If you are starting a career in Marketing or want to run your own business, you need to develop a deep understanding of customer needs in order to create value for consumers and your company.
Identifying the needs of your target customers is a crucial step in developing consumer-led Marketing strategies and launching products or services that meet the requirements and preferences of your target audience effectively.
Customer needs understanding is a vast topic so let’s focus on 3 key areas to start with.
1 – Why is understanding customer needs so important?
2 – What are the different types of customer needs?
3 – How to identify the key needs of your target customers?
1 – Why is understanding customer needs so important?
It is relatively easy to come up with ideas to create a new product or service. Every day, new businesses and brands emerge on the marketplace across the globe. As well as continued innovation from existing players.
But how many of those new businesses and brands succeed and last in the long term?
Estimating the exact number of new products that fail every year on a global scale is challenging due to various factors such as definitions of failure, the vast range of industries, and the lack of comprehensive data.
However, several studies and industry reports shed light on the challenges faced by new products in the market.
• A report from Nielsen suggests that only about 15% of new Consumer Packaged Goods (CPG) succeed in the market. This implies that a significant majority of new CPG products fail to gain traction or are discontinued.
• A study from the Harvard Business School suggests that approximately 75% of venture-backed start-ups fail to return investors’ capital. While this statistic is not specific to products, it highlights the high failure rate in the start-up ecosystem, which includes many product-based companies.
• According to Gartner, about 80% of new products fail within the first two years. This failure rate can vary by industry, with some sectors experiencing even higher rates of product failure.
• A survey by Innovation Leader found that around 64% of new products are considered failures based on various criteria such as financial performance, meeting customer needs, and achieving business objectives.
The success or failure of a product can depend on various factors such as market dynamics, competition, Marketing strategies, product quality or fundamentally the inability to meet customer needs and expectations.
With an ever-increasing number of products and services available on the market and evolving consumer purchase and consumption behaviours, it is key for new and established Marketers to really understand customer needs in order to develop brand propositions that hit the spot and last the test of time.
2- What are the different types of customer needs?
Needs serve as primary drivers that influence human behaviour.
When needs are not met, individuals may experience discomfort or dissatisfaction, motivating them to take action to fulfil those needs.
a) Universal needs
To understand customer needs on a broad level, a good place to start is Maslow’s Hierarchy of Needs.
Maslow’s Hierarchy of Needs is a theory proposed by psychologist Abraham Maslow in 1943, which categorises human needs into a hierarchical structure, often depicted as a pyramid with different levels.
Physiological needs: At the base of the pyramid are the most basic physiological needs, such as food, water, shelter, and sleep. These are essential for survival and are the primary needs that must be met first.
Safety needs: The next level includes safety and security needs, such as personal security, financial security, health, and well-being. These needs reflect our desire for stability, order, and protection from harm.
Social needs (Belongingness and Love): Moving up the pyramid, the next level encompasses social needs, including the need for love, belonging, friendship, and interpersonal relationships. These needs represent our desire for connection, acceptance, and meaningful relationships with others.
Esteem needs: The second-highest level includes esteem needs, which involve the desire for self-esteem, confidence, respect from others, recognition and achievement. These needs reflect our desire for self-worth and a sense of accomplishment.
Self-actualization needs: At the top of the pyramid are self-actualization needs, which involve realizing one’s full potential, achieving personal goals, and finding meaning in life. This level represents the highest aspiration and the desire for personal growth, fulfilment, and self-realization.
Note that over time, some interpretations and adaptations of Maslow’s theory have expanded or modified the original hierarchy to include additional levels or dimensions, such as Cognitive, Aesthetic and Transcendence needs.
Cognitive needs involve the desire for knowledge, understanding, curiosity, exploration, and intellectual growth. These needs reflect our intrinsic motivation to learn, solve problems, and make sense of the world around us. Cognitive needs can be seen as a subset or extension of the self-actualization level, emphasizing intellectual pursuits and cognitive development.
