Understanding Your Customers -A Key Business Success Factor

One of the reasons behind Walmart’s success was Sam Walton’s knowledge of customer’s needs, desires, wants and pains. He lived among his customers as one of them.

The foremost factor for a successful business is an in-depth understanding of its customers.

It is important to understand the needs, desires, fears, wants, and limitations of your customers. To know them, we need to observe them. The more we observe them, the sooner we begin to think from their shoes. As we began to think from their perspective, we would sooner become one of them. We are them & they are us.

If you become them, you would be making business decisions from your consumer’s perspective or user’s perspective & your business would grow rapidly.

OBSERVING CUSTOMERS -HONDA SUPER CUB

In the 1950s, the size of the American Bike market was small but had rapid growth potential due to changing economic conditions. The market also had only a few competitors and largely dominated by Harley Davidson. Sensing an opportunity to establish a foothold, Honda wanted to enter USA two-wheeler market.

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As Honda had no in-depth understanding of the American consumers, it looked up to Harley Davidson & it’s products.

Harley Davidson’s target segment was Americans who required higher capacity motorcycles as they travelled long distances. On the other hand, Honda was well known for building affordable smaller capacity bikes for middle-class Japanese people who mainly used it for short-distance travelling. It’s the polar opposite.

Benchmarking your competitors, their products, behaviour and strategy are a distraction & it is noise. They are not proper market signals. To get precise market signals, a company has to look at users/consumers.

“If you are trying to incorporate everything that your competitor does, then you won’t be doing what he or she is not doing”.

Honda fell into the trap, ignored its unique strengths and introduced a 250cc, 305cc bikes similar to Harley Davidson’s models.

Unfortunately, Honda’s bikes were not robust enough to withstand the ruggedness of long-distance travel. Customers faced a lot of maintenance problems(frequent clutch failure, oil leakage etc..). This affected sales. Honda could sell only 1315 motorcycles in the first year.

Due to frequent maintenance problems, the ‘American Honda’ team stopped selling the bikes and sent them back to Japan. They advised the Japanese team to re-design the vehicles for better reliability.

Meanwhile, the Honda staff in the USA started driving 50cc Super-Cub in the streets, hills for running errands. They observed that Supercub was gaining people’s attention.

The staff wondered about this phenomenon. They dug deep into the minds of people to understand the reasons behind their interest in the Super-cub.

The staff noted that there’s a section of people, who were looking for a small, inexpensive, convenient vehicle for running short trips around town. Higher CC bikes did not meet their requirements and also expensive. Harley Davidson and other brands had ignored this segment. Availability of a niche market requirement for Honda!.

The Honda team’s research also showed that the demand for short bikes would be multiple times more than higher CC bikes.

Honda redrew all its US plans. Their marketing team began to focus on promoting only Super-Cubs.

By 1965, the sales grew to 227,000 motorcycles. The revenue grew from $0.5 million in 1960 to $77 million by 1965. (Reference: Establishing American Honda, Harvard Business School working paper by Ramon Casadesus and John Heilbron)

The Honda team’s understanding of American users transformed their business. They could identify the hidden market segment and understand the customers because they lived among them. They observed the customers. Eventually, they lived the life of a customer. They also found ‘Super-cub’ bike convenient to go for errands.

When you live like a user, you would understand the hidden needs and desires. Your needs are your user’s needs. You can connect your product easily with the user.

OBSERVING CUSTOMERS -STARBUCKS

Jerry, Siegel and Gordon, the founders of Starbucks, were so knowledgeable and passionate about coffee beans, the wide-variety taste palettes and roasting process. They were one of the coffee connoisseurs. Through coffee interests, they often met other coffee lovers and interacted with them. They loved spending time in discussing coffee.

Jerry and Gordon saw how the fellow coffee lovers were struggling to procure good quality coffee beans. Being a user themselves, they could understand the frustrations of not being able to locate a good coffee source. This inspired Jerry, Siegel and Gordon to open the first store called ‘Starbucks’ in Seattle whose purpose was to sell authentic coffee beans to a tiny niche of gourmet coffee lovers.

Howard Schultz -One man who transformed Starbucks from a small store selling coffee beans to a retail giant is Howard Schultz. He introduced the ‘Social aspect’ to drinking coffee.

How Howard got the idea? Because he kept observing the customers. It helped him to understand the changing attitudes, needs of customers. After joining Starbucks, he visited nearly 500 coffee espresso bars in Milan and Verona and observed everything. He took notes, photographs, and video graphed baristas & customers in action. He noted customers’ local habits, behaviour and their ‘jobs to be done’ within particular contexts.

Without those in-depth understanding of customers, Starbucks would have vanished from the market.

Note: The above content is part of the following book(Available on Amazon)

21 KEYS to SUCCESS in BUSINESS -A Guide for Every ASPIRING ENTREPRENEUR by Shah Mohammed M.

Written by

Secular Humanist, Business Growth Consultant, Design Thinker, India. Reach me at mmshah8@gmail.com. or https://www.shahmohammed.com

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