Understanding customers is key to transforming your business

Understanding the psychology of your customers can help you build better products.
22 June 2018

Understanding your customers does not equal to the customer being always right. Source: Shutterstock

Products fail. Blood, sweat, tears, and money have been poured into projects that were ultimately trashed.

Even Google has killed off many failed projects; at last count, there have been 34 project graves at the Google Graveyard.

A lot of these failures comes down one fact – users don’t find the product useful. What makes it more difficult, is when the product is a direct request from customers, but still fails to deliver business results.

In an interview with Tech HQ, Nir Eyal, the author of Hooked, said that not properly understanding the customer is a common trap for businesses.

It is common to see companies with fancy technology showing off interesting features of their products. Oftentimes, these might be a response to what customers said they wanted. However, regardless of how interesting a piece of technology is, products that fail to solve a customer problem will not be a good market fit, leading to the product’s demise.

“There are all kinds of things that customers will tell us they want but then when it comes to their actual behavior, there’s a discrepancy there,” he observed.

He called this “articulatable” and “inarticulatable” needs. Customers can provide useful feedback to businesses based on the needs they are consciously aware of. However, a larger part of behavior falls into the category of inarticulatable needs. These are automatic behavior patterns that users are unaware of themselves, and thus unable to tell businesses about them.

For companies to fully understand their consumer’s needs, they need to understand the deep psychology behind customer behaviors.

To avoid falling victim to lost time, money, and effort due to failed products, Eyal detailed a concept called a GEM framework.

GEM stands for growth, engagement, and monetization; it serves as three main pillars for the success of a product.

Growth refers to a strategy for acquiring customers. The cost of getting a customer should be less than a lifetime value, which is the predicted amount of profit you will get from your customers.

Companies need to then find a way to engage the customers they’ve acquired, so that consumers continue to interact with the business. This means businesses can reduce the churn rate, as they don’t have to keep reacquiring customers.

‘That’s always the best thing to do. It’s much cheaper to keep a customer engage than to acquire new customers,” Eyal advised.

Finally, monetization is important for businesses to stay viable. It is an ongoing concern for businesses to understand how much to charge, to stay sustainable.

To help companies get started, Eyal noted three key points that companies should focus on when they build products.

  1. Truly understand the psychology behind how and why people use a certain product.
  2. Apply a psychological framework to customer behavior, not build a product and expect people to use it.
  3. Prioritise the features that should or should not be built.

He urged companies to build products, features, and specifications based on frameworks.

“It’s not just what the highest paid person in the company, or the venture capitalist, not even what the customers say we should do,” he explained.

Eyal recognized that prioritizing features is often the hardest. It is a challenge for product managers to decide what needs to be built immediately, later, or never. He stressed that frameworks are important to help businesses make those decisions.

Guesswork will only contribute to lost time and money, which often determines the success or failure of a startup. Those that succeed are companies that first understands what their consumers really want, and build those functionalities into the products.