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How to Conduct Customer Analysis – Are You Aware of Your Client Needs?

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Competent analysis of your consumer is one of the essential stages of a company’s strategic development.

how-to-conduct-customer-analysis-are-you-aware-of-your-client-needs

Mostly, companies focus on realizing their opportunities, overlooking the fact that those opportunities need to be looked for in the market itself. Have you asked yourself whether there are new areas of application of your product? Or is it possible to create a new need through your product, as, for example, it happened with overalls and socks for dogs?

After all, taking care of our beloved pets, it is unlikely that someone thinks about how the population of these animals has survived without clothes and socks?

What value does your product carry to the consumer?

Before starting to uncover what consumer analysis is, let's find out the essence of the product you offer. And this is our top priority since the consumer sees in a product not just a thing, but a solution to the problem. And here we can recall an example known to all: buying a drill, the customer ultimately buys a hole in the wall.

Of course, there can be a few solutions to the issue: for example, to quench your thirst, you can buy juice instead of lemonade. In this case, each of the drinks has its value for the consumer, which lies not only in food components, but in its packaging, container, or price.

Understanding what client problem your product solves, it is also necessary to take into account that there are persistent consumer habits regarding certain types of goods, especially in consumer markets.

Are we aware of the true needs and motives of your consumer?

Obviously, the need arises before the choice is made. Identifying the needs of your target audience is of paramount importance because understanding the nature of the need itself gives a clearer picture of the motive with which the buyer makes a choice. It should be noted here that the stimulus, in contrast to the need, is characterized by a greater certainty, that is the "objectified" way in which the need is satisfied.


how-to-conduct-customer-analysis-are-you-aware-of-your-client-needs

The famous American psychologist A. Maslow, studying the needs of people, came to the conclusion that at first, a person tries to satisfy the dominant needs, and only then, moves on to the needs of the highest level category. At the same time, the highest level needs serve as a motivator for human behavior, as if pushing people to satisfy those needs.

Fig.1. Maslow's hierarchy of needs

Fig.1. Maslow's hierarchy of needs

When studying the needs of your target audience, it is crucial to highlight the following factors:

  1. What other goods (services) can meet the needs of your customers. The more substitute goods on the market, the higher the buyer's sensitivity to price changes. In addition, the prices of substitute goods determine the upper price limit on the market for a given product.
  2. What is consumer awareness of substitute products, and which of them are the most appropriate alternative solution to meet the need.
  3. What products that meet the need, customers will refuse for sure.

Understanding your customer's motives has an array of benefits. First, it helps in planning the development and launch of a new product to market. How does it work? For example, a fitness club is visited by women who want to deal with back pain issues, as well as by women who want to maintain good physical shape. Obviously, for the first group, the basic need is health maintenance, i.e. the category of safety, while for the second one, most likely, it is recognition or self-actualization. In the first case, the consumer's incentive is rational, in the second case, it is close to emotional. But your task is not just to help the first category of women to get rid of back pain but to retain them by shifting their attention to proposals that satisfy the higher-level needs. This can be done, for example, by offering them group fitness classes for people with certain common interests, or by becoming a participant in a competition, etc.

how-to-conduct-customer-analysis-are-you-aware-of-your-client-needs

Secondly, having in mind the key motives of your consumer behavior leads to the creation of the most effective company strategy in the market. For example, a company that strives to increase its market share must first find out the incentives for

  • why its buyers do not purchase more goods,
  • and what are the main obstacles to it?
  • What level of need will force the consumer to use the product more often or in large quantities?

Answers to these questions will help to reveal the ulterior motives of the consumer and bring the business to a more daring strategic level - diversification.

Thirdly, being aware of the motives of the consumer, the company has a chance to effectively separate its offer from competitors' analogs. An example is the recent entry of American retail Kroger into the Chinese market. The best-selling product in the new market was fruit rings, which the American giant was selling for 89 yuan per piece ($12), which is several times more expensive than at homeland.

how-to-conduct-customer-analysis-are-you-aware-of-your-client-needs

The main impetus for Chinese people that buy snacks is the desire to get a better product based on the belief that imported goods are made with superior quality ingredients that are carefully selected.

There are many ways to identify consumer motives, ranging from direct surveys, conduction of focus groups, and simple observations, to developing feedback systems and researching reviews on the Internet.

Analysis of consumer motivation directly consists of several stages and begins with building the most complete list of motives. It is pivotal to pay attention here to the so-called "hot buttons", i.e. consumer motives that have the greatest impact on the market.

Fig. 2. The sequence of identifying motives

Fig. 2. The sequence of identifying motives

Then, the motives are divided into groups and subgroups, ranked from the most crucial (strategic) to specific (tactical), and their relative importance is determined. At the same time, both the opinion of the company's employees and the opinion of consumers are taken into account through direct and indirect questions. The last stage, which is identifying the strategic role of motives, covers not only the issue of consumption but also the strategic development of the company as a whole, its goals and opportunities.

