In the course of these customer surveys, the product to be developed can either be explained abstractly or a first prototype can be shown. In this way, the potential customers can better imagine the possible solution to their problem. This is an important process that is still neglected by many companies. Precisely because many companies are unsure about their product development and the recognition of customer needs, they are also not ready to make decisions quickly and, if necessary, to revise those that have already been made or to develop the product again from scratch. In addition to speed, a successful product development process and the recognition of customer needs also include a willingness to take risks and flexibility.

The four W questions for analyzing customer groups and needs

The four big W’s help you as a company representative as key questions when analyzing potential customer groups and needs. We analyze the key questions below:

who are your customers?

The first step in this process is completely about who your relevant customers are for a product. This includes research into the basic characteristics of customers:

  • gender
  • Age
  • job
  • income
  • residence
  • Hobbies

Why do customers shop?

Correct customer analysis also includes understanding why they are buying certain products or services. The reasons can be varied:

  • Family reasons
  • Work demands
  • Lack of money
  • Social or emotional needs
  • Affiliation
  • Brand preference

All of these factors influence customers' purchasing decisions. The better you understand them, the better you understand your customers.

Which Are the types of shopping the customers prefer?

In addition to the reasons customers shop, understanding what their preferred shopping methods are. These can be:

  • Purchasing in stationary retail
  • Purchasing in online shops
  • Shopping via smartphone
  • Spontaneous or long thought-out purchase decisions

How do customers spend a lot of money?

Different customer groups also spend their money in different ways to meet their customer needs. You should therefore find out how much money your customers have on average monthly or annually and how they spend their money. Examples include:

  • The average monthly income
  • The percentage they spend on offers similar to the way you produce them
  • How and whether they save a certain amount

Using the results of the four W questions, you can create so-called empathy maps with the various properties of your customer target groups. This allows you to visualize the results and empathize with your (potential) customers much better. This in turn helps in the analysis of customer problems and needs.


Source: transformation.blog.nhs.uk

The right approach to customer surveys

There is now a lot of input and assistance online and offline about the correct approach to customer surveys. One book that is mentioned and highly praised in this context is “The Mom Test” by Rob Fitzpatrick. In it, Fitzpatrick explains with clear examples which mistakes you should absolutely avoid when interviewing potential customers and which method you should use to get really honest and meaningful answers.

The point is that you ask the questions in a way that you do not already imply the answers or lead your counterpart in a certain direction. It is important that you can collect enough honest statements from which you can draw valuable customer feedback for your product development. Make sure that you always communicate in an understandable manner and that you do not use technical terms. In this way you can also reach and understand people who have never had anything to do with your area of ​​expertise.

After you have recognized the customer needs, you can move on to product or service development. With the information obtained, you can develop offers for your customers that really solve their problems.

How to use customer feedback sensibly for your product

As already mentioned, the correct processing of customer feedback is a central component in successfully identifying customer needs and, conversely, customer problems. This feedback is extremely important not only in the product development process, but also after the completion of a purchase transaction. Because as soon as the customer really uses the product in everyday life, you should continuously obtain further customer feedback. This in turn is used to measure customer satisfaction. In addition to analyzing customer feedback, the aim is to ensure that customers are so satisfied with your product or service that they also share your offer in their network and recommend it to others.

Based on the results of the measurement of customer satisfaction, you can in turn draw conclusions about customer needs. Because customer satisfaction shows whether the needs of the customers are really being met or whether there is a need for improvement.

Other relevant metrics for identifying customer needs

Customer retention rate

The customer retention rate indicates how many customers become 'repeat offenders' and repeatedly buy from a company. There can be several reasons for this: The customer is so satisfied with the purchased product that he buys other or the same products from the company. It is also possible that the customer will not find any better product alternatives. The latter reason is not a good sign for you and your company, because competitors can appear in the market at any time who offer a better product. So your job is to find out what reasons motivate your customers to buy in order to continuously improve your offer and to meet customer needs as far as possible.

Long-term customer value

This cumbersome term is also referred to in English as "customer lifetime value". This means the value that the customer generates for a company over his entire life. The customer can only buy a product or service once or come back again and again.

Repurchase rate

The repurchase rate metric quantifies how often an existing customer buys from the company again. This allows direct conclusions to be drawn about customer satisfaction. Because the more often a customer becomes a 'repeat offender' when shopping, the more satisfied they seem to be with the offer. However, it could also be due to the unfortunate case that there are no better alternatives on the market (see customer loyalty rate). So here your questioning and analysis skills are required to find out.

Return rate

The return rate is also an extremely important metric for identifying customer needs. The more often customers complain or return a product, the less it seems to meet the needs and demands of the customers. So if you have a high return rate for your products, you should find out as soon as possible what the reasons are. Only then can you counteract an increased return rate.

Conclusion

Ultimately, your customers want one thing above all: to be understood with their worries, needs and needs. Not only from their closest family and friends, but also from people and companies with whom they interact on a daily basis. In addition, customers want to feel that they have enough information and thus options and alternatives in their daily purchase decisions. As soon as you, as a company representative, have understood this and adapt your products and services accordingly, you have very good prospects of recognizing and satisfying your target group's customer needs.