How to Understand Customer Needs?
In this article, I will introduce the meaning of satisfying needs and how to properly understand customer needs.
"Needs" is used as a marketing term. Of course, many people use it by themselves as well as see and hear it regularly. However, when asked to explain in detail what needs are, few people can answer with confidence.
This time, I will introduce the meaning of "meeting needs" and how we can correctly grasp needs. Let's correctly understand the "needs" that we have been using until now and utilize them in our future marketing strategies.
Table of contents:
- About customer needs
- What are customer needs?
- The difference between needs and wants
- The manifest needs and latent needs of customers
- How to understand customer's needs
- Refer to information on the Internet
- Survey your customers
- Analyze customer data
- Useful tools for analyzing customer data
- Tips on how to meet customer needs
The word "need" in marketing is derived from the word "need(s)," which means a need, desire, or demand, and refers to a state of being deprived of a certain sense of fulfillment necessary for human life.
In daily life and work, people have ideals such as "I want to live a rich life" or "I want to be a boss who is loved by my juniors." However, in reality, there may be gaps such as "I save money every day" or "I can't get along with my juniors." Needs refer to the desire to fill the gap between the ideal and the reality. Satisfying needs means satisfying this desire.
What are customer needs?
"Customer needs," often used in business, can be summarized as the desires and demands that customers have, according to the previous explanation of "needs."
However, it is easy to think that "products and services that customers want = customer needs," but "I want xx" is only a means to a solution, and it is necessary to find out the purpose of "why I want xx."
"Reason for wanting xx" is the real need, and if you simply think of the product or service itself as a "customer need," there is a risk that there will be a difference in recognition.
The difference between wants and needs
One word that is often confused with "needs" is "wants." While needs are objectives, wants are means.
For example, let's say that a customer is considering buying a computer. In that case, the motive of "I want a computer," which is the means of buying a computer, becomes the "wants," and the purpose of buying a computer, such as I want to improve my work efficiency, becomes the "needs."
If the customer's need is to improve work efficiency, but the motive is "I want a computer = need," there is a risk of introducing a product that does not match the customer's need, such as a cheap computer with low specifications. Instead of satisfying the customer's needs, this will lead to a further distance from the ideal and reduce their satisfaction.
On the other hand, if you know that the customer's need is "to improve work efficiency," you can introduce a product that the customer wants, such as a computer with faster processing speed.
Customers' apparent needs and latent needs
There are two types of customer needs: apparent needs and latent needs.
Apparent needs are the needs of customers who are aware of their needs, and latent needs are the needs of customers who are not aware of their needs.
Identifying apparent needs is relatively easy and can often be answered by repeatedly asking "why" questions based on the customer's wants. Specifically, here are some examples
A: I want a new computer.
B: Why do you want a new computer?
A: Because the old computer I'm using now runs slowly.
B: Why do you want a computer that runs faster?
A: Because I want to improve my work efficiency.
From this conversation, we can see that the customer's apparent need is "I want to improve my work efficiency." As you can see, apparent needs can be surfaced with just a simple interview, even if the relationship with the customer is not very strong.
However, it is important to note that introducing a product based on apparent needs alone may not be accepted by the customer. In this case, it is necessary to explore the latent needs that the customers themselves are not aware of.
Latent needs can be grasped by analyzing customer attributes and products purchased in the past.
For example, you know that the customer's need is "work efficiency," so you introduce a recommended computer that will help them in their work, but there is no product that the customer will buy. In such cases, by researching and analyzing past purchase histories and attributes, we can identify trends that the customers themselves are not aware of, such as liking the latest home appliances or purchasing many home appliances with a high level of design.
How to understand customer needs
There are several ways to understand the needs of your customers.
Commonly known methods include "referring to information on the Internet," surveying customers," and "analyzing customer data such as RFM analysis and CTB analysis."
Each of these methods has its characteristics, and while there are advantages, there are also disadvantages.
It is possible to better understand your customers' needs by combining multiple methods.
Let's take a closer look at each of these methods below:
Refer to information on the Internet
Today, with the proliferation of social networking sites, there is a growing interest in an analysis called "social listening."
Social listening is a method of collecting and analyzing daily conversations and behavioral data posted on social networking sites.
The advantage of social listening is that you can hear the honest voices of your customers. Unlike surveys in which customers are asked to answer questions set by the company, customers are free to post their own content, so there is a possibility of discovering opinions from the customer's perspective that the company has not considered.
However, it is difficult to grasp the gender and other attributes of the speaker, and the reliability of the data is low, which is a disadvantage.
