Companies today spend a huge amount of time, money, and human resources trying to learn about customer needs. They don’t do this for laughs; smart companies do it because they are looking for ways to grow their business. But different types of growth require different inputs from customers; if you don’t know that up front, your efforts can fail at providing meaningful insights.
In this blog, I’d like to briefly overview the four different ways a service business can grow and the types of customer needs that can and should inform each.
I. Grow Your Current Customer Base
The starting point for growth is market share – a combination of retaining more current customers and attracting competitive customers. Fortunately, from a customer needs perspective, the focus is the same. Loyalty to your service requires that customers see your service as better satisfying their needs than competitive services.
Customers base their loyalty on two different questions.
1. How well am I able to get the job(s) done for which I am hiring the product or service? For example, a traveller determines whether or not to reward Expedia, Kayak, or Bing Travel with their loyalty on the basis of how well they are able to effectively and efficiently make various travel plans.
2. Is the experience of working with a given service company a good one? For example, an insurance customer bases part of their loyalty on the experience of working with USAA or State Farm. Are they friendly? Are they responsive? Are they convenient?
When the objective is to grow the customer base, these are the two critical questions to consider. If you only have insight into one or the other, you are only getting half of a very important picture.
II. Get Customers to Buy More
Because there is a certain amount of trust already established with current customers, a next natural consideration for growth is whether a company might be able to satisfy other needs of current customers via new products and services.
There are three distinct ways that customer needs might inform this consideration. First, are there natural adjacencies to help the customer get more of a job done? If a service were focused on helping investors to evaluate investment options, for example, there might be value-added services its current customers would value related to creating an optimal investment portfolio or monitoring investment performance over time.
Second, are there more specific delineations of a customer job for which a new service might be optimized? If the job is making travel arrangements, then what about making international travel arrangements or making group travel arrangements? If the job is evaluating investments, then what about evaluating bond investments or evaluating real estate investments?
Finally, are there related jobs that current customers are trying to get done before, during, or after using your current service? These related jobs are often tied to – or at least could be tied to – related products and services the customer hires. When we make travel arrangements, for example, we might also want to arrange for transportation, get tickets to a play, or track travel expenses. In a similar way, we often need to create a retirement plan before investing, and we need to prepare income taxes after investing.
III. Grow the Size of the Market
Some markets grow because they’re in growth mode, not because of an expanded focus on customer needs. That’s not my focus. Rather, my focus is a concerted effort by a company to make the overall market bigger by satisfying needs that hold current customer consumption back.
There are two ways to think about non-consumption, and customer needs are tied to each. First, there may be particular times, places, or applications when service use is somehow problematic. For example, credit card usage was quite limited for making purchases at mobile business sites until services like Square came along that allow individuals to accept credit card payments via their mobile device. You can even pay Girl Scouts for your Thin Mints cookies via credit card these days.
Second, there may be some potential customers who do not use the current service because of some constraint to their usage or because the service lacks sufficient benefits to justify the price. Some prospective students, for example, may choose to forego getting an MBA because current services are unaffordable, too inflexible, or simply not perceived as worth it for achieving goals.
When the objective is to grow the size of the market, a company should ask customers why a product or service is not used, or at least why it is not used as much as it might be. Where, when, and why is consumption held back?
In addition, a company should consider asking non-customers who are trying to get the same job(s) done why they choose not to use the product or service or why they choose to use substitutes instead. Why do some individuals choose on-the-job training, certifications, or online seminars rather than getting an MBA? Where is the MBA worse? Where is the MBA better?
IV. Expand into New Markets
As markets mature, company growth priorities shift toward new markets. (I am not talking about geographic expansion; that is not the focus in this blog.) The focus I encourage companies to consider is the possibility of new services to help someone get a new job done. Of course, there is no shortage of new markets out there, but some make more sense than others based on its current company capabilities and markets.
One way to find new markets that are relatively close to home is to identify other jobs that a current or new customer group is trying to get done. Unlike related jobs, these other jobs are not tied to current service usage. Still, it is preferable to look for jobs that are thematically related and tied in some way to a current service capability or company vision.
For example, with the objective of getting beyond basic checkups, a medical clinic could seek to help individuals with a wide range of health and wellness goals, such as monitoring a chronic condition, creating healthy nutrition plans, and losing weight. Consider how Enterprise Rental Cars now sells cars to customers to help them with the job of acquiring a used car.
Another way to find new markets is to consider the needs of individuals who are impacted by your services, but who are not your immediate customer. If patients are your focus, then what about family members? If students are your focus, then what about parents? If shoppers are your focus, then what about retailers? Each group has its own set of needs related to the job(s) they are trying to get done, and each could potentially offer opportunity for new services.
No doubt, your company wants to grow. But it really doesn’t make sense to say “What are the customers’ needs that can help us to grow?” without first determining the growth priorities for individual products and services. As I hope to have made clear in this blog, there are many flavours of customer needs and some are better suited than others for varying growth objectives.
The really good news is that customer needs can guide all the types of growth your company might desire. You simply need to know where to look to get the insights your company requires.