Thousands of new businesses open their doors every single day. Unfortunately, the survival rate is not very high. It is estimated that at least 50% will shut down within five years. There are clearly many reasons for these unfortunate failures. One of the biggest causes is that entrepreneurs don’t understand the needs customers face. Without understanding their actual needs, they obviously can’t develop business models that will be in high demand.
Don’t look to the pet rock for inspiration
It is true that some businesses thrive merely by being unique. The. It was a bizarre idea that didn’t fill any real need, but somehow managed to be successful based on pure hype.
Unfortunately, this outlier has given false hope to countless entrepreneurs. They believe that they can make a fortune creating an equally inane idea. The trouble is that most silly ideas will fail. Even if an entrepreneur is able to find success with one for a while, it is likely that they are going to fail further down the road. The only people that make money from strange fads are does that identify them based on strong trends and know when to close the company down. The reality is that they are not going to last forever.
What should they do instead? They should learn about Maslow‘s hierarchy of needs and build businesses accordingly.
What is Maslow‘s hierarchy of needs?
Back in the early 1940s, Abraham Maslow wrote a paper titled “A Theory of Human Evolution.” This paper noted that humanity had evolved from our Paleolithic ancestors, but we still held onto some of our prehistoric roots.
Maslow pointed out that there were a number of driving forces that affected humans the same way they had since the dawn of civilization. Some of these factors influenced us more than others. Here is an overview of.
Physiological needs are those that are fundamentally necessary for human survival. Without them, the human body will eventually shut down and die. Physiological needs include air, food, water, shelter, sleep and sexual gratification.
You can see examples in real life where people placed physiological needs ahead of any others, including safety. My old business school professor gave a great example many years ago that stuck with me to this day. He pointed out how gazelles will drink from a water where they know a crocodile is lurking, waiting for a meal. They know there is a risk of being eaten by the reptilian beast, but are willing to take their chances.
There are many business models based around this need, many of which revolve around food. Since so many people have medical problems that make eating difficult, companies likeare filling the void.
Safety is the next tier on Maslow’s hierarchy of needs. People crave peace of mind. This is why there is such a strong demand for home security systems and other business solutions.
Humans are very social creatures. They want to feel like they are accepted. In a strange way, we can see this more than ever today by studying people with highly polarized political views. They are desperately trying to seek belonging within a metaphorical tribe.
The need for belonging is one of the reasons that websites like Meetup.com and OkCupid have become so popular.
Everybody has a desire to feel good about themselves. They want recognition and respect, but they also needed from them sells more than anybody else.
We don’t talk as much about self-actualization as we should these days. That is possibly because people don’t feel very secure in this day and age, especially with growing economic uncertainty. However, self-actualization is still very important. What is it? It is I need to feel like you are achieving everything that you can. The believe that man must eat at all he can be.
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