ILLUSTRATION by ruth macapagal
Last week I wrote an article titled “Warning: Here is what every business needs to know about product and service development.” With artificial intelligence (AI) being the talk of the town, many readers approached me with the request to write more about the role that AI can play in the effective development of products and services. By “effective,” I mean 100 percent focused on customer needs.
As I have explained before, the number one obsession you should have as a business leader is with your customers. In an ideal world, you should anticipate their needs and wants. If you fail to do that, at least you should be in step with the needs and wants so you can truly satisfy them and dramatically improve their loyalty.
Your golden ticket: Lifetime customer value
Your primary focus should always be the question of how you can serve your customers best so that you maximize their lifetime value. Anyone can sell something to a customer once, but the real test of your goods and services is: How often can you sell to that same client? And how many other customers are they going to refer to you?
Lifetime customer value (LCV), also known as customer lifetime value (CLV), is a crucial metric in the business world. It represents the total amount of money a customer is expected to bring to a company over the entire duration of their relationship.
Businesses use LCV to make informed decisions about how much to invest in acquiring new customers, retaining existing ones and providing quality service. It helps companies understand the long-term impact of their customers, guiding strategies to build strong relationships and maximize profitability over time.
AI and the needs-based approach to developing excellent products and services
AI emerges as a powerful ally for CEOs and business owners in the quest to develop products and services that align seamlessly with customer needs. AI technologies are transforming industries across the board and when harnessed effectively, they can revolutionize the needs-based approach, driving efficiency, innovation and customer satisfaction to new heights.
1. Data-driven customer insights
AI excels at processing and analyzing vast amounts of data in real-time. Businesses can gain deep insights into customer behavior, preferences and pain points by leveraging AI-powered analytics tools. These insights are invaluable for understanding the nuanced needs of various customer segments, guiding product development decisions and tailoring marketing strategies to specific audiences.
2. Predictive analytics for trend identification
AI-driven predictive analytics sift through historical data to identify emerging trends and anticipate future customer needs. By leveraging these insights, CEOs and business owners can stay ahead of the curve, proactively adapting their offerings to meet changing demands. This demonstrates a forward-thinking approach and positions the business as a market leader.
3. Personalization at scale
Personalization has become a hallmark of customer-centricity. AI algorithms can analyze customer data to create highly personalized experiences, from tailored product recommendations to customized marketing messages. This level of personalization enhances customer satisfaction and engagement, demonstrating a deep understanding of individual needs.
4. Natural language processing (NLP) for customer feedback analysis
AI-powered NLP enables businesses to analyze unstructured customer feedback from sources such as social media, reviews and customer service interactions. This technology can identify sentiment, extract critical themes and pinpoint pain points. CEOs and business owners can then use this information to make data-driven decisions on product enhancements and service improvements.
5. Rapid prototyping and testing
AI can streamline the prototyping and testing phase of product development. Generative AI models can create design options based on user input, accelerating the ideation process. Additionally, AI-powered simulations can predict how customers interact with new products or services, allowing for informed adjustments before launch.
6. Chatbots for real-time customer interaction
AI-powered chatbots can engage customers in real-time conversations, providing instant assistance and gathering valuable feedback. This direct interaction enhances customer support and serves as a continuous source of insights, aiding in the refinement of offerings to better meet customer needs.
7. Market segmentation and targeting
AI algorithms can segment markets more precisely based on various variables, including demographics, behaviors and purchasing history. This enables businesses to tailor their offerings to specific segments, ensuring each product or service resonates with the intended audience’s unique needs and preferences.
8. Continuous learning and improvement
AI systems are designed to learn from data and adapt over time. Businesses can use AI algorithms to track product performance, customer feedback and market trends. These insights can guide iterative improvements, ensuring products and services align with changing needs.
Human or AI?
As I already said many years ago, the answer is always “both”. Incorporating AI into the needs-based approach is not just about adopting new tools; it’s always about creating a synergy between human insights and AI capabilities.
In retail inventory management, for example, retailers can blend their understanding of customer buying patterns with AI-driven demand forecasting. Take Walmart. It uses AI algorithms to predict demand for products at its stores. This information is combined with human insights about local events and trends, enabling the company to stock shelves more accurately based on both data-driven and human-informed decisions.
Financial services: Financial advisors can integrate their expertise with AI-powered data analysis to offer personalized investment recommendations. Betterment, a robo-advisor platform, combines AI algorithms with human financial planners. While AI optimizes portfolio allocations based on customer risk profiles, human advisors provide additional insights and tailor strategies to unique client circumstances.
Customer support: Customer service representatives can combine their interpersonal skills with AI-driven chatbots to provide comprehensive assistance. Bank of America’s Erica is an AI-powered virtual assistant that helps customers with tasks such as account inquiries. If a complex issue arises, Erica can seamlessly transfer the customer to a human agent for personalized support.
Manufacturing optimization: Manufacturing engineers can collaborate with AI systems to enhance production efficiency and quality. For example, Siemens employs AI to monitor manufacturing processes and detect anomalies. Engineers work alongside AI to analyze data and make decisions about adjustments to improve product quality and reduce defects. INQ
Tom Oliver, a “global management guru” (Bloomberg), is the chair of The Tom Oliver Group, the trusted advisor and counselor to many of the world’s most influential family businesses, medium-sized enterprises, market leaders and global conglomerates. For more information and inquiries: www.TomOliverGroup.com or email Tom.Oliver@inquirer.com.ph.