book.chapter Identify customer needs opportunities

In the dynamic landscape of customer relationships, the sale is often misconstrued as the culmination of the interaction. However, a more strategic and beneficial approach is to see the sale as merely the beginning of an ongoing partnership. This paradigm shift requires a deep understanding of how clients interact with your product or service post-purchase, including usage, maintenance, payment, storage, and disposal. By immersing yourself in these financial activities, you can create additional value for both the customer and your business. The economic life of a product or service extends far beyond its initial cost. In fact, the network of economic events that surround its use can exceed the purchase price by a factor of ten to twenty. This expanded value chain is rife with inefficiencies and customer pain points. By identifying and engaging with these areas, businesses can tap into significant revenue opportunities. Customer demands can generally be categorized into three levels. The first order encompasses the core product or service. The second order involves the logistics of acquisition, delivery, billing, and payment. The third order, which is often the most overlooked, pertains to the broader economic impact of using the product or service. It is within this third order that demand innovation truly thrives, as it uncovers commercial opportunities to meet more complex customer needs. Addressing third order needs can catalyze growth in several ways. It enhances customer loyalty by focusing on more than just price, as you attend to their broader requirements. It allows for the creation of integrated offerings, which can open up new markets that were previously inaccessible. Moreover, it enables the transformation of improvements in the client's value chain into new revenue streams through various models such as outsourcing fees, usage charges, output guarantees, and subscriptions. Cardinal Health exemplifies a company that has successfully identified and catered to third order customer needs. Originating in pharmaceutical distribution, Cardinal Health expanded its services to help its retail pharmacy customers navigate the complex economics of their industry. The company provided tailored information systems for inventory control and purchasing expertise. It also offered a suite of administrative services to pharmacies. For hospital groups and managed care providers, Cardinal developed an automated medication dispensing system that enhanced accuracy. Furthermore, it provided drug manufacturers with a comprehensive suite of logistics, outsourcing, contract manufacturing, and other specialized services. By extending its reach into these various aspects of the economic chain, Cardinal Health not only saw double-digit growth in revenues and operating profits but also added over $25 billion in market value over five years by meeting these higher order needs. This approach to customer relationships and value creation is not just about selling a product or service; it's about becoming an integral part of the customer's ongoing economic activities. By doing so, companies can not only increase their revenue but also build stronger, more resilient relationships with their customers. The key is to recognize that the sale is not the end but the beginning of a journey where the true potential for growth lies in the untapped needs and inefficiencies that surround the everyday use of a product or service.