Your business wants to sell more and more products or services to customers. But, you cannot sell anything that you want to sell! You can sell something that your customers want to buy and spend money on it. Because of that, it is important to understand the customer’s needs.
Many times entrepreneurs are making a mistake when they sell something that they think they must sell. In such a way, they simply don’t understand the real needs of the customers. Because of that, they suffer from a low number of customers and low income.
Two Negative Effects of Low Level of Understanding the Customer’s Needs
With this low level of understanding of the customer’s needs, there will be two different negative effects:
- A low number of satisfied customers and losing every unsatisfied customer.
- You will invest your cash in products and services that will stay on your stands or in inventory and cannot be sold.
Negative Effect #1: Low Number of Satisfied Customers
If the customers cannot buy something that they want, then they will become unsatisfied customers that will search for alternatives for your business where they can buy something that needs. However, what is more, important is that every new customer that will not satisfy their needs with your business will lose it as a customer. This means that all your investments into marketing to gain new customers will be for nothing.
Let’s see an example related to this. If you have 1000 current customers for a month and your marketing campaign is good, bring 100 new customers every month. In the table below you can see what happens in the next 3 months with the number of customers, you have with 30%, 20%, 10% and 0% customers with unsatisfied needs, respectively. See the results in the table:
As you can see, with the 30%, 20%, and 10% unsatisfied customers, you will continually lose the customers and this is the negative butterfly effect. This means that you will constantly lose your business potential energy into the marketing and current customers. Every improvement from 30% to 10% will give you a dramatic increase in that energy. However, with 0% of unsatisfied customers, you will have a positive butterfly effect. (For more about positive and negative butterfly effects you can read in Business Butterfly Effect – The Basics.) In this case, you will use the business potential energy in your marketing activities and also in your current customers. You can transform that energy into better income and profit for your small business.
Negative Effect #2: Losing Cash Because Low Level of Understanding the Customer’s Needs
In the second negative effect that comes because of the low level of understanding the customer’s needs, you will lose business potential energy stored in your cash and in the products that you are selling to your customers.
First, your cash has very big potential energy for your business. Without cash, you cannot finance basic business operations. Another thing is that your cash with great business potential energy will be stored in the products without strong business potential energy that you cannot sell.
For example, you have cash with great business potential energy. But, that potential energy must be transformed into the potential energy for the products or services that you sell. If you spend your cash on the product and services that do not bring added value to the customers, they cannot be sold.
In the next post, you can read about the steps that you must do to increase business potential energy with understanding the customer’s needs.