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|How to Conduct a Customer Needs Analysis

How to Conduct a Customer Needs Analysis

Lower customer acquisition costs, better customer retention programs, more effective marketing campaigns and lower support costs. The benefits of a customer needs analysis are vast.

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by Sitel staff August 10, 2021 - 12 MIN READ

An organization choosing to ignore a customer needs analysis is akin to a pilot actively deciding to fly blindfold. Unless a business builds its product and services roadmap and its approach to customer experience (CX) on the results of a customer needs analysis, it can never really understand why customers are choosing its brand over another and, more importantly, the reasons why they stop being loyal and start looking elsewhere. In other words, just like a pilot without vision, it’s just a matter of time before they crash and burn.  

What is a Customer Needs Analysis? 

A customer needs analysis is a structured, methodical approach to understanding customers’ relationship with, and perception of, an organization’s products or services and its brand.   

When properly executed, a customer needs analysis will identify each of the factors that motivates customers to purchase products and services. Furthermore, it can also recognize their wider expectations relating to the organization – its brand promise and position within the wider market – and how well the brand is delivering in terms of expected levels of customer experience and customer satisfaction. 

What Are the Benefits of a Customer Needs Analysis?   

The biggest benefit of conducting a customer needs analysis is gaining actionable insights around customer wants that can make a measurable difference to the business.  

When an organization understands who its customers truly are and the substance of the glue that binds them to its brand, there are huge opportunities to reduce costs and to increase profits without negatively impacting on consumer-facing aspects of the business. After conducting a customer needs analysis, a brand can develop a product or service roadmap with greater confidence, knowing that future releases will reflect expectations.  

Likewise, marketing strategies can be both more focused and more cost effective – tailored to the key audience, while simultaneously minimizing frustrations for those infrequent customers whose behaviors do not align with target segments.  

Knowing who you are serving and why those people have chosen you to serve them, provides the framework for creating optimized customer retention programs, for lowering initial customer acquisition costs and for identifying greater efficiencies and better interactions within customer experience. Each of which has a positive impact on medium-to-long-term growth.  

Every organization in every industry who commits to completing a customer needs analysis will end up with a unique set of customer insights relating to needs and challenges and even regarding what customers expect from a typical customer service situation.  

However, whether asking what customers expect from a retailer or what customers expect from a bank, all brands have the same starting point. The basic customer needs that dictate how and why someone chooses one brand over another are universal.  

The Five Basic Needs of Every Customer 

Every person is different, yet all consumers are united in that they are searching for a product or service that addresses five basic customer needs: functionality, price, reliability, usability and compatibility – 64% of customers who switch brands do so simply because another company offers a more relevant product or service

Functionality 

First and foremost, a customer is searching for a product or service that solves a physical problem or meets a specific demand in their lives. Do the organization’s offerings clearly solve that problem or orbit a genuine issue? If they don’t, then they won’t move from the awareness to the consideration phase in that customer’s decision-making process.  

Price 

A product or service needs to be offered at the right price point. A customer needs to believe that what they’re buying represents value for money. Different customers may have different levels of disposable income but this doesn’t necessarily dictate how much an individual is prepared to pay in order to achieve an objective or solve a problem. In other words, don’t confuse price and value – it doesn’t matter how much an item costs if the overall experience reflects the price point – 42% of consumers say value for money is the single biggest driver of customer loyalty

Reliability 

Customers don’t want to have to take a risk when choosing a product or service. They need to have confidence that the offering will deliver on expectations and perform as intended every time it’s in use – that the reality of ownership reflects the supporting advertising or promotion.  

Usability  

Regardless of product or service type, it needs to be simple to use. Its purpose is to remove rather than add to frustration within a customer’s life. Part of this usability is in the provision of information and guidance – particularly for organizations that offer a wide product or service range. By ensuring a potential customer understands exactly what the offering can and can’t do; that person can choose in confidence. 

Compatibility 

A customer will only choose something that fits into their existing routine and that works with, rather than against their existing products and services. Customers need to know a brand is there to reduce, not increase friction in their day-to-day lives.  

Meeting Physical Customer Needs 

This initial list of customer needs can be further expanded to include elements pertaining to performance and efficiency. However, what each of these five typical customer needs has in common is that they are physical needs.  

In the physical world, customers are trying to complete a task, work through a process or get a job done. In this context, understanding customer needs and challenges is understanding the circumstances in which a product or service plays a role in helping that individual meet an objective.  

