Comprehensive Guide: How to understand what your customers need based on qualitative interviews

Understanding customer needs is crucial for any business aiming to create products or services that truly resonate with their target audience. Qualitative interviews provide rich, detailed insights into customer experiences, preferences, and pain points. However, the real challenge lies in extracting meaningful, actionable needs from these conversations.

At my company FunnelBud, we recently did such a study, which has resulted in a clear understanding of who our customers are and what they need. It will allow us to market effectively to the right people, and build a feature roadmap that we believe will truly resonate with our customers.

We learned a lot during this research. In this post, I’d like to share publicly what we learned – as we found these lessons truly valuable. Hopefully, by reading this, you can also benefit by understanding how to find out what your customers actually want.

This post will assume that you’ve already interviewed your customers, and we’ll not go through the actual interview methodology or which questions to ask. In our view, there are a lot of methodologies already covering this. However, we didn’t find any satisfactory way to actually interpret the interviews that would work for us. So in this post, we’ll guide you through a deep understaning of:

• What a need actually is
• How to find deep underlying needs behind things customers say in interviews
• How to use those needs to understand your customer segments

We’ve been heavily inspired by Strategyn and their Jobs to be Done methodology, but adapted it for a smaller company with less resources. Read more about their formal methodology at: https://strategyn.com/.

Why we can’t just do what customers ask us to do

When talking to customers, they’ll often state problems they have, things they like or don’t like about your solution, things they like about competitors, or things they’d like you to develop. None of these things are needs. They are perhaps:

• Benefits
• Problems
• Solutions
• Something else?

Neither of these things can be used effectively to understand who your customers truly are, segment them, and innovate solutions that will deeply satisfy them.

The reason is, in short, if you do so, you’ll just be a copycat or you’ll “build a faster horse”.

In order to win in the marketplace we need to precisely understand the factors that define the segment that we are best fit to serve, why we are best fit to serve that segment (the needs we are best equipped to satisfy), and how to innovate to serve those needs better than anybody else.

The starting point is to understand the underlying needs behind all those different types of statements that our customers provide in interviews. This is crucial because:

1. Needs persist through time, unlike solutions.
2. Needs have a causal factor, and it’s these factorst that will ultimately define the customer segment we will serve.
3. Focusing on needs allows us to innovate more effectively, rather than simply implementing customer-suggested solutions.

By concentrating on needs, we avoid putting the burden of innovation on the customer. While customers are experts in knowing what they’re trying to achieve, it’s our expertise and our role to solve those needs. We can do so much better than our customers – otherwise we shouldn’t be in this market. This approach prevents us from merely “building faster horses” and opens up possibilities for true innovation.

The challenge lies in extracting those needs from whatever customers tell us, and encoding them effectively. What should we look for in the answers, and how do we uncover the underlying needs behind what customers say?

Examples of needs underlying customer statements

Hypothetical Example: Sawing Machine Needs

– “It’s hard to make straight lines” → Easily cut straight lines

– “I’m trying to cut wood indoors” → (Context for understanding the specific group’s needs)

– “I hate when there’s debris everywhere” → Minimize the amount of debris when sawing

Real Customer Example from FunnelBud

Customer: “I want ready-made templates that I can use to launch customer campaigns” 

→ Why: “Because it’s time-consuming”

→ Need: Quickly build customer campaigns

Our better innovation: “AI that asks you what your campaign should achieve, then builds a draft for you that you can edit”

What is a need?

Our goal is to extract the thing from customer statements that allow us to:

1. Innovate solutions that create customer satisfaction
2. Put different customers into different groups, and point to the causal factors that lead them to belong to these different groups

We’ll call this “thing” that we extract a need. Thus, the definition of a need would need to satisfy these requirements:

• Solution agnostic:
  • If the need is tied to a solution, it is not tied to something fundamental about the customer and therefore won’t allow us to segment customers into different groups based on some underlying factor about them that makes them different.
  • If it’s tied to a solution, our ability to innovate is limited by current technological paradigms or solutions.
• Devoid of solutions in how it’s stated: Otherwise it’s not a actually a need, but a gap in current solutions that customers use. While solving such gaps might be valuable, it will limit your ability to innovate (because any innovation you come up with must be attached to current solutions) and be vulnerable (because improved or new solutions might render the need you found worthless).
• Persistent through time: If the need we find is not persistent across time, it means that it is not something fundamental about the customer, but rather tied to something about the current technological paradigm. This presents the same problem as in the previous points (segmentation and vulnerability).
• Specific enough to allow us to innovate a solution for it: Otherwise it won’t allow us to innovate sotuions that create customer satisfaction.

To test if you’ve extracted a true need, check it against these criteria. If it’s still not clear, you can look at the goal – why are we trying to extract needs in the first place – and ask yourself if the thing you extracted allows you to reach those goals. Otherwise, ask “why” to dig deeper into the underlying need.

