PREDICTING CUSTOMER'S NEEDS

Methods for Predicting Customer Needs

A crucial part of running a successful business is determining and fulfilling customer needs. This lesson will discuss the importance of being able to predict customer needs and provide methods for predicting customer needs.

Predicting Customer Needs: Why Is It Important?

There are many vital aspects of running a business, one of which is making sure that you're keeping your customers happy. That's why it's important to be able to predict customer needs in addition to just providing good customer service. Predicting customer needs involves providing a service or product that customers have not expressed a demand for yet. And this goes beyond your current customers--you must think in terms of potential future customers, as well.

Car companies, for instance, are constantly adding features to cars that consumers did not even know they wanted or needed. Some cars have touchscreens, Internet radio, and Wi-Fi service. These additional services were created to provide a solution to customers' needs before the customer was aware that they needed it. Successfully predicting customer needs can increase sales, profits, and your customer base, as well as keeping current customers satisfied.

 

Predicting Customer Needs: An Example From History

Let's look at a real-life example of the benefits of predicting customer needs. At the end of the 20th century, Proctor & Gamble released the electrostatically charged Swiffer cloth when researchers saw a woman accidentally spill coffee grounds on the floor and realized that there was not yet an ideal solution for quickly cleaning this small mess. (The broom could not completely clean up the wet grounds, while a vacuum was too much of a hassle to employ for such a small task.) And so, the researchers recognized a need before the consumer, effectively predicting the customer need and providing the Swiffer line of cleaning products.

 

How To Predict Customer Needs

There are many methods that one could use to predict customer needs. Let's look at two common techniques:

 

Study Current Customers

One way to predict the needs of your customers is to study and spend time with your current customers. These customers already buy your products and may be loyal to your company. Studying their buying and product-using habits is a good starting point to anticipating the needs of your current customers.

Say, for example, that the general manager at a local hotel likes to spend a little time every morning talking to his customers at breakfast. This is when he gets the most feedback about what his customers want and need. One day, he spoke to a customer who placed a special order to the kitchen for breakfast. The general manager learned that the customer always put in special requests, because he gets tired of having the same, standard breakfast every morning when he's traveling.

The general manager then used this feedback to create a new addition to the menu--each week, it would include a different Breakfasts of the World option, allowing guests to try something they wouldn't normally eat at an American hotel. For instance, one week the menu would feature delicate French pastries, while the next would offer a traditional Polish breakfast of eggs, kielbasa, and potato pancakes.

The general manager was able to use customer feedback to predict customer needs and satisfy the wants of the hotel's guests, even if they didn't know they wanted more variety in their food options.

3 Ways To Predict What Consumers Want Before They Know It

 

The insight that sparks innovation appears to occur randomly. After all, the iconic shorthand for innovation is a light bulb, implying that ideas come from sudden flashes of inspiration. While such flashes are surely good things, it is hard to depend on them, particularly if you are at a company that needs to introduce a steady stream of innovative ideas.

Steve Jobs once said, “It is not the customer’s job to know what they want.” That’s absolutely right. It is yours. And don’t think you don’t have a customer because you work in an internal support function or for a company that provides components or services. Everyone has a customer, whether it is a purchaser, user, or co-worker.

More than 50 years ago Peter Drucker wrote, ‘The customer rarely buys what the company thinks it sells him.’

The quest to identify opportunities for innovation starts with pinpointing problems customers can’t adequately solve today. More than 50 years ago Peter Drucker wrote, “The customer rarely buys what the company thinks it sells him. One reason for this is, of course, that nobody pays for a ‘product.’ What is paid for is satisfaction.” Companies think they are selling products and services, but in reality people hire those products and services to get jobs done in their lives. As marketing guru Ted Levitt quipped to his students a generation ago, “People don’t want quarter-inch drills–they want quarter-inch holes.” A problem arises, and the customer looks around and chooses the solution that gets the job done better than competing alternatives.

To discover your quarter-inch holes, obsessively search for the job that is important but poorly satisfied (for more on the underlying theory of jobs to be done, see The Innovator’s Solution by Clayton M. Christensen and Michael Raynor). Innosight’s research and field work over the past decade suggests that following three specific activities can increase the odds of identifying innovation opportunities.

1. GET TO CONTEXT

In 2000, when A.G. Lafley became CEO of Procter & Gamble, he found a company that had lost its way. The stock had plunged almost 50% after a March 2000 warning that the company would miss earnings estimates. Lafley looked for simple ways to reenergize that company’s innovation energy. He came to the conclusion that P&G needed to fundamentally reorient itself. The company was world renowned for driving decisions based on deep customer understanding, but upon reflection, Lafley realized that the company had drifted away from that understanding.

Lafley is gifted at communicating complicated ideas in simple ways. He developed a simple mantra to refocus P&G: The consumer is boss. He would say something along these lines: “Fellow P&G-ers, I’d like you to meet your new boss. You may think that I, as your CEO, am boss. That’s not right. You might think that the board of directors to which I report is boss. That’s not right. You might think our shareholders are the bosses. That’s not right. You might think your line manager is boss. That’s not right. We have one and only one boss that matters. The consumer. The consumer is boss.”