Don’t Confuse Customer Needs with Solutions  

This misunderstanding is why many organizations that have committed to undertaking a customer needs analysis have struggled to act on the findings. Rather than seeing a need as a situation or circumstance where its wares can have a positive impact, they have confused a customer’s articulation of need with a solution. A physical-world need isn’t a new product or service, but it is a trap that businesses who are focused on product, rather than moving towards customer centricity still fall into.  

Typical Emotional Customer Needs 

Yet, even when an organization clearly understands the difference between a need and a solution, it can be too easy to focus solely on the physical rather than also trying to decode psychological motivations that influence customer needs and customer wants. 

How well an organization delivers on a customer’s psychological or emotional needs is now the biggest single differentiating factor. This is especially true within industries or sectors where competition is fierce and where products or services provide similar levels of functionality at comparable prices. And, within the emotional sphere the typical customer needs are friendliness, empathy, control and time.

Friendliness 

The emotional customer need on which all other psychological expectations hinge is friendliness. A customer needs to feel welcome, that the service surrounding the purchasing decision is inclusive, friendly and respectful – especially if it is that customer’s first interaction with a brand. This overarching need is why 69% of consumers say that in their opinion, helpful and friendly staff is the single most important aspect of a good customer experience

Empathy 

An organization needs to be able to demonstrate it understands the customer – the types of questions they may ask and the potential issues that may arise post purchase – and be attentive to those needs. Being friendly and helpful are two different things. Indeed, 68% of customers now take it for granted that a brand will demonstrate empathy

Control 

Likewise, customers want to feel that they’re the ones making the decisions. They own a product or service and they can control the interactions around it. Within customer service that means a customer can choose how he or she wants to engage with the organization if they encounter a problem or need help and guidance.  

Time 

This can be viewed as an overarching need that touches on control and empathy. Customers need to experience efficient service. At the point of consideration this could mean simple and immediate access to the information needed to make a final purchase decision. Post-purchase it means an efficient service with minimum hold times and being able to solve a problem or resolve an issue at the first attempt – one in five customers would consider walking away from a brand if they received a slow or inefficient service.  

Therefore, the goal of a customer needs analysis to identify how and where physical and psychological needs intersect. This point of intersection is the reality of brand perception. And this is why understanding the role emotion plays in the overall customer relationship is the key to optimizing customer experience.  

Connecting Customer Need and Customer Experience 

Customer experience is how an organization makes its customers feel throughout the lifetime of a brand relationship. CX is cumulative. It builds over time, based on every touchpoint and interaction a customer may have with a business, be it navigating a website, speaking with an agent, using live chat or messaging or the ongoing support provided as consumers live with a product, service or offering. Each of those engagements will evoke either a positive or negative feeling towards a brand and will ultimately decide whether a customer remains loyal or leaves. So, how do you conduct a customer needs analysis?  

How to Conduct a Customer Needs Analysis:  

Step 1: Customer Segmentation 

A customer needs analysis begins by identifying which customers to engage with. This means performing a basic segmentation using existing customer data. However, the ability to effectively segment the customer base is dependent on the quality and completeness of the customer data at an organization’s disposal. If information relating to a single customer sits in siloed systems across different parts of the business, building comprehensive archetypes will present a challenge.  

Nevertheless, even without a consolidated, single source of data, it should be relatively straightforward to segment customers into groups such as infrequent and frequent purchasers, those with low or high average order values, new customers and long-term customers and ideally, customers who most often seek support or make complaints.  

Step 2: Direct Customer Feedback  

Conducting a customer needs analysis is about data; it forms the backbone of any attempt to get closer to customers. In order to really know customer needs and wants, an organization has to gather and combine as much solicited and unsolicited feedback as possible. Solicited feedback will come in the form of well-designed, customer- (not business-) focused surveys and questionnaires. It can be too easy to unintentionally build bias into surveys designed in-house or to restrict respondents’ ability to elaborate on opinions or views.  

Customer Needs Analysis Survey Design   

The best customer needs analysis surveys look beyond an organization’s own products, services or levels of customer support. They frame feedback in the context of the market as a whole in order to understand what elements of an organization’s brand have the greatest sway in customers’ decision-making process when compared directly with other brands in the market.  

Customer Needs Analysis Best Practice  

This is why the best-practice approach is to engage with independent experts regarding survey design and delivery and subsequent data collection and analysis.  

