If you are Product Manager managing a B2B product, have you ever consciously thought about the overall budget allocation by B2B customers to buy products that can ensure continuity in business, manage operations, cut costs, increase profits etc. Did you ever manage to identify what % of the budget is allocated to purchasing your product, what is the priority for the need addressed by your product in relation to other needs of customers? Measuring desperation index provides answers to those questions. Customer budgets are limited and many products do fight to get a small share of allocation. Higher the desperation index, there is a high probability that your product will definitely get a pie of budget allocation and as the desperation index goes lower, your product might get little or nothing. So it is essential to measure the desperation index and strategize to keep it higher always. I am borrowing Maslow’s hierarchy of needs to better measure desperation index and to understand its implications
Maslow defined the hierarchy of needs for human beings. The hierarchy defines needs in a pyramid structure where the needs at the bottom are the most important needs. Human beings meet those needs first before proceeding to other needs in the hierarchy. For human beings, food, shelter, clothing, financial security, love forms the basic needs. Probably communication comes next in Internet era. Without meeting those needs, human beings do not normally attend to other needs in the hierarchy, probably buying a car. While validating the new product idea, especially in a B2B segment, it is essential for a Product Manager to define a similar hierarchy of needs for a B2B customer segment to understand the desperation index of customers to satisfy the need addressed by the new product in relation to their other existing needs. Doing so, Product Manager can understand the relative priority of his product from the perspective of customers.
The B2B customer segment has lots of needs primary among them being profitability, shareholder relationship, employee connect, social responsibility etc. In order to fulfill those needs directly or indirectly and ensure continuity in business, customers buy products for office automation, payroll, email communication, sales and leads tracking, collaboration, connectivity, data center etc. Product Manager has to identify all those needs and define a hierarchy of those needs. Later should ascertain the level at which the need addressed by the new product idea is positioned. Customers, while expressing their willingness and affordability to buy the new product will respond in isolation without dwelling too much into their buying economics. However, when customers either allocate or estimate budget for actual purchases, they will prefer buying products at the bottom of the pyramid and will go upwards to satisfy other needs. Product Manager has to ensure that customers’ budget does not dry before reaching the level marked by the positioning of the need addressed by the new product. If a majority of customers could not reach that level, then the new product hardly stands any chance for survival. Product Manager might have to either strategize to push the need towards the bottom of the pyramid by articulating the value that the new product could bring to customers’ business or gracefully discard the idea of building the new product. Either way, Product Manager has to consciously identify where in the hierarchy, does the need addressed by the new product is positioned and ascertain whether the new product has any chance of survival.
Hierarchy of needs will indicate the desperation index of customers to satisfy the need addressed by the new product in relation to their other existing needs. Customers will start buying products in the descending order of desperation index. The product that addresses needs with higher desperation index is at the top of customer purchase list. Purchase list will contain an exhaustive list of products that customers purchase to address their entire business needs.
The presence of need addressed by the new product at the bottom of the pyramid does not essentially guarantee success. It will only provide an opportunity for survival. Whereas survival will further depend upon how efficiently the new product is addressing the need. In addition, effective positioning of the new product among target customers, prudent pricing of the new product and optimal ways of selling the new product will also determine the survival instincts of the new product. Formulating a pyramid outlining the entire hierarchy of needs and later identifying the layer in which the need addressed by the new product is positioned can also help Product Manager ascertain the impact to sales during a recession and financial slowdown. Especially during those tough times when customers drastically cut the budget, using the pyramid of the hierarchy of needs, Product Manager can easily identify what needs do customers might be willing to forego.
Seth Godin has proposed the pyramid for the hierarchy of needs for B2B sales. I am providing it as a reference for Product Manager to define their own hierarchy of needs based on their understanding of their B2B customers’ needs. It is essential to identify an exhaustive list of needs that are on the purchase list of target customers and organize them in the pyramid in accordance with the desperation index of target customers for each need. After constructing the pyramid, Product Manager could validate it by observing purchasing patterns of customers. Purchasing patterns of not specific products but entire products in the purchase list.