Lafley urged P&G to understand their boss as never before. P&G had to hear what the consumer was saying and, much more importantly, tease out what the consumer wanted but couldn’t articulate.

One of the dirty little secrets of innovation is that even the most well-intentioned people lie.

To do this, Lafley worked to create a culture where everyone in P&G–from the chairman down–would spend time living with consumers, shopping with consumers, or working alongside consumers. He would describe invaluable insights he personally obtained in his career by spending time in the market. For example, while Lafley worked on Tide branded laundry detergent, P&G would regularly administer quantitative surveys to assess the quality of its product and packaging. Consumers reported that they loved Tide’s packaging (at the time, Tide was packaged in cardboard boxes). Yet, when Lafley was interacting with a consumer, he noticed that she almost always used a screwdriver or scissors to open the Tide box. Lafley realized that the woman didn’t want to risk breaking her nails opening the cardboard box. She said she loved the packaging because she didn’t know of any alternatives, but in reality, she had to find a creative way to open the box because of its design limitations.

Many P&G products trace their inspiration to these kinds of observations. For example, watching a woman grow frustrated when she spilled coffee grounds on her floor helped to inspire P&G’s Swiffer quick cleaning line, which today produces more than $1 billion in annual revenue.

One of the dirty little secrets of innovation is that even the most well-intentioned people lie. They say they will do things they won’t, and purport to have interest in things they don’t. Spend time in the market so that you can know the customer better than they know themselves.

How to get started: Detail the amount of time you spent with customers or key stakeholders in the last three months. Find a way to triple that time.

2. WATCH FOR WORKAROUNDS

Carefully studying current and potential customers often highlights workarounds that customers create to make up for the limitations of existing solutions. Drilling into these compensating behaviors can help to unearth innovation opportunities.

Consider jeans shopping. Research shows that women find it the second-most intimidating shopping experience, behind shopping for swimwear. In 2009, as part of an ambitious innovation program, VF Corporation, which makes Wranglers and Lee Jeans, began to spend more time with customers in order to understand specific points of frustration.

One trip to a local department store proved particularly illuminating. Executives watched as a prospective female customer shopped for a new pair of jeans. She wandered around the endless racks of clothes in the store, picking up pair of jeans after pair of jeans. The VF team was struck by two observations: First, the sheer volume of jeans the woman brought into the dressing room. Second, the fact that the woman had picked up multiple sizes of just about every pair she was trying on.

The executives assumed that she must have recently experienced a weight change, so she was unsure of her size. But in fact it turned out that her experience taught her that the sizes that appeared on the labels of jeans only loosely related to what would actually fit. Her workaround involved bringing in volumes of pairs of jeans in order to find one good fit.

The innovation efforts created $100 million in incremental revenue.

These observations helped the company focus its innovation efforts on the jeans-buying process. VF changed the labeling on its jeans, developed innovative display mechanisms in retail stores, and launched an online campaign where noted style icon Stacey London helped women find jeans that would be most appropriate for their body type. In early 2011, VF reported that these and related innovation efforts had created $100 million in incremental revenue in its jeanswear division.

3. FOCUS ON NONCONSUMERS

The natural tendency for would-be innovators is to study existing customers who participate in existing categories. By all means do that. But also look for people who face some kind of constraint that inhibits their ability to solve a pressing problem they are facing in their lives. Apple, Southwest, Ikea, Nintendo, and many more companies trace their success to unlocking demand that was pent up because existing solutions were too expensive or complicated. These companies found a market opportunity just sitting there, waiting for someone to develop a convenient, affordable solution.

Look for people who face constraints that inhibit their ability to solve a pressing problem.

Indian conglomerate called Godrej & Boyce used this approach when it developed its ChotuKool refrigerator, designed for 85% of the Indian population who didn’t purchase refrigerators. These consumers wanted some of the benefits of refrigeration, but needed something that was smaller, more portable, and less power hungry. The ChotuKool addressed these barriers to consumption. The size of a small cooler, it costs an affordable $70 and is battery powered, so it can run off the grid when electricity is down. The product exceeded sales expectations during a trial launch in 2010. In early 2011, Godrej won an award from the Indian prime minister for its efforts, with sales accelerating dramatically.

It takes some mental discipline to look to markets that don’t exist. But that discipline can pay off in the form of growth opportunities that are hidden in plain sight.

How to get started: Write down five things that a coworker or friend can only do by relying on an expert or going to a central location. Think about ideas that would let these people do it themselves.

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Spending time with customers, watching for workarounds, and exploring nonconsumption helps to highlight exciting innovation opportunities. Of course, there’s more to innovation than the spark of an insight. Innovators have to translate that insight into an idea that gets the innovation job done and delivers against whatever metric matters (revenues, profits, process performance, employee satisfaction, and so on). But the right starting point makes the journey infinitely easily.