In addition to uncovering the key customer needs an organization is aiming to meet, enlisting expert help has the added advantage of obtaining an even greater depth of brand as well as customer insight.  

Surveys can be developed that incorporate elements such as positive and negative brand associations, usage context, wider product category and brand substitution analysis. 

These initial surveys should return findings that are both positive and negative and will provide the topics and themes that will be explored in more depth within focus groups, ideally made up of both customers and non-customers to ensure balanced insights.  

Step 3: Leverage Customer Data  

To put the findings from direct questionnaires and focus groups into an even clearer context, combine the data collected with all information relating to customers that sits within an organization, such as data from CRM systems and within the customer service department.  

Organizations that operate contact centers will have a head start in this respect. They will be able to analyze contact logs, talk with agents, examine tickets and see how metrics such as customer satisfaction (CSAT) and Net Promoter Scores (NPS) are in line with or below the industry average. What’s more, if an organization has access to speech and text analytics, it’s possible to process the intent and sentiment contained within every single customer interaction within a live customer experience channel.  

Step 4: Unsolicited Customer Feedback  

The best time to capture feedback relating to a brand experience or the quality or a product or service is in the moment. No matter how well constructed a survey is, it is still asking a respondent to remember an experience or situation that happened in the past.  

This is why it’s crucial to gather as much unsolicited feedback as possible. Social media listening provides valuable insights regarding how customers really perceive a brand and what they think about products, services or levels of support at the moment when they are having the experience. Analyzing review sites will also help provide a fuller picture both of an individual brand and the industry or sector in which it operates.  

The final element in this step of the process is to examine search engine keyword data. Understanding the types of searches customers are making that – theoretically – should lead to the organization appearing in the page rankings will provide need indicators. Customers on different stages of the customer journey will use different search terms or pose search engines different questions. How well a brand ranks in these circumstances can be useful in measuring how closely aligned it is to customer needs.  

Step 5: Analyze and Visualize Customer Data 

The processing stage of a customer needs analysis begins by classifying all collected data in terms of the major physical and psychological customer needs. These groupings can be refined further by aligning the data in terms of identified customer archetypes.  

The next step is to start drawing insights through an analysis that identifies common keywords, positive and negative emotion and the step within the customer journey.  

When expertly analyzed, data should tell an engrossing story. Therefore, it doesn’t matter how compressive or detailed the findings if the results of the customer needs analysis are difficult to understand. Visualizing data from a customer needs analysis in a way that makes it clear and accessible will help stakeholder buy in. More importantly, it will make it easier for people across the organization to understand why changes need to be made in order to meet customer expectations and the role they will be playing in implementing the changes. All of which is key to moving from a product focus and to real customer centricity.  

Why a Customer Needs Analysis Never Ends  

Understanding who your customers are should be viewed as an ongoing process. Behaviors change, new trends emerge, markets become disrupted and new generations arrive with new expectations in tow. Luckily, at the same time, new technologies, tools and techniques are constantly moving into the mainstream that – if properly leveraged – will simplify the task of keeping tabs on who your customers are and how well a brand is aligning with their needs, at any moment in time.  

For instance, with the results of an initial customer needs analysis serving as the foundation, it is easy to build out a regular Voice of the Customer (VOC) program that will help maintain or elevate customer satisfaction levels while providing long-term actionable customer insights. 

Likewise an investment in artificial intelligence (AI), notably around machine learning will make it simple to sort, classify and interrogate different datasets pertaining specifically to customer needs or general product and service feedback. This, in turn, should provide the motivation necessary to make customer data collection and mining a regular behavior.  

Speech and Text Analytics  

However, in order to keep a constant finger on the pulse of customer opinion and expectation, the most powerful tool at an organization’s disposal is speech and text analytics.   

Speech and text analytics give an organization the ability to analyze and understand the motivation behind each and every contact through all channels flowing into their contact center. This means obtaining actionable insights, in real time, relating to how well customer experience delivery is aligning with customer needs. As well as superior understanding, it gives any organization the power to immediately change course, even within an individual interaction, to ensure the best possible customer outcomes.  

Customers are the most valuable source of information about every aspect of any organization from its products, goods and services, to its support and after-sales service. But unless a brand can identify who its customers are and understand their emotional and physical needs, it will always be one step behind. A customer needs analysis is the first step towards closing that gap for good.

Download the Best Practice Guide Understanding and Measuring Customer Satisfaction to learn more.

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