Abstract
In this research, we propose a conceptual model for understanding customer needs, which considers the nature of the benefits and costs associated with the usage of a product or service. Customer needs are divided into substantive needs, which are the fundamental benefits sought by the customer, and contingent needs, which arise due to usage costs imposed by the product or service. Based on their interrelationship, we propose the following categorization of product or service elements : benefit, compensatory, facilitating, indifferent, and usage cost elements. The model's validity is shown through a survey of consumer perceptions of usage benefits and costs in several service industries. Furthermore, its superiority in explaining consumer preferences is demonstrated through a conjoint analysis of survey data on waiting time. The model's relevance to manufactured goods and implications for quality planning and design is also discussed.
