Identifying customer needs to create customer value

Identifying customer needs to create customer value

What is the most accurate way for an organization to analyze and define customer needs? What key factors need to be taken into account?

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Customers are different in terms of their value to you and their needs from you. That's both sides of the value proposition – what a customer pays and what he wants for it. The problem most companies have is that when it comes to differentiating one customer from another, they look only at the customer's value, as revealed by current and predicted future transactions. And while value is important, it's even more important to understand customer needs.

It's complicated to predict a customer's lifetime value, which is the gold standard of value differentiation, because it involves projecting previous transactions into the future, and making educated guesses about things you can never fully know. But as difficult as this is, the answer is one-dimensional – it comes in the form of dollars and cents, or pounds and pence, or whatever. It's economic.

There are as many different dimensions of customer needs as there are analysts to think about them. Psychological needs, for instance, can be categorized in any number of ways, but they are probably the most useful in terms of gaining a continued understanding of customers, because psychological needs don't change very easily. Is a person seeking reassurance or advice? A good deal or a quick one? Is she assertive or passive? Curious or not?

There's no substitute for good research in categorizing customers by their needs, psychological or not. Usually we recommend some qualitative research (focus groups, in-depth one-on-one interviews, etc.) along with quantitative surveys that are informed by these qualitative findings.

Hear more in Creating Customer Value, a SearchCRM.com monthly podcast series with Peppers and Rogers.

This was first published in April 2008