Customer benefits are the key to understanding how competition effects companies. When a company segments the market by means other than how its products or services benefit its customers, it is unable to truly understand the competitive marketplace.
In this article, we introduce benefits and why they should matter to your company. We end with a quick example of how competitors move into your industry.
Let's begin with why you need to define your market in terms of benefits.
What Is a Market?
There is a tendency for people in marketing is to focus on a product or service they can see—and therefore to think of that product or service as "the market."
When viewed that way, however, the market exists at a narrow category or industry level. That, in turn, leads marketers to immediately focus on some vague notion of a "target market" and then go directly to personas, audience types, SIC codes, verticals, and so on, without ever stopping to think about what a market really is.
In addition, once marketers focus on products and services, they then focus on features, attributes, and characteristics.
It's perfectly natural to think that customers buy products and so they think about those products' features and characteristics.
People do think about those things, but is that why they buy something?
As the noted management and marketing legend Theodore Levitt has said, "People don't want to buy a quarter-inch drill. They want a quarter-inch hole!"
In other words, people ultimately want the benefits of a product or service.
I know you've heard of his quote, and probably thought it was cute. But Levitt was serious: He saw entire industries collapse because they didn't focus on benefits. (I'll discuss a recent example a bit later.)
If you're not sure whether Levitt is right, look around the room you are in and find something you own and like and ask yourself, "Why did I buy that?" Sure, it might have some appealing feature, but why did you want that feature?
By repeatedly asking yourself "why," and answering it, you will understand Theodore Levitt's central message.
Why Benefits
By focusing on benefits, marketers focus their attention on what customers are really buying.
In fact, you can think of a market as simply "a group of customers who want or need the benefits they derive from products/services that provide those benefits."
When marketers focus instead on features, attributes, characteristics, they focus their attention inward, toward the company and its products—and away from customers.
Now, that doesn't mean features, attributes, and characteristics aren't important… They are, because ultimately it's such product aspects that deliver the benefits that customers want.
But you first focus on customer benefits, and only later do you put your attention on the critical product aspects that are necessary to provide those benefits, because doing it in that order helps in three ways:
- First, you start by being customer-focused and obsessed with providing what customers really want.
- Second, it helps to avoid adding features that customers don't value and won't pay for.
- Finally, since competitors often enter a market by providing perceived greater numbers or volume of benefits than current providers, by focusing on customer benefits you avoid being blindsided by new competitors and substitute products.
What Are Market Benefits
To focus on benefits, we start by identifying the benefits that make up your market. But what are benefits? It turns out you can classify benefits into three types:
- Functional benefits, which solve a customer's problem and challenges (large and small) or conserve customer's resources (time, money, physical, psychological)
- Experiential benefits, which stimulate the senses and the mind and warm the heart
- Symbolic benefits, which facilitate identity building
B2B markets tend to be composed mainly of functional benefits, whereas you will find experiential and symbolic benefits mainly in consumer markets (and possibly some B2B markets)—experiential benefits such as when you go to a restaurant and have very tasty food, and symbolic benefits such as when you buy something that makes your feel inspired, proud, unique, connected, or validated.
Examples of Functional Benefits
Here are a few examples of generic functional benefits that various customers need in many B2B markets (along with a very short description). Notice how they all solve a customer's problem or conserve time, resource, etc.
- Reliability: doesn't break down and cause problems
- Ease of use/installation: doesn't take much time to get up and running
- Performance: makes things work faster, gets more done
- Customer support: provides help when you need it
- Compatibility: works easily with other devices/software
- Security/protection: makes sure everything is working securely
- [Affordable] cost/price: makes total cost of ownership reasonable
Benefits Help You See Competition Better
One reason benefits matter to companies and industries is that thinking about benefits avoids the well-known problem of marketing myopia.
In 1960, Theodore Leavitt discussed the classic example of how the invention of the automobile blindsided the buggy-whip industry. Had people in the buggy-whip industry defined their market in terms of the benefits that customers want (i.e., getting from point A to point B), they might have anticipated the impact of the automobile and adjusted accordingly.
Marketing myopia happens when we focus on a product, industry, vertical, or demographic instead of benefits that our customers want. Companies and industries can become blindsided by thinking too narrowly about their markets.
Consider the rise of rideshare services, such as Uber, as an alternative to taxicabs. Taxis can be traced back to 1640, when horse-drawn vehicles were available for hire. The modern taxi business was critical to many cities, such as New York, as it provided transportation in and around urban areas. Under the medallion system, taxis operated with limited competition.
Although they competed with other modes of transport—buses, subways, private cars, shoe leather—there was no other, more convenient way to get from one point to another in a city other than by hailing or calling a taxi.
When smartphones came out in the early 2000s, there was no attempt by the taxi industry to provide more control and certainty to consumers using that technology. Then along came Uber (2010) and Lyft (2012). Taxi companies could not believe that anyone would jump in a car with an unlicensed stranger. But people valued the benefits of hailing and paying for rides from their phones.
Meanwhile, what had made taxis dominant—the centralized dispatch systems, limits on the supply of medallions, industry regulations, and more—suddenly became liabilities.
How Do You Identify Benefits?
Here are a couple of ways to start identifying benefits:
- Observe customers in real-life usage situations. Observational studies can be highly useful for seeing where customers get frustrated, upset, angry, disappointed, confused, or exhibit other negative feelings from the use of a product or service.
Observational study is among the various research techniques that uncovered why cupholders in cars are so important to consumers. The nature, presence, and shape of cupholders can determine which car customers buy (if all else is equal). Why? They want the convenience of having their drink, their change, their sunglasses etc., at their fingertips when they're driving.
- Listen to customers—including unhappy ones. Focus groups and social media can be helpful in this regard. But pay attention to the benefits customers seek (not the features they want). You can use various available tools to listen in on via social media posts using keywords, such as your brand name and products. You can set up those tools to alert you at specific times or you can have someone regularly monitor it.
Need Help With Identifying Customer Benefits?
Benefits are central to marketing strategy. When you identify and focus on benefits, you ensure that you are not wasting money and energy in your marketing efforts.
This may be a new way of thinking about your market, but it's critical—especially when thinking about competition and breaking out of a commodity market.
Need a little help with identifying customer benefits?
We realize obtaining benefits that make up your market is not an easy task, and we are here to help. Get in touch and see how we can help you.
