Businesses that focus on satisfying customer desires, instead of pushing products, have the edge in a competitive market. Recognizing that today’s consumers have more options than ever before, responsiveness to buyer selectivity is a key to success for these customer-driven businesses. See the following article from The Street for more on this.
It isn’t what a company wants to sell that matters, but what the customer buys. Just ask Ford(F), which has dropped low-performing brands and replaced a pre-recession focus on big trucks with an emphasis on lower prices, higher mileage and seductive perks. Its signature SUV, the Explorer, is now a crossover vehicle with Microsoft(MSFT) SYNC system to connects Bluetooth phones, touch-screen displays and keyless starting.
That’s where the market went, and Ford recognized it. The critics are applauding and Wall Street has rewarded the moves. After hitting bottom at $1.39 a share two years ago, Ford now trades closer to $12 a share.
Understanding customer needs, problems and desires — not to mention market gaps — is critical to the success of products, services and technology. When innovation is isolated from customer needs, you have great ideas without markets and consequently without appreciable value. Alternatively, some ideas are great, but no one wants or needs to buy them.
Customer need isn’t defined by what a company believes. It isn’t about what internal “gurus” of the marketplace perceive or think; Customer need is solely about what the market wants. Is there an emerging trend, a noticeable shift in consumer behavior? For example, did anyone really “need” Google(GOOG)? The search engine’s creators recognized a gap that would emerge that drove the need, the opportunity and ultimately the company’s success. Ford recognized a need for higher-tech, more “green” vehicles that caused consumers less pain at the gas pump as prices rose.
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When considering your business with regard to customer needs, answer these questions about your product or technology: Is it desirable? Feasible? Salable?
The intersection of these dimensions is where your product needs to be for optimal mass-market position. In the desirable-feasible-salable space, customers have a recognized need they will make a purchase to address. Anywhere outside of this “sweet spot,” companies are product-driven, not customer-driven.
Product-driven companies create innovations, products, services and technology — then look around for markets, customers and profits. Customer-driven companies understand what they are good at and find customers with needs they’re able to meet, problems they can solve and innovations that are well-timed and well-placed.
Features are important only when they provide a benefit to the customer. Think of buying a car. You visit the dealership, and after doing online research you know what you want. You want an all-wheel-drive vehicle with four doors and roomy cargo area. It must have an automatic transmission, anti-lock brakes and so on. The dealer doesn’t have one in stock, but he’ll make you a “great deal” on this other model that has everything you want and lots more you don’t … and it’s a color you really hate!
You could live with some of the extras, but not at a higher price. You really don’t like that color, but the salesperson says, “Other customers love the color. It grows on you,” and you think “Yeah, like mold!” You aren’t interested because the dealer doesn’t throw in the extras, making the cost over your budget.
The salesperson keeps selling — until you walk out the door to a competitor from a different manufacturer, who had a vehicle with the features and color you wanted. The first car dealer lost not only this sale, but also future sales to you (and so did the manufacturer), because the competition understood your needs, your desires, your problem and your budget.
By the way, the second car dealer didn’t have the car on the lot either, but instead found one at another dealer and had it brought over the next day for you to look at (and buy).
The lesson: Successful businesses understand their customers, current and future. They deliver the desired products at the right price, understanding there are other alternatives available to the customer, including the option to save, not spend.
This article has been republished from The Street. You can also view this article at The Street, an investment news and analysis site.