Editor's note: Cliff Havener is president of Growth Resources, Inc., a Minneapolis-based consulting firm.

The most functional and fundamental means of identifying a market is by its systems of needs. By literally seeing the purchase decision maker's problem through the decision maker's eyes, it is quite easy to determine:

  • what combination of product characteristics represent real value,

  • how to communicate the product for the maximum perception of value, and, once that's done,

  • how likely the respondent will be to buy. This may not be a unique point of view. What is unique, however, is the ability to precisely define a set of benefits that meets needs and can accurately predict purchase response. There are some sophisticated software packages that provide some insight, but they don't incorporate enough context to allow the level of clarity and predictability that's possible when a perceptive mind looks at market needs.

The real challenge in "need research" is in consumer markets, where individual values drive attitudes. Attitudes towards a subject, combined with the potential user's goal for that subject, form attitudinal need systems. When systems of perceived benefit are interfaced with need systems, "unmet" or partially satisfied needs are identified.

However, this article is about need research in industrial markets, which is considerably more straightforward than in consumer markets, although it follows the same process. What makes it "easier" is that each respondent's job-not his or her personal values and attitudes-pretty well defines his or her priorities toward the subject. Consequently, markets are more homogeneous, generally speaking, with less individual variance from prospective user to prospective user.

The appropriate starting point is to segment the market by the variables that create different perspectives about the same subject. For example, we recently did a study designed to "find a home" for an electronic controller for air compressors.

Specifically, the study had to identify the "problems" users of compressed air had with this practice, to determine those the controller could solve. Therefore, the market segmentation, based on attitudes and objectives about use of compressed air, was designed to identify different problems held by different groups of users. It was to differentiate need systems.

This specific controller handled on centrifugal compressors, not rotary or reciprocating compressors. Step one was to identify industries with a high incidence of centrifugal compressors in use. The next was to identify those industries where consumption of compressed air was a major component of total plant energy use. The perspective that drove this cut is that people make greater investments to solve big problems than to solve little ones.

Once we had a list of those industries that were the heaviest consumers of compressed air, we then did the actual segmentation based on the nature of demand on the compressed air being produced and used. It was likely that an industry such as textiles that uses compressed air continuously to drive precision equipment would view its operations-and hence, its needs-very differently from an industry that used compressed air in batches, on fairly coarse equipment such as air powered hand tools, like many plants in the automotive industry.

The focus in designing a theoretical segmentation is identifying those fundamental factors that are likely to create very different definitions of needs from one type of prospective user to another.

The next step in the process was to define the purchase decision chain, that is, all jobs or positions in the company that influence the purchase decision. The influence may be direct, as in evaluation of the solution offered to the problem, or it may be indirect, as in the definition of the problem itself. Job titles will often change from industry to industry, even from company to company. The levels of influence of each player in these multilevel purchase decisions will change from company to company. Therefore, in scheduling interviews within any company that represents a market segment, it's critical to identify who the "players" are in that company, and then talk to all of them.

Remember, the product-the solution to their problem-has to be seen as the best solution to the problem by each purchase decision contributor in order for it to pass through all the screens and be actually purchased. Each of these "screens" is different-each job has different priorities and concerns. Because of that, the "solution" actually must be positioned differently to the different need systems or points of view that make up the company's purchase decision process.

In the case of the compressor project, we talked to: powerhouse managers who were ultimately responsible for the performance of the compressed air supply system; plant based manufacturing engineers; corporate based manufacturing and energy management engineers; plant managers and plant comptrollers. The one job didn't interview was "purchasing agent," because the definition of both the nature of the problem and desired criteria for a solution came from various combinations of the above jobs.

Once we knew who to talk to, the next trick was to find out how to talk with them so as to obtain their whole view of the situation. Most so-called need research focuses too tightly, too soon, on the application or use situation. Interviewers might open by asking, "How do you feel about how your compressors are operating now?" or worse, assume a benefit of this product and present the "solution" in whatever choice of words they and/or their client dreamed up without understanding the potential buyer's perspective. Then they might ask for a reaction to the "concept."

To obtain "context," start with the person's job responsibilities. Define his or her priorities for doing the job. Determine how the person in the job sees his or her own career advancement, because when it comes to any decision, that decision will almost always be primarily driven by that person's perception of "how to get ahead."

Once this has been defined, then move to how the product application at hand does and does not support "doing a good job." For example, in the compressor situation, one plant manager whose number 1 priority was to increase plant productivity had a list of eight areas of productivity that needed to be tightened up. Compressed air wasn't on the list in any form. How receptive do you think he would be to any promise of solving compressed air problems? How articulate will he be at describing problems with compressed air? Once you know the subject is so low on a respondent's priorities that it's effectively a non-subject, end the interview. Whatever he might say after that is worth nothing.

Another plant manager had just received a top management directive to reduce energy costs. He'd also been told by the corporate energy engineer that compressor blow-off (oversupply that is exhausted into the atmosphere and thus, wasted) could be as much as 30% of his compressor energy consumption and 15% if his total energy cost. Now, in the context of "doing a good job," how likely is this guy to pay attention to compressor issues?

From this level, we get even more specific. The respondent defines the nature and dimensions of the problems as he sees them. That's his "need profile." For example, assuming that blow-off is occurring at the estimated level, why? Well, in his view, it's a combination of several factors:

1. Production changes its demand for compressed air significantly, hour to hour and shift to shift.

2. The powerhouse uses different combinations of compressors to supply different demand levels.

3. Rotaries come up fast but are inefficient for constant demand. Centrifugals have the opposite characteristics, etc.

There are several more factors that constitute his view of "the problem" and often, these come from specialists like corporate energy engineers and manufacturing design engineers.

Once the whole view of the usage/ problem situation is defined, then isolate which factors or factor interactions contribute most to the essential problem. In the compressor situation, the essential problem is waste, due to blow-off.

In this plant manager's mind, the primary cause of blow-off (key factors) was an inability of the powerhouse staff to anticipate changes in demand and then figure out which compressors to reduce or increase, and by how much, relative to changes in demand, so that their combined output fluctuated in sync with demand. This synchronization, he believed, would eliminate blow-off caused by over supply yet would supply all the power needed up and down the demand cycles.

The combination of understanding his goal, his motivation, his view of the whole condition where the problems exist and his view of the major factors causing the problem come together to form a picture of "the problem" which is both complete and accurately emphasized.

The interviewing process I've just described can be diagrammed as shown.

The complete definition of "the problem" in this example is: "To look good in the context of management's directive to reduce plant energy costs, this plant manager is seeking a means of instantaneously adjusting and balancing a bank of compressors to bring it into synchronization with fluctuating demand, thereby reducing waste sufficiently (50 % or more) that it will be reflected in reduced plant energy costs on the plant's operating statement."

If the electronic controller could produce these results, what the plant manager would buy would be "sufficient reduction in plant energy costs so that it was clearly reflected on the plant's operating statement" because he's buying career advancement, not an electronic air compressor controller.

If the manufacturer doesn't understand the whole problem and doesn't show this plant manager how his electronic controller will very likely produce lower energy costs on the plant's operating statement, he's not likely to "sell" this prospect.

If you, the interviewer, know what the product can do, and you've done the need research accurately, you should know the respondent's likelihood of purchasing it before you ever communicate the product's attributes to him and ask him how likely he is to buy. But doing so is a good test. If the respondent's answer doesn't match your expectation, you've missed something along the way. Now you get to go back and find out what it was.

Identifying groups of prospective buyers who have common views of their problem creates true definitions of markets based on attitudes. Identifying the view of the problem that most highly values your solution creates true target market definition.