Product Vision blog

Needs Analysis Part 2: Differentiating Based on Needs

Wednesday, December 3rd, 2008 | Uncategorized

In Needs Analysis Part 1 I showed how we can rate a product like the Toyota Prius by how well it satisfies a set of customer needs.  Putting this needs profile in a colorized table makes it easy to see what problems the product is solving well, and with what trade-offs.

Needs tables get even more interesting when we add a set of related products.  We get a very nice summary of the intrinsic differentiation among them, which allows for instant comparisons.

So let’s add some comparison points to the Prius needs table.  These are other vehicles customer might consider if they are thinking about getting Prius:

• a typical sedan - a good all-around car for a reasonable price that would be an alternative to the Prius
  
• an econobox - a small, less expensive car with good gas mileage
  
• the Chevy Volt - a plug-in electric vehicle scheduled for 2011.  It is said to drive 40 miles by battery, after which a gas generator kicks in.  It’s intended to be plugged in overnight to charge its batteries.  Its advanced batteries are expected to make the car expensive, about $40,000.

Here is my take on the needs profiles of these products.  Remember, bigger, darker numbers are always better.  I’ve boldfaced some numbers to emphasize each product’s distinguishing characteristics:

Try using this table to answer a few questions:

• What do a Prius and a typical sedan have in common?  Why might someone choose a Prius over the typical sedan?  Why might they choose the opposite?
• What trade-offs would an ecologically-minded customer face if they went with an econobox (the third row of the table) instead of a Prius?
• The Chevy Volt sounds like an exciting alternative to the Prius.  It’s touted as over 100 MPG!  What’s the catch?
• Which products have the best and worst initial cost?  Fuel cost?
• Which needs are undifferentiated, in other words, about the same among all our comparison points?
• Based on your knowledge of these products, what might you have rated differently than I did, and why?

The needs table puts what we know in a form that makes these important comparisons straightforward.  You can look at the table horizontally to see the core story of a given product. And you can look at it vertically to see, for any need column, which competitors do the best and worst job of addressing a given need.

Customer needs as the basis for differentiation

There are many possible ways to compare a set of products.  Why should we focus on needs?  There are many benefits; here are a few.

Products tend to differ in hundreds, if not thousands, of little ways.  It’s too much detail and too much information to understand the gestalt of what is happening, like thinking of a grapefruit in terms of its molecules.  Needs reduce overwhelming set of details to a small set of dimensions (a handful to about thirty for the most complex products).

Needs cut through the hype.  A new car may have a Hybrid Cataloozer 3000 engine with dual Ener-G flux capacitors.  But what that really means to customers comparing products is that the product does a great job solving the need for fuel economy (and possibly time travel).  Focusing on needs clears out the hype and exposes what is meaningful about a product: the problems it solves and the needs it fulfills.

Comparing needs highlights the meaningful differentiation.  If there is meaningful differentiation between any pair of products, it shows in the needs table.  The greater the differentiation between any pair of products, the greater the difference in the table.  If two products have about the same needs profiles, you know that they will be close alternatives and, other things being equal, fierce competitors.

This is the beginning of Needs Theory, something I’ll expand on in the near future.

Needs tables simplify the problem of understanding competitors in a complex market, but without oversimplifying it.  If you have ever felt annoyed at seeing a bunch of competitors plotted out in a pat 2×2 matrix, you know where I’m coming from. Characterizing a field of competitors on two dimensions is too coarse and simplistic.  Characterizing them based on the feature charts or list of technologies is way too much detail.  Needs represent an intermediate level of magnification that is just right for understanding the essence of products and (as we’ll see) formulating product visions.

A mental journey

So far I’ve just handed over the results of the needs analysis I did, and had you study my findings a bit.  But there are important benefits to be gleaned by going through the process yourself.  It actually takes a lot of consideration and iteration to tune the needs space (the set of dimensions to use) and to think through each product.  You get a lot by going through the mental journey of doing so.

It forces you to see through what is plainly visible, to the essence of each product.  And it forces you to look at the products from the customer’s standpoint, since the needs you are rating are customer needs.  You have to constantly ask yourself questions like, “What need does that flux capacitor serve?  What are the SSNiFs behind it?  How well is the needs addressed relative to the degree of need that customers have?”

Filling out the table tends to uncover critical reality check questions.  It helps us separate marketing hype (the competition’s, or even ours) from the intrinsic benefit to the customer.  (e.g. For the Chevy Volt, how will the batteries, with limited charge/discharge cycles, affect maintenance costs?  And, above all, who will find the additional needs satisfied by the Volt worth the $40,000 price?)  This helps us tell whether a seductive-sounding new product is really the Next Big Thing or whether it is part of a reality distortion field.

One of the tenets of visionary philosophy is that marketing hype, which may indeed convince many people to buy our product, is only a sweetener.  Visionary products have at their heart a profile of needs that is truly ahead of the competition.  It’s not just talk.

Using needs as the basis for comparision establishes a high bar for differentiation, that matches the harsh nature of commercial competition.  It can take a lot to move the needle from the customer’s perspective, and so it can takes a lot of effort to move a need value from an average, middling “2″ to a market leading “3″.  Toyota spent years of R&D into alternate engines to increase the “need for low fuel cost” rating from a 2 to a 3.  The coarseness of the scale helps us remain realistic about what it will take to achieve meaningful differentiation in the customer’s eyes.  It’s harder to fool ourselves into thinking that incremental improvements will make a big difference.

Needs tables give us an absolute reality check on what we are doing (especially when we start comparing needs addressed by products to needs felt by customers, which I will get into later).  We may be proud of ourselves for creating the industry-leading doo-dad, but if there is still a big gap between what we are delivering and what people intrinsically need, we are leaving a hole for competitors.  A careful needs analysis can give us this reality check and clarify what gaps remain.

Filling out the table gives us mastery over the competitive field.  This is part of the Understanding level at the base of the Design Pyramid.  You cannot go through the needs exercise without gaining clarity on your personal or your organization’s vast knowledge of the market.  This clarity makes it easier to understand the market and its trajectory, makes it easier to make strategic product decision and it makes it easier to communicate them.

Try this at home

Thinking in terms of needs develops our x-ray vision into the essence of the products.

If you want to try this out, try adding these comparison points to the needs table:  the Honda Insight, the General Motors EV1, a Ford Escape hybrid SUV and the first generation Prius sold in North America, and the Smart Fortwo.

If you want to jump ahead and start formulating your own needs spaces, try this:  pick up some simple product close by, like a mechanical pencil or a coffee cup and ask yourself: what features make this distinct from its alternatives and competitors?  What needs do those features fulfill?  On a scale of 0 to 3, how would you rate each comparison point on each level of need?  Trying this on simple products will help you get used to thinking about products at their essence.

See also:

• Needs Analysis Part 1: Rating Products by Needs
• Other examples of needs analysis: Reusable shopping bags | Moviegoing

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