Aesthetic needs relate to the appreciation of beauty, harmony, creativity, and the pursuit of aesthetic experiences. These needs reflect our desire for sensory pleasure, artistic expression, and a deeper connection with the world through aesthetic experiences. Aesthetic needs can be considered a higher-level aspiration beyond self-actualization, emphasizing the importance of aesthetic appreciation and creative expression in human fulfilment.
Transcendence needs involve the desire for spiritual growth, connection to something greater than oneself, and a sense of purpose and meaning in life. These needs reflect our intrinsic motivation to transcend the individual self, connect with others, and experience a deeper sense of unity, purpose, and spirituality. Transcendence needs can be seen as the highest level of Maslow’s hierarchy, representing the pinnacle of human development and the realization of one’s full potential in a broader spiritual and existential context.
It is important to note that the inclusion of Cognitive, Aesthetic and Transcendence needs in the hierarchy is not universally accepted and represents interpretations or extensions of Maslow’s original theory.
Different scholars, researchers and practitioners may have varying perspectives on the structure and content of Maslow’s hierarchy of needs and the interpretation of these additional levels can vary depending on the context and application of the theory.
Coming back to the original work from Maslow, his hierarchy suggests that lower-level needs must be satisfied before higher-level needs become motivators. Once a lower-level need is met, individuals are motivated to fulfil the next level of needs, progressing towards self-actualization.
We have to bare in mind that Maslow’s Hierarchy of Needs is a theoretical framework and that individuals may prioritise and experience these needs differently based on personal circumstances, cultural influences and individual differences.
Now, when you look at the multitude of products and services available in the marketplace through the lens of Maslow’s Hierarchy of Needs, you can see the many choices available to customers to satisfy each level of need, with some product and service categories delivering across several levels. If we take Social Media platforms as an example, we can see how Facebook, Instagram, Tik Tok can deliver Social and Esteem needs.
b) Life stage related needs
Universal needs will be present throughout people’s life but their order of importance and how they are met, can vary pending on where customers are in their life cycle.
For example, if you become a parent, you are entering a different life stage and this will generate a new stream of functional and emotional needs to be met. You are still looking to meet your own needs as an individual but also the needs of your new child as a parent. This means having to research, shop, buy a totally new type of information, products and services.
Interestingly, you can still apply Maslow’s theory on customers’ needs relating to different life stages.
For example, when shopping for a new family car, SAFETY becomes a higher need to be met than SELF-ESTEEM.
With the addition of a child to the family, customers are more concerned about meeting the needs at the bottom of Maslow’s hierarchy than meeting those at the top.
c) Occasion related needs
Customers’ life stages can be further broken down into occasions.
Still using the example of Parenthood as a life stage, there are MANY ‘usage occasions’ within it, leading to customers shopping for diverse products and services to meet specific needs relating to specific occasions.
Think nappy changing, feeding time, bath time, bedtime, eating out and eating in, going from A to B, playtime, education etc… the list goes on when it comes to Parenthood related occasions.
This is what Marketers call Occasion-based segmentation. This Marketing approach involves dividing a target market based on specific occasions or events that drive consumer needs, behaviours and purchasing decisions.
Instead of focusing solely on demographic or psychographic factors, this segmentation approach recognises that consumers have different needs and preferences depending on the occasions they are experiencing at different points in time.
Note: You can define customer usage occasions in relation to a specific life stage (i.e. Parenthood) or in relation to broader consumer ‘moments’ (i.e. big nights out). Pending on the nature of your products or services, you might approach customer occasions segmentation in different ways.
What you need to know about Occasion-based segmentation:
Understanding occasions: Customer occasions refer to events or situations that prompt individuals to make specific purchasing decisions. These occasions can include holidays, birthdays, weddings, anniversaries, seasonal changes, cultural celebrations or personal milestones.
Varied customer needs: Different occasions trigger different customer needs and preferences. For example, during the Christmas holidays, people may be looking for gifts and festive items, while during the back-to-school season, they might be interested in school supplies and clothing.
