How to structure observations of customer behavior

In this video we introduce a value-in-use perspective to better understand what customers need.

Shift of focus to context and practices

Value-in-use is about what customers truly value when using your product or service. Entrepreneurs may benefit from this way of thinking about customer value because it shifts the focus to context and practices of use rather than to product or service attributes as in traditional marketing approaches. Developing products/services based on a thorough understanding of value-in-use likely yields better market success and decisions since they are better aligned with the true needs and practical problems of potential customers.

Mapping potential market segments

However, one must be aware of the fact that customer value or experience is an elusive term and can be very fluid and dynamic (Helkulla, Kelleher & Pihlström, 2012). This might complicate the capture of value-in-use for certain groups of customers and the exploration of viable potential customer segments. In this pursuit, it is therefore important to ask four basic questions: where, how, when, and why customers use certain technologies/products/services. These questions form the basis for collecting the data necessary to map potential market segments. Ideally entrepreneurs structure their observations of customer behavior along these four questions, for instance using the table below.

By repeating this exercise various times among different potential customers, entrepreneurs are able to identify similarities and differences in answers which then would lead to the identification of different segments in their market.

References:

Helkkula, A., Kelleher, C., & Pihlström, M. (2012). Characterizing value as an experience: implications for service researchers and managers. Journal of Service Research, 15(1), 59-75.

Vargo, S. L., & Lusch, R. F. (2004). Evolving to a new dominant logic for marketing. Journal of Marketing, 68(1), 1-17.

Woodruff, R. B. (1997). Customer value: the next source for competitive advantage. Journal of the Academy of Marketing Science, 25(2), 139.