Why Customer Needs Are Important
Strategy
January 4, 2022

Why Customer Needs Are Important

Gaussian Team
Understanding and formalizing what your customers truly need is vital to your product success

It’s a fact. Most innovative endeavors fail. Even venture-backed ones.

Why? Simply speaking, due to high levels of uncertainty.

How is uncertainty defined in this context? First, let’s agree on the fact that we’re living in a dynamic and increasingly fast-paced world where ideas and things that are meant to improve our lives are becoming slightly overabundant. 

To compete, companies innovate and imitate faster, which in the long-term makes it harder to identify real market needs. And when a new product or service fails to recognize customer needs for its chosen market, it inherently fails as a business.

There’s hard data to support this. In a report covering founders and employees from 101 startups, CB Insights found that a staggering 42% of ventures fail because there's no market need for their product or service. 

Think about that. Nearly half of these companies (themselves already the cream of the crop) spent several months or even years building a product before finding out there was in fact no significant customer demand for it.

Understanding your market needs is paramount to a new product succeeding as a business. Let’s dive into this further below.

Your Product Exists To Satisfy Customer Needs

That’s the crux of it. Products and companies exist to satisfy customers. 

When an organization builds a new product, there are usually many assumptions made, from what the users are looking for, what marketing strategies to use, to how the design should work, and which policies and regulations are to be complied with. 

As Jim Brikman explains in his recent article for Y Combinator, no matter how good you are, some of the assumptions made by new companies will eventually prove to be wrong. Waiting for months before discovering these critical flaws is not a luxury you can afford. The most tactical way to test assumptions is to put your product in front of real users as quickly as possible, and keep it in front of them, just as Agile or Lean Startup would say.

A successful product or service solves a subset of your customer’s unmet needs, beyond the full cost of using it. Full cost refers to more than just a price tag - it’s the time commitment, internal resourcing, and the cognitive burden that it takes your team to build it.

Examples of customer needs for an industrial technology company.
Examples of customer needs for an industrial technology company.


So what are some of the benefits of elevating and formalizing customer needs as part of your strategy and research?

The 3 Benefits of Using A Customer Needs-Focused Approach

1. It continually validates market demand

Your product solely exists to solve a market need. Having a customer needs-oriented approach helps you to recognize whether your product is in demand, and the ‘juice is worth the squeeze’ so to speak. 

By breaking everything down into customer needs, you have an easier time identifying both the market need and its size and have a sense of the magnitude of the demand in your product’s niche.

2. It helps to prioritize your resources and feature roadmap

When you’re in the process of building a novel service or product, you have to make certain trade-offs, like deciding which components should be incorporated now and which ones can wait until a later time. There will be lots of brainstorming around this which is going to be influenced by your teams’ input, customer feedback, and feature requests. Inevitably, it's difficult to prioritize these inputs. 

A customer needs-focused approach allows you to prioritize features by the expected impact on market needs, and specifically, the expected impacts on the higher priority customer needs. You’ll be ultimately focusing on building features that solve the biggest problems that your customers have while leaving the low-priority customer needs aside. This "impact on top customer needs" could be a simple score, like "low," "medium," and "high."

You can assess total priority by adding this impact score to the feasibility for each feature. Feasibility can include cost, time, complexity, and so on, and can likewise be a simple score, like "low," "medium," and "high."

For more on prioritization, check out our video.

3. It helps to identify new feature areas 

Your customer needs-focused strategy also helps to identify new areas you could be building your features around. 

Oftentimes, when you’re building your product features exclusively around the data from your customer feedback, you’re essentially performing a local optimization - that is, you’re identifying bug fixes and improving current features. However, with this approach, you won’t be able to spot new categories of features that your customers aren’t complaining about or aren't top of mind for them.

Putting customer needs at your core helps you to do global optimization. This is all about solving more generally to get the biggest bang against your customer needs.

Local optimization gets you to the top of a mountain. Global optimization gets you to the top of the tallest mountain.

How You Can Start Using Customer Needs Today

⮡   Focus on your market research

You'll need to spend some time identifying your customers and specifically your customer segments. Create your buyer personas, describe them and map them out in great detail. Be data-driven, and don’t forget to look at reports, reputable articles, and trade journals to stay abreast of market insights and what your competitors are doing.

Some areas you can focus your research on are sometimes colloquially referred to as "SWOT" (strengths, weaknesses, opportunities, threats). We like to think of these as positives and negatives both internal and external to your organization. (A positive internal is a strength, and so on.)

⮡   Maintain a list of 5 to 10 customer needs

Maintaining a list of five to ten customer needs in priority order will enable you to clearly see customer pain points as well as some realities about their behaviors.

How do you prioritize? This sometimes can be challenging for organizations to figure out on their own, and something that Gaussian's consulting arm can help with.

In short, prioritization can be done according to several factors. For instance, what’s the magnitude of the pain that this customer need is related to? Another could be the level of customer’s willingness to pay to have their problem resolved.

See our recent article on how to ideate and prioritize customer needs to learn more details.

⮡   Use feedback from customers and prospects to evolve customer needs

As Paul Adams, head of Product at Intercom once tweeted, your sales team knows your product failings better than you do.

Collect feedback from both your existing customers and those prospects and opportunities that are still in the sales process. Then use the data acquired to modify your current product and discover new areas.

Bonus: How do you get feedback when you have no customers? Any feedback is always better than no feedback, but the opinions of your friends and colleagues are no match to the input from real users. Check out this great article by ProductPlan that discusses how establishing a private beta group is a simple and effective solution to collecting customer feedback in cases like these.

Final Words

Understanding your customer needs is not only vital to the market share and retention of a new product, but also to the resiliency of a company to to market condition. Ultimately, taking a customer needs-centric approach is all about building a product that people will truly love. At Gaussian, we're quite keen on embedding customer learning into the strategies of our high-growth portfolio and our clients - find out more about how we tackle voice of customer. Or keep reading to learn about companies that have excellent customer-needs-driven approaches.


Photo by Alexis Fauvet.

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