What your customers need
I’VE just come back from the annual Gazelle’s Growth Summit where thought leaders were challenging the way we viewed the world.
There is now a huge oversupply of goods and services on the world market that is hitting us here. It is not just China; Mexico is now producing goods cheaper than China.
Last year 25,000 Australian office jobs, including accounting services, were outsourced to the Philippines and is expected to double this year. Medical diagnosis is being outsourced in India.
What does this have to do with us? Business for the past three hundred years has focused on producing what we are good at and then finding customers to sell it to.
To succeed now, business needs to change its focus to what customers want and provide that. That is a very different perspective.
The best way to understand this shift is to look at what has happened to dog food. When the focus is on supply dog food is sold based on the dog. Different food for small dogs, young dogs etc.
This led to dog food being a commodity. The cheapest food thrived and profit margins shrank. But it is not the dogs that buy the food, it is the dog owners.
There are dog owners who treat their dogs like a child, others like part of the family, others like their dogs to be their training partner when they walk or run. Then there are others like me that just want to feed my dogs the cheapest food that they will eat.
The first group, you could call “pampering parents,” want the food to be almost good enough their children could eat it. They want to be able to see the vegetables in the meat.
These people will pay a substantial premium for what they want and packaged the way they want it. Those that see their animals as their fitness partners want to see food that will be nutritious for their dog, giving it energy and vitamins.
By understanding the deeper needs of the customer’s dog, food supply can be tailored in a way that better meets that need of the customers.
By better understanding your customers you know who you can charge more to and maintain healthy profit margins.
To understand the demand we need to talk to our customers to find out what they really want. When Henry Ford asked his customers what they wanted, they said faster horses.
From that Ford understood their real need could be met by economically produced cars.
By talking to your most profitable customers you will be able to continue to meet their future needs and retain them. This will also give you ideas on what to do to get more of these profitable customers.
By focusing on supplying what your customers real needs are you will be able to stay differentiated and not compete solely on price. Research has shown that businesses differentiated in the customers eyes grow 227% faster and are much more profitable. So, do you know what your customers really need?