Finding the Optimal Abstraction Level

When formulating a need, you have the opportunity to make it more or less generalized and abstract. By asking “why” multiple times, you will get higher level and more abstract needs. The challenge is to know when to stop – i.e. how specific a need should be.

Deeper needs allow for more innovation but may be less tangible to customers.

Shallower needs are more immediately recognizable but may limit innovation.

The right level depends on runrate. If you have a long runrate, you can afford to spend considerable amounts on more revolutionary innovations that satisfy more fundamental needs.Stop at a level where you can innovate a solution within your desired timeframe and ROI expectations.

How to formulate needs statements

While Strategyn insists on a specific format ([Direction] [something measurable] [verb] [context]), we find that for our purposes, we don’t need to be that specific. Instead, we give two options:

A) Natural language method

   Format: ([Easily and/or Quickly]) [verb / know that / ensure that] [something is done / achieved]

   Example 1: “Easily send a message to a customer”

   Example 2: “Easily and quickly know that your customer received your message”

   Example 3: “Ensure that a salesperson can gain access to the customer list”

B) Strategyn method

   Format: [Direction] [something measurable] [verb] [context]

   Example 1: “Minimize the amount of debris when cutting a wood”

   Example 2: “Maximize the likelihood that the cut gets completed”

   Example 3: “Minimize the time it takes to log in to the software”

Choose the formulation that makes the need easy to understand and unambiguous.

Practical step-by-step approach to extracting customer needs from a transcript

Extracting from Individual Transcripts

1. Read each statement, trying to understand the underlying need.
2. For problems or solution hints, ask yourself why the customer would say this.
3. Write down needs in a sheet with columns for Customer, Needs statement, and Supporting quotes.
4. If unsure about a need, mark it with a question mark for later review.
5. Append new quotes to existing needs if they support the same need.
6. Merge and refine needs as you go, consolidating similar statements.
7. After completing the transcript, review and reformulate all needs statements.
8. If time allows, re-read the transcript to catch any overlooked or misunderstood needs.

Consolidating Needs Across All Customers

1. List all needs from all customers and extract a complete list of unique needs. Best to do this in a sheet.
2. Create a column where you create a new and consolidated needs statement that replaces whatever is on the left side of the same row. Make this a dropdown with unique values of itself (you can achieve this easily in Google Sheets or Excel by using validation based on values in the same column). Go through each need until you’ve consolidated them all into fewer needs statements capturing all needs, but where you’ve replaced the same need formulated in multiple different ways (left column) with a single statement that replaces those different formulations (right column).
   1. OPTIONAL STEP: To make the following steps quicker, you can take a shortcut by asking an LLM to group needs together. As of writing this (2024-07-06), it’s unlikely to get it completely correct, but it will usually be quicker to edit the results it gives you to do the below steps, rather than doing it all from scratch.
3. In your list of all needs from all customers, create a new column where you copy in the new needs statement into a new column.
4. While doing this work, it’s likely that you’ll gain new insights and may want to reformulate, edit or create new needs from the transcripts. That’s good as it will continue to increase the quality of your understanding and extraction of real and actionable needs from the transcripts.

You will now have a list of consistently formulated needs across all customers.

It’s helpful to put this in a sheet with customers in columns and needs in rows. You can then proceed to group needs based on causal factors they might have in common. Here’s an example of how that might look:

With this in hand, you are now equipped to proceed with segmenting your customers based on which needs they have expressed, and hypothesizing unique customer segments based on which needs they have and what factors cause them to have these needs.

Segmenting Customers Based on Needs

1. Identify the causal factors that lead different groups to have similar groups of needs (based on the grouping of needs you made above).
2. Define customer segments based on these factors and their associated needs.

Here’s an example of how that might look:

This will be a subjective, iterative process. We recommend spending quite a lot of time creating different hypotheses and testing them against actual needs that the customers have, who those customers are, and what they said.

After doing this, it is likely that you’ll end up with clear cut customer segments, differentiated by factors that both describe the segments, and explain why they have the needs that they have.

Next Steps

Choose which segments to serve based on:

• Which needs you’re most likely to satisfy effectively
• Where you have a sustainable competitive advantage

Use Porter’s “Competitive Strategy” book, “What is strategy” article, and “Understanding Michael Porter” book for guidance on strategic decisions.

By following this methodology, you’ll be able to extract meaningful customer needs from interview transcripts, allowing you to develop more targeted and effective solutions. Remember, the key is to focus on the underlying needs rather than just the stated problems or requested solutions. This approach will guide your innovation efforts and help you create products that truly address your customers’ most important needs. Focus on the right needs for a segment you can serve effectively, and you’ll have a long-term roadmap for both product innovation and marketing that will allow you to create a sustainable, profitable company that your chosen group of customers love.