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How To Identify Customer Needs: 4 Steps to Create What People Love

how to identify customer needs
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One thing that separates a mature entrepreneur from an immature one is the ability to make valuable assessments on the needs of the market and individual customers.  Inability to assess customer needs accurately leaves you:

  • Creating products people don’t need
  • Spending too much time on idea realization
  • Producing products and services that don’t sell
  • Entering saturated markets
  • deeply dissatisfied with your results because you’re not able to reach the income goals
  • and, unable to experience the fulfillment you dream of

An entrepreneur is a professional problem solver, therefore, an entrepreneur who is unable to discover genuine problems is in one heck of a bind, and this article was written to help get them out.

how to identify customer needsMy Story

I’ve always wanted to be an entrepreneur, however, I didn’t always have all of the resources.  I wasn’t always confident enough.

I didn’t always feel I had the financial wiggle room, and there were other hinderances that stopped me from expressing my entrepreneurial desires until my late 20s.

When I started applying my entrepreneurial ideas…

I was ALL OVER THE PLACE.  I bought an ATM and managed it.  I wrote 15 books in less than 2 years.

I offered freelance services, and my husband started a church and a General Contracting business.

Of course, not all of those ventures worked out to be a long term venture, but my love for Entrepreneurship increased.  I learned alot about business agreements I would like versus ones that don’t serve me well.  I grew in confidence and established the best positioning for me, and I also learned HOW TO IDENTIFY CUSTOMER NEEDS.

In my early days…

I would over-complicate product development.  For example, I spent a lot of time and effort on my books.

I wrote draft after draft, had beta readers, got several edits, went thru different coaching programs (that I traveled to participate in), and I went thru great lengths to ensure a quality audience, but I missed one major component that drives sales….IDENTIFYING THE CUSTOMER NEEDS.

Overall, after many products with slow sales and taking it personal, I’ve learned it’s best to use the minimum viable funnel approach where you release an imperfect product and allow feedback to help improve it; rather than to obsess over a perfect product or service, and release it to hear crickets.

My own personal dissatisfaction for the numerous times when my sales could have been better is the reason for me writing this post...In hopes, that you’ll take the time to identify your audience well and release products and services to droves of interested prospects.

What Are Customer Needs

There’s a process that each person goes thru when they’re trying to accomplish something, then they realize they’re missing a major component to complete the goal.  For example, the goal could be simple like baking a cake.

Maybe you go into your cabinet to pull out the ingredients to bake a cake.  You may have the flour, the baking powder, the eggs, but maybe you’re unsure of what else you might need to bake the cake, so you go searching.

This is where the problem solver is needed.  It’s at the point where the customer has realized a component is missing in order to accomplish their goal.  Ideally, the entrepreneur would want to position their product or service as THE solution to the person’s need.

The solution can be simple like a Youtube video on the ingredients to bake a cake from scratch, but as entrepreneurs we want to solve a problem someone else is actively looking to solve.

how to identify customer needsThe Backwards “Newbie Entrepreneur” Approach

As an immature entrepreneur, you may be:

  • Very creative
  • Optimistic
  • Full of ideas
  • and, in belief that you understand the market
  • But, you could fall short.

Newbie entrepreneurs tend to see starting a business and creating products and services as a way to “own their life”, “be free”, “be without a boss”, and express their creativity and individuality.  They use their personal agenda as the primary inspiration for their products and services rather than using the market demands as their primary focus, which is one large component of why most small businesses fail.

They don’t see success until they see that business success is directly correlated to the selfless effort of solving the problems for others and compromising for market demands.  In other words, rather than having one boss, entrepreneurs have several bosses: each customer, employee, and patron counts as one.

The Walmart Founder, Mr. Sam Walton said it best, “There is only one boss. The customer. And, he can fire everyone in the company from the chairman on down, simply by spending his money somewhere else.”

Once entrepreneurs realize, their work is a service to more bosses rather than a hobby–or symbol of personal expression and gratification–then, that’s when things start to change, and they start to think about how to identify customer needs.  The paradigm shift from personal gratification-focused to customer-centric is a major sign of entrepreneurial maturity.

how to identify customer needsThe Evolution of Identifying Customer Needs

Still, the process of truly understanding customer needs comes in phases for most people.

You might begin looking around at the people you’re connected to, and you assume because your mom, dad, brother, sister, best friends, church family, sorority sisters, and school alumni has validated your idea, then there’s a bigger market for it.

This hypothesis is a good start in the evolution because you’re looking beyond your personal gratification, but it’s not all the way mature.  The process for how to identify customer needs must be honed and quanitifiable.  Here’s a few steps to creating a mature process for how to identify customer needs…

4 Steps for How To Identify Customer Needs

Identifying customer needs takes quite a bit of observation.  Very established companies have a very particular process for identifying whether a new product, service or market has a good potential ROI, and regardless of your stage in business (Startup entrepreneur, pre-startup entrepreneur, early growth, or other) it’s important to have a calculated process before investing your time in product or service development.

Here are some great components of a honed process…

how to identify customer needs1. Being Involved in the Community (Online and in Person)

It helps to be around people, analyze their behavior, and identify problems because it helps build rapport and genuine friendship.  For example, my sister stops by my house to check on me often (we both do this for one another).

Last week, she noticed I spend a long time mopping the floor, and cleaning messes after my two young children (A PROBLEM).  Even though our floors are tile, they manage to get gum, jelly, paint, and other things they’re using stuck on the floor, so when I’m mopping, it’s a very strenuous job.

