Customer needs analysis: Definition & Research Methods

Addressing a significant customer problem or need in exchange for some value is at the heart of building a successful business. Many products and services fail because they cannot satisfy such customer needs. Entrepreneurs build their products based on what they believe customers need without additional validation. To help startup founders and product leaders avoid this pitfall, this article will outline steps to follow to conduct a customer needs analysis and build a product that is in demand.

By understanding well the customer's needs, you will:

• Create strong product messaging that resonates with the target audience
• Build a product that creates values and naturally engages and retains users
• Identify your unique value proposition and unfair advantage to build a defensible business

Types of Customer Needs

Customer needs can be classified using a similar categorization as the Maslow pyramid. To illustrate this in practice, we will use Strava, a social fitness platform for athletes and sports enthusiasts that tracks, shares, and analyzes their achievements.

Level 1: Basic Functionality Needs

The product or service you are building must relate to a specific job the target customer needs to do. At the very basic level, you must address this need to be a relevant alternative for the customer.

Example: Strava's foundational feature is its ability to track or import an activity from an external source. Activities are the foundation of the social platform; without them, everything else is irrelevant.

Level 2: Reliability and Security Needs

Your product should tick all relevant non-functional requirements, like being secure, reliable, and functioning without errors.

Example: Strava has worked continuously to provide safety and reliability for its customers. When uploading an activity, you can pick geographical areas near your home, office, or another location you want to keep private, and the area will be excluded from the map showing your activity.

Level 3: Collaboration and Connection Needs

Great products help you do your job and open the door for you to a community of like-minded people with whom you can connect and interact. As social creatures, humans have a natural need to interact with others. By addressing the need for belonging, brands increase their retention by introducing users to a new social environment.

Example: Multiple features in Strava foster interactions and collaborations. You can add friends who can like and comment on your activities to further motivate your fitness journey. You can also interact with people you are not friends with through clubs, common activities, and others. The social element is a strong factor for persistence in sports, and Strava has recognized this well.

Level 4: Empowerment and Status Needs

By reinforcing the feeling that customers are unique and valuable, you are putting them at the center of your product, customer-centricity. Great products are focused on making their customers shine rather than putting the product or service in the spotlight.

Example: In Strava, you track your personal best times, position in the leaderboard of segments, and who has trained the most in a given segment. All this helps to boost your self-esteem and recognize your achievements in the community.

Level 5: Growth and Fulfillment Needs

Great products focus not only on tackling an everyday problems but also on helping customers achieve their ultimate long-term goals and unlock their full potential.

Example: Most importantly, Strava helps you become a better athlete through insights from your activities, recommended training plans, or just by motivating you not to give up.

Bonus Level: Purpose and Impact Needs

Really amazing products empower you to expand your growth beyond yourself to society and the environment. This is something that you, individually or collectively with others, will be remembered for even when you are no longer around. Through this level, the product connects to the inner calling of its customers, connecting them with their mission and passion.

Example: The open data of Strava generated by all athletes helps cities plan better their bike lanes and recreational areas based on real demand and usage.

There are a few rules to that hierarchy of needs:

• You cannot meaningfully address a need at a higher level before sufficiently addressing the needs of all previous levels. If you have the most amazing email service that helps people reduce their carbon footprint and be more efficient, if their correspondence is leaking to the public - nobody will want to use it.
• The higher the level of need you create, the more engaging and sticky the product you will have. When your product addresses the foundational values of your customers, people will become your most loyal customers.
• Customer expectations evolve, and so should your product with them. This hierarchy is not static and will change based on market shifts, technology trends, and evolving customer problems.

Steps to Conduct a Customer Problem Analysis

Step 1: Identify Your Target Customer

If you are solving a problem for somebody, you have to understand first who those people are. Even though the definition of your ideal customer profile might evolve, you still need a starting point.

Step 2: Conduct a Product Research Using Customer Problem Interviews

Customer interviews are the best method to understand deeply your target audience and get into the details of their needs and problems. It’s important to conduct these interviews according to the best industry practices to avoid biases, opinions, and misleading information. Your interviewees are well-intended people, but they might have very different perspectives about themselves and their actions from their real behavior.

Step 3: Analyze the Customer Interviews and Extract Insights

The purpose of the interviews is to aggregate data and isolate repeating themes. These might be:

• Blocker's people face with their everyday work
• Frustrations when working with existing alternatives
• Underserved needs and problems

Tools to Facilitate Your Customer Needs Analysis

Many product teams use documents, spreadsheets, recordings, and dashboard platforms to store their customer needs analysis. However, this leads to chaos, a lack of a common way to find and save information, and the tools themselves not supporting customer needs analysis.

Icanpreneur is a platform that completely handles the process of customer needs analysis. It helps with all critical points of that process:

• Preparing an interview script for the customer interviews that is based on the industry’s best practices and is adapted for the job-to-be-done you will exploring
• Storing reliably all conversations in a format that is consistent and easy to get back to
• Automatically extract insights across all interviews with quotes that support them from your own customers using the latest AI technologies.

Once you are done, you can integrate your findings back into the business canvas to have a complete overview of your business idea.

Common Mistakes and How to Prevent Them

Relying on Assumptions over Evidence

Many entrepreneurs fall victim to over-relying on their own experience and perception and extrapolate their perspective to the whole customer segment. Starting with your vision about how to solve a problem is great, and a strong leadership vision often sets amazing products apart from others, but this vision needs to be validated by the market before moving further with it.

Introducing Biases

Introducing biases in the customer needs analysis is a dangerous mistake that can lead to losing a lot of time, money, and effort. Biases can come from different directions:

• The product team
• The potential customers
• Investors and partners
• External people who are not stakeholders in your business

It’s important when you validate your idea to validate it only with your potential customers by following the best practices for customer interviews.

The following are not good sources of validation:

• Asking friends and family what they think about your idea
• Posting on social media, like Reddit, X, or LinkedIn, especially if the community you are reaching out to does not represent your target audience
• Other businesses that tried successfully or not your idea

Interpreting “wants” as “needs”

In a customer interview, you can often hear the interviewee saying, “I want [something].” This is an interesting direction to explore, but this statement does not validate their customer problem. Very often, product teams that prioritize based on “wants” create features and products that are not used.

Instead, try to follow with some of the following questions:

• What makes [this thing] important for you? What is the effect of not having it?
• When was the last time you had this want? How did you resolve it? What was the effect of resolving it this way?

This will bring the conversation back to previous experience and will move away from speculative and opinionated language.

Ignoring Emotional Needs

As discussed in the section with Type of Customer Needs, there are additional needs than features and functional requests - how the customer feels. Failing to build a connection between your customers and the product on an emotional level can cause low customer retention and even become a dealbreaker for the buying decision.

This is important for B2C products but also in the context of B2B sales. After all, companies don’t buy products, people do.

Conclusion

Analyzing your customers' needs and problems is a key milestone on your journey to getting a product-market fit. Icanpreneur is your best partner in this process, ensuring your findings are based on real-world data and your conversations are conducted and stored consistently for further reference.