How to Identify Latent Customer Needs

By Josip Lazarevski » 7 min read

Companies can find consumer demands that are unknown even to customers themselves by learning from their market experiences and observing the experiences of collaborators and rivals. Doing so can improve the odds of creating a popular product.

A primary factor in product failure is that it doesn’t meet a meaningful customer need. Only when you identify what customers genuinely want can you develop a win-win product solution that creates real value for your customers.

Experiential Market Understanding

To uncover consumers’ latent needs, consider looking at the consequential consumer experiences that might reveal causal patterns of customer problems.

For instance, when we work on a solution for a digital ad agency, we may work to identify innovative new products by analyzing “owned” data sets of user behavior.

Our data mining for clients is typically proprietary, and the details of those projects need to remain under wraps. But a good example of experiential marketing analysis is the work done by Netflix. Over the years, the company has conducted numerous experiments to identify latent customer needs. The most famous of these is their Netflix Prize.

The Netflix Prize was an open competition for the best collaborative filtering algorithm to predict user ratings for films, based on previous ratings. This was done without any other information about the users or the films. Without any direct interaction with users, Netflix wanted to go back in time and learn about their tastes in films to improve customer satisfaction with future recommendations.

 

Netflix prize image

 

Source: thrillist

 

Netflix awarded a $1 million prize to a developer team in 2009 for an algorithm that increased the accuracy of the company's recommendation engine by 10 percent.

The company never actually used the algorithm as it was written, but they did learn a great deal about what films were most meaningful to segments of users – priceless information! That led to improvements on their platform that increased profits and bolstered the brand overall.

Vicarious Market Understanding

A company can also learn about its customers by monitoring other firms' market experience.

Because these vicarious experiences are rooted in personal contexts, the understanding can boost analyses of market events even for firms in different situations. This type of learning can lead to thinking well past traditional ideas and help identify novel causal patterns that signal hidden needs.

For example, Apple was able to discover a hidden consumer need thanks to observations of the market experience of Napster, the company that developed a software application that let users download songs online.

 

Itunes Image

 

Source: arstechnica

 

Based on the success of Napster, Apple learned that many people would prefer to take only a few songs of an album and not the whole thing. It also recognized that musical tastes follow a long tail that is impossible to indulge with physical CD stores but can be supported online.

While Napster was a free service, the key data point was that people just wanted to pay less than the high prices of CDs that music labels were forcing at the time. Apple took advantage of that and hit the market with the iPod and their market-leading iTunes service.

Which Method Can Serve You Better Today?

Companies and private business owners should submerge themselves in data about the real lives of consumers to uncover areas of discomfort and watch for the novel, unexpected events that contradict our expectations of customer behavior. Both methods of accomplishing this – using owned data (experiential) or the behavior observed by other brands (vicarious) – can be applied with equal effectiveness. 

But given a choice? Choose the latter method: vicarious discovery.

That’s because in a fast-paced, turbulent market, external data is for more plentiful than your own and often just as rich in insight.

Train yourself to be a Market Detective, and watch for consumer behavior coming from other firms and individual entrepreneurs, especially behaviors that surprise you. If you look in the right place, your business could discover the unmet needs that lead to your own breakthrough product – your own iPod product or iTunes service! 

About TA Digital

TA Digital is the only global boutique agency that delivers the “best of both worlds” to clients seeking to achieve organizational success through digital transformation. Unlike smaller, regional agencies that lack the ability to scale or large organizations that succumb to a quantity-over-quality approach, we offer resource diversity while also providing meticulous attention to the details that enable strategic success.

Over the past 20 years, TA Digital has positioned clients to achieve digital maturity by focusing on data, customer-centricity, and exponential return on investment; by melding exceptional user experience and data-driven methodologies with artificial intelligence and machine learning, we enable digital transformations that intelligently build upon the strategies we set into motion. We are known as a global leader that assists marketing and technology executives in understanding the digital ecosystem while identifying cultural and operational gaps within their business – ultimately ushering organizations toward a more mature model and profitable digital landscape.

Recognized in 2013, 2014, 2015, 2019, and 2020 Inc. 5000 list as one of the most successful technology companies in the United States, TA Digital is pleased also to share high-level strategic partnerships with world class digital experience platform companies like AdobeSAP, and Salesforce and possess global partnerships with industry leaders such as commercetoolsSitecoreEpiserverElastic PathBigCommerceAWS, Azure and Coveo.

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WRITTEN BY:

Josip Lazarevski

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