Understanding customers

Customers who buy

The market research you may have conducted earlier was broad and strategic, describing the environment in which your new idea and innovation might achieve success. You now need to be more specific and targeted. If you don't know who and where your innovation's customers are, how can you sell to them?

You should examine these issues to assess your customers' motivations:

• What factors affect purchase decisions?
• Who is likely to buy? Will some buy earlier than others?
• What affects the timing of customers' purchase decisions?

What motivates customers to buy

A customer's decision to purchase generally follows a series of 5 steps:

1. Problem recognition

The buyer recognises a need or a problem to solve.

2. Information search

The buyer actively searches for information about how to fulfil the need or solve the problem. They usually identify a number of alternatives.

3. Evaluate alternatives

Customers consider 6 factors when evaluating alternatives (Rogers 1995), which may include new ideas and innovations. From a customer's perspective, the decision to buy a new technology is high-risk. Customers don't want to make bad decisions because of market or technological uncertainty, switching costs or training needs. Consider how your innovation measures against these factors:

• Relative advantage – do the benefits of adopting your new technology outweigh the costs?
• Compatibility – how similar to existing ways of doing things is your innovation?
• Complexity – how easy to use is the new product?
• Trialability – can your new product be tried on a limited basis?
• Ability to communicate product benefits – how easy is it to tell prospective customers about the benefits of owning and using your new product?
• Observability – how observable to the consumer are the benefits of using the new product?

Assuming your customers will understand the usefulness of the innovation is not enough. Your sales and marketing should communicate how your innovation addresses these 6 factors.

4. Purchase decision

Once the buyer has made a decision on the best alternative, they will negotiate a purchase price and buy your new innovation.

5. Post-purchase evaluation

Having purchased your new product or service, the buyer will assess whether it has realised its potential or expectation. Their response at this stage will likely determine what sort of relationship they will have with you and your future innovations.

References

Rogers, Everett M. 1995. Diffusion of Innovations. 4th ed. New York: Free Press.