Segmentation criteria: Occasion-based segmentation involves categorising customers based on the occasions they are currently experiencing or anticipating. This segmentation can be applied to a wide range of industries, such as retail, food and beverage, travel, and more.
Customised Marketing strategies: Once customers are segmented based on occasions, Marketers can tailor their strategies to align with the specific needs and desires associated with those occasions. This may include creating special promotions, brand experiences, targeted themed advertising or personalised messaging.
Flexibility and timing: Occasion-based segmentation requires flexibility and a keen awareness of timing. Marketers need to be proactive in identifying upcoming occasions and adjusting their campaigns accordingly.
Integration with other segmentation criteria: Occasion-based segmentation can complement other segmentation criteria, such as demographic and psychographic factors. Marketers may choose to combine occasion-based segmentation with other methods to create a more comprehensive understanding of their target audience.
Data analysis: Marketers often rely on data analysis and customer behaviour insights to identify patterns related to occasions. This data-driven approach helps businesses anticipate customer needs and plan their Marketing strategies effectively.
Measuring success: Success in Occasion-based segmentation is measured by how well a Marketing strategy resonates with customers during specific occasions. Metrics may include sales figures, customer engagement, and brand loyalty associated with those occasions.
In summary, Occasion-based segmentation is about recognising that consumer behaviour is influenced by the context of specific events.
By understanding and responding to these occasions, Marketers can create more targeted and effective campaigns that resonate with their target customers at the right moments.
3 – How to identify the key needs of your target customers?
Now that you understand more about customer needs at broad level, it is important to develop a deeper knowledge of your target customers in order to define your brand proposition and develop products or services that meet their specific needs effectively.
Market research
– Conduct surveys, interviews, focus groups with your target customers to gather information on what people do, want, expect when it comes to a specific product or service category and aim to identify customer insights (the why behind what people do, want, expect / their deep rooted motivations)
– Analyse customer feedback and reviews on your products or services, as well as those of your competitors, to identify common themes and areas for improvement.
– Utilise online analytics and data analytics tools to analyse customer behaviour, preferences, and purchasing patterns.
Customer persona development
– Create customer personas or buyer personas that represent different segments of your target audience, including their demographics, preferences, motivations, and challenges.
– Use these personas to guide your Marketing strategies, product development and customer engagement efforts.
Competitive analysis
– Study your competitors and analyse their Marketing Mix strategies and customer reviews to identify gaps in the market and areas where you can differentiate and add value.
– Identify unmet customer needs or pain points that competitors may not be addressing effectively and develop solutions that meet these needs.
Feedback loops
– Establish feedback loops with your customers through various channels, such as customer support, social media, email or online communities.
– Encourage customers to provide feedback, suggestions, and insights into their experiences with your products or services and use this information to continuously improve and innovate.
Observation and empathy
– Observe your customers in their natural environment, such as their homes, workplaces, or during their interactions with your products or services at the point of purchase or consumption.
– Practice empathy and put yourself in your customers’ shoes to understand their needs, preferences, and challenges from their perspective.
Collaboration and co-creation
– Engage with your customers through co-creation initiatives, such as workshops, brainstorming sessions, or collaborative projects.
– Involve customers in the design, development, and testing of new products or features to ensure that they meet their needs and expectations effectively.
Continuous learning and adaptation
– Stay informed about industry trends, technological advancements, and changing customer preferences to anticipate future needs and opportunities.
– Continuously iterate and adapt your products, services, and strategies based on customer feedback, market dynamics, and emerging trends.
By implementing these strategies and methods, you can gain valuable insights into the needs, preferences, and expectations of your target customers and develop products, services, and solutions that resonate with them effectively.
In summary
Researching, identifying and understanding customer needs is a fundamental skill for Marketers as well as for business owners. The ultimate aim of Marketing is to create value for your target customers and for your business.
Remember that customers’ needs evolve over time, so are the multiple products and services aiming to meet those needs, so it is critical for Marketers to keep a finger on the pulse, adopt a curious mindset and continuously learn with real life examples.