She decided to look for solutions to the problem I hadn’t even identified, and she found a more potent natural cleaning product I could use.  Now, rather than spending hours scrubbing and mopping the floor, she’s improved my efficiency because the product does part of the work for me (SOLUTION).

Similarly, when we’re out at our community centers, in our workplaces, or networking with others, we can observe how they’re interacting with their environments, problems they may be having, and start jotting down ideas of ways to improve the standard of living of those around us.

Good Online Resources

In addition to your offline networking, these sites are also valuable resources for market insight:

  • Quora
  • Youtube
  • Blogs
  • Forums
  • Bookmarking Sites
  • E-commerce Reviews
  • Business Directories and Reviews
  • Social media (with special attention to engaged and active groups)
  • SEMRush
  • Keyword Research Tools like Jaaxy, the Google Keyword Planner, or Google Keyword Planner

These sites help you see how people are interacting with niche products and services.  You can use them to ask questions about specific problems or to ask what they’re using as a solution for problems.  It’s good to hear from your ideal customer.  You want to know how they feel about problems you’re identifying or how they’re solving them.

how to identify customer needs2. Identify Quantifiable Problems

We don’t want to stop the ideation process simply by identifying problems though.  Some entrepreneurs go wrong by identifying a problem, creating a solution, but not quanitfying how big the market is for the solution.

Example 1: My Street Invention

It would be like if I decided that my street has a difficult time communicating (which is true).  Some people have graduation parties at conflicting times where others want silence.  Some neighbors want gatherings with streetwide barbeques or something of the sort.  Communication is a problem everyone on my street talks about between us.

I could jump into solving the problem by creating a blog for my street.  It could have updates and announcements, schedules, and so on, however, how many people would benefit from this solution?  Only those living on my street.

Similarly, when a problem is identified, you want to ask yourself:
  • “How many people are experiencing this problem?”
  • “What type of relevant solution are the majority of those people looking for?”
  • “Are the people with the problem willing to pay a sufficient amount for the solution to make it worth my time?”

The more specific you can be with the numbers the better.

how to identify customer needsExample 2: My Local YMCA

Another recent example is from my local YMCA…

I had established a relationship with the executive staff at my local YMCA.  They asked me to help propose different program ideas to build up my community.  As a result, I started making observations specific for them.

I noticed quite a few women bringing their children to the YMCA, but very few men were joining the families.  I thought if we could contribute to family unity, the YMCA would have a more loyal membership, so I proposed a program idea to the Executive Director that would bring more men out.

In response, he said, “What are the metrics to show how big the competing programs are?”.

What a great question!

The location he leads has a loyal membership, a large email list and media reach, and alot of local tout and influence, but still, he’s unwilling to introduce new programs without calculated and quantifiable data.   If that’s the first question of the Executive Director of a large organization with a sizeable influence and budget, as an entrepreneur (potentially with less influence and a more conservative budget), shouldn’t you be even more careful to quantify the potential impact of things you’re thinking to introduce?

3. Identifying Relevant Alternative Solutions From a Customer’s Vantage Point

how to identify customer needsFor many people (especially from the millennial generation and younger), they probably wouldn’t see pens and pencils as competition for printers and xerox machines, right?  But, in a broad sense, they are.

Some potential printer customers are using pens and pencil to record information they could print off from their computers.  As a result, printer companies recieve less revenue than they could if they figured out how to convince these pen and pencil users to use printers.

Similarly, you may not be considering every person who could find your solution relevant to their needs.  In order to truly assess the scale and quantity of your particular market, you have to get feedback from the ideal customer.

When you go out and talk to customers asking questions like:
  • What do you currently use to solve (the problem you solve)?
  • How do you like that solution?
  • What would you want to improve about that solution?

You can get a gauge on whether they’d be interested in your approach to solving the problem.  Having quantifiable data about who may be interested coupled with data on who may be interested in your specific solution is invaluable.

4. Polling Potential Customers About an Idea, Prototype, or MVP Prior to Investing

The best proof of concept is sales or purchase orders.  As a result, the best thing to do prior to launching a product or service is to poll potential customers about your idea, potential solution, prototype, or minimum viable funnel, and see if they’ll buy.

how to identify customer needsIn keeping with my local YMCA example, I could call local businesses to find out programs offered for men and how they’re working out.

Then, to go even further, I could ask around to members, potential members, and people in the community saying, “If the YMCA had a program for men that had (blank) benefits, would you attend, join, or register?”

After polling a certain number of people, we’d find whether the idea was worth pursuing or not.

It’s important to let the market dictate what products and services you choose to offer because otherwise, you can overinvest your time and money and achieve less than optimal results.

Recommended Resources

Pickfu Review – At Pickfu, you can poll customers as much as you want, and get back data from real customers. Check out my full Picky review here.

Wealthy Affiliate – Wealthy Affiliate has several built-in polling features to help identify customer demand. Check out my full Wealthy Affiliate review and demo here.

Fiverr – Fiverr has a marketplace of freelancers who can serve various market research functions: from beta testing to helping with user experience modifications. Check out my full Fiverr review here.

Final Words on How to Identify Customer Needs

The goal of this article was to show a 4-step process for how to identify customer needs. If you have questions or concerns about this, don’t hesistate to leave them in the comments section.  I’d love to help you out!

If you liked what you saw here and you’d like to start or scale a business, check out my free e-course. It’s a framework to grow a business: from idea to eterprise. Check out my free e-course here.

Now, it’s Your Turn…

How do you identify customer needs?  What advice would you add for how to be sure entrepreneurs create products and services loved by the market?  Leave your comments below.


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