Is our consumer satisfied and how much?

A key stage in the analysis, that is assessing the degree to which the customer’s needs are satisfied, is designed to bridge the gap between what the manufacturer believes the customer expects and what the customer actually wants. Unfortunately, as practice shows, only an insignificant part of buyers informs the company about dissatisfaction with this or that product.

The most common method for measuring customer satisfaction/dissatisfaction is the method based on the calculation of the CSI index (Customer Satisfaction Index). This technique involves conducting consumer surveys to identify their attitude to the product (service) and the degree of importance for them of this or that parameter.

how-to-conduct-customer-analysis-are-you-aware-of-your-client-needs

First, the parameters of the product/service are expertly determined (for example, quality, price, service, personnel, etc.). The experts, as a rule, are employees of the company who are in direct contact with their target audience. The next step is to assess the importance of the parameter for the consumer. In the table given by us as an example, the experts determined the service speed and quality of the goods as the most vital parameters of the product.

Table 1

Table 1

The company can obtain an assessment of the level of satisfaction with the parameters according to the chosen point scale by conducting personal interviews (CAPI / PAPI), via the Internet (CAWI), or by telephone (CATI). For evaluation, Likert scaling, SIMALTO, semantic differential, etc. can be also applied.

At the last stage, the average estimates for each parameter are calculated and an integral estimate is derived - the CSI index. In our example, this index is 80%, which indicates a fairly high degree of consumer satisfaction with the product.

The CSI itself only gives a company an overall satisfaction measure. To spot the ways of improving parameters that consumers are less satisfied with, it is recommended to use the «parameter importance/parameter satisfaction» matrix. The practicability of using this method is that it allows you to check whether the quality of the offered product meets the expectations of the client or not.

Look at how this scheme works in our example. The parameter "Quality" is of high importance for consumers, and they are satisfied with it. The main activities of the company should be aimed at maintaining the achieved quality level and its possible improvement. The parameter "Service speed" is also of high priority for the consumer, but they are dissatisfied with it, so the company should take measures to boost the speed of customer service.

Fig. 3. Assessment of the level of satisfaction (see table 1)

Fig. 3. Assessment of the level of satisfaction (see table 1)

When defining parameters for assessment, you should not limit yourself to indicators of apparent functional benefit. It should be remembered that the needs of clients can originate in their emotional satisfaction, in the desire for self-expression.

And of course, an essential point of this stage of the analysis is the study of the satisfaction of the company's key customers, i.e. those who provide the bulk of its profits. Creating your own customer dashboard is one of the most effective ways to keep in touch with loyal customers. It allows you to track and find new ways to improve your product.

What is the reaction of your customer to our actions?

Further, information about how the client makes a purchase of the product, its areas of application, and after-sales service must be added to the customer analysis. At this stage, the consumer's behavioral response is analyzed, i.e. it can be any action in response to an incentive from the company.

Fig. 4. Stages to the consumer buying process

Fig. 4. Stages to the consumer buying process

Various studies have shown that the buyer goes through the so-called learning process, which consists of the following stages: cognitive, affective, and behavioral. The level of consumer cognitive response can be determined by measuring the degree of brand awareness. This information is obtained through surveys. The lowest level of brand awareness is its recognition by the buyer, which is very important at the point of sale, at the moment when a choice is made.

A consumer's affective response is measured by the emotional degree and customer’s attitude to a product or brand. What is meant by an attitude? In general, it is a synthesis of perception, feelings, assumptions in relation to a certain trademark, which arises in the mind of the consumer and determines the behavior. Since the consumer perceives a trademark as a set of attributes, it is necessary to assess the degree of presence of each attribute in the trademark. Information for conducting analysis is also obtained through surveys.

The usefulness of such an analysis is the opportunity for a company to get a clearer idea of the future work with the product. The strategically important decisions to change the consumer's attitude to the brand can be product modification and strengthening of a certain product attribute, changing the positioning of the brand, as well as creating new benefits for the consumer. It is also possible to convince the consumer of the importance of certain attributes and the quality of the product, which means raising the prices.

Finally, the level of behavioral response can be directly measured by the volume of sales of a product. A significant indicator for the company is also the market share in each segment and, of course, its indicator in dynamics.

So, the tactics presented in this article, of course, are not an exhaustive list of consumer analysis. Research methods by building customer journey maps that describe the entire customer path when interacting with a product are becoming more and more relevant today. With the extension of online sales methods, the need to study consumer behavior in the online environment has also increased. One of the most efficient ways to understand user actions is to build an empathy map.

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