Survey your customers
Questionnaires allow companies to get answers to the information they want to know, and they also let them understand the attributes of the respondents. Therefore, it is the easiest way to understand the needs of customers.
Once you have created a questionnaire, you can conduct surveys regularly with the same content, and more and more companies are using crowdsourcing to conduct surveys.
The main advantage of questionnaires is that you can listen to your customers' evaluations. However, the disadvantages are that it takes time and effort to design and tabulate the survey, and it is difficult to dig deep into the responses.
In addition, if the motivation for answering a survey is to "get a prize" or "earn points," it is not advisable to only conduct surveys since there is a possibility that the responses are non-responses or not honest opinions.
Analyze customer data
Word of mouth and questionnaires introduced earlier were ways to find out about apparent needs, but now let's look at ways to find out about latent needs.
One way to find out about latent needs is to analyze basic customer data and purchasing information. And when analyzing customer data, it is necessary to formulate a framework.
A framework in the IT field is used to systematize concepts and methods to solve problems. Rather than analyzing the large amount of customer data acquired in the dark, it is possible to improve efficiency by following a predetermined procedure and framework.
There are famous frameworks such as Logic Tree and MECE, but I would like to introduce three effective frameworks for customer analysis in this article.
RFM analysis is a method of analysis based on the three indicators of "Recency" (date of most recent purchase), "Frequency" (frequency of use), and "Monetary" (amount of money).
In RFM analysis, customers can be grouped based on their loyalty, such as new customers, dormant customers, and excellent customers. Since approaching all customers in the same way, would result in wasted costs, categorizing customers using RFM analysis makes it possible to target those customers who are most likely to purchase products.
CTB analysis is a method of analysis based on the three indicators of Category, Taste, and Brand. It is used to predict what products customers will purchase in the future.
"Category" categorizes products into large categories (fashion, gourmet, etc.) and small categories (tops, shoes, etc. within fashion) to understand the general tastes of customers. "Taste" is used to understand customer's preferences, such as colors, patterns, and other textures. And Brand allows us to understand the brands they prefer, such as fashion brands and characters. And by categorizing customers using CTB analysis, we can recommend the products they are likely to buy next.
Segmentation refers to the process of subdividing the entire market and categorizing (segmenting) the customers when a company is planning its strategy on which market to target.
Mass marketing is a method of approaching all consumers, in the same way, using mass media such as TV and newspapers. In the days when "if you make it, it will sell," mass marketing may have been effective even at a high cost. However, with the spread of the Internet and smartphones, more and more generations are moving away from TV and newspapers, and customer needs are becoming more diverse.
For example, if the product is lipstick, women are more likely to purchase it, and if the product is a necktie, men are more likely to buy it. Reaching out to people who do not use products would be a waste of effort and cost.
Therefore, by using segmentation analysis to divide (subdivide) the market based on criteria, such as age, gender, and occupation, it is possible to discover targets to target and new needs.
Useful tools for analyzing customer data
I have introduced a variety of analysis methods as a way to understand customer needs. However, it takes time and effort to manage and analyze a large amount of customer data, and since the data is updated as needed, traditional Excel management has its limitations. This is where CRM becomes a practical tool.
CRM stands for Customer Relationship Management.
CRM tools allow you to easily collect and manage customer data and analyze and automatically graph customer data based on the collected data, even if it takes an enormous amount of time manually.
This makes it possible to formulate a well-founded strategy based on data, rather than relying on conventional experience and intuition, and approach each customer appropriately.
Tips on how to meet customer needs
It is said that the value standards expected by customers are divided into the following four primary levels.
- "Basic value," which is the essential basis of the transaction
Expected value," which is what customers naturally expect from transactions
Desired value, which is not expected but would be highly valued if it were.
Unexpected value, which exceeds expectations and desires and is worthy of pleasure
"Basic value" and "expected value" are naturally necessary for doing business and the minimum line of market activity. And the most important things to keep in mind when you want to satisfy customer needs are "desired value" and "unexpected value."
If you simply satisfy the needs of our customers, you never know when our competitors will take over. Therefore, in today's society, where customers' needs are diversifying, it is not enough to simply satisfy your customers' needs.
Considering the "desire value" and "unexpected value" of customers beyond the needs is the first step in building a continuous relationship of trust with customers.
In this article, I have introduced how to understand customers' needs. In order to meet customer needs, it is important to look at things from the customer's perspective rather than the company's perspective. Analyzing customer data and discovering latent needs that customers are not aware of will lead to further business opportunities.