How do you identify latent customer needs?

I think this problem can be approached by thinking about two different types of new products: products that fit easily within an existing category and new products that smash the boundaries of existing categories.  You can definitely find quotes from Steve Jobs or Henry Ford that are dismissive of marketing research, but Jobs and Ford had the luxury of working with products that made previous product categories completely outmoded (much like the iPad severely hurt existing sales of cell phones and laptops). If you are lucky enough to have a product that fits this description, then your best course of action is probably to figure out how to get a prototype of product into the hands of consumers and simply watch them using it.  One of the upsides to working with such a product is that it is often impossible to tell exactly how consumers will use it.  According to Claude Fischer's http://www.amazon.com/America-Calling-Social-History-Telephone/dp/0520086473, the automobile was originally intended to be a big toy for upper class men to race around with, but instead Henry Ford and other early automakers showed that the working class and middle class would buy automobiles too if they could afford them.  Instead of being a largely recreational product, the automobile became something that people used to get themselves to and from work, giving rise to modern "commuter" culture.  By contrast, the telephone was originally viewed as a labor-saving device for passing messages between people in the same office, but the development of residential telephone service meant that people were more likely to use the telephone for socializing and connecting with family members (e.g., the old phone advertisement about "reach out and touch someone").  If you believe you have a product that could be just as innovative as the automobile or telephone, then the best thing to do is create a workable prototype, give it to members of the market segment you most expect to use it, let them "play" with it, and take very good notes about what they do.  If you want to bring in professional help, you can bring in a consultant who specializes in ethnographic marketing research, but if you are constrained by cost, you may be able to get a starving anthropology grad student or a really bright intern to gather field notes for you in a pinch. If you think your product is more "ordinary" than the iPad or Model T, don't despair, because you can still benefit from the identification of latent customer needs.  Most methods designed to identify latent customer needs borrow from http://marketresearchexpert.co.uk/2010/12/15/top-10-projective-techniques/ originally developed by psychologists.  One of the conceptually simplest of these techniques is "laddering," which I know is used a great deal by the consumer insights department at General Mills. The basic idea behind laddering is that products confer functional and technical benefits that the consumer links to more intangible, emotional benefits.  The reason you want to link to these benefits is that emotional benefits are intrinsically unquantifiable, which makes it more likely that your consumer will be willing to pay extra for your product, because they can't always put a price tag on how a product makes them feel. General Mills does this with qualitative interviews, but after the respondent answers a question, the interviewer answers the respondent with another question focused on trying to get the conversation to a more abstract or emotion level.  For example, you might get an interview like this: Q. Why did you pick out Cheerios when you selected a breakfast cereal? A. Because it tastes pretty good and it's low fat. Q. Why is it important to you that a cereal is low fat? A. Well, I heard that the oats in Cheerios make a difference in lowering your cholesterol levels. Q. And why is it important to lower your cholesterol levels? A. Well, I have a three year old son, and I want to be around for him when he's older, because you know I had an uncle that died of heart disease, and I don't want that to happen to me. So when you see those heart-tugging commercials where some adorable little tyke stuffs Cheerios in Daddy's front pocket because he doesn't want Daddy to get heart disease, projective techniques like "laddering" are where companies like General Mills get the ideas for that. Another effective projective technique is to avoid requiring the consumer to talk about the product directly, but to get the consumer to think about the product in terms of metaphors.  You can do this verbally by asking questions like, "If Product X was a person, what kind of car would he drive?"  Another way you can get the consumer to think metaphorically is to have consumers make drawings or collages that allow them to get their meanings across more indirectly.  For example, there is a hilarious example in my marketing research textbook of a pesticide company that wanted to sell a product that made it easier for women to get rid of roaches without actually seeing the roach.  When the company asked a group of working-class women to make drawings of roaches and talk about them, the roach drawings slowly began to resemble the women's boyfriends and husbands, with the women describing the roaches as nuisances who ate up all your food. The company discovered that making the process of roach disposal more impersonal and antiseptic for the women would be a total flop, because the women actually got major satisfaction out of seeing the roach and knowing that it was dead. Another classic technique to get people to speak frankly about a product category that might have a bad reputation is to include a subtle reference to the product but don't point it out directly.  One of the best examples of this is a study done in the late 1940s about Nescafe instant coffee.  Most advertisements in the late 1940s emphasized how important it was for a woman to be a doting housewife.  The makers of Nescafe worried that their product might not get adopted in the marketplace because women might think that buying Nescafe makes you a bad housewife.  To test this hypothesis, the behavioral scientist Mason Haire assembled two groups of women but presented them with two different grocery lists.  One of the grocery lists included Maxwell House Coffee, while the other list included Nescafe instant coffee.  Haire never pointed out the coffee, but simply include coffee in a shopping list with lots of other items.  Even though Haire never pointed out the coffee to the women in his study, when he asked the women to describe the imaginary woman who made the shopping list, he found that how they described her differed a great deal based on whether the shopping lists contained Maxwell House Coffee or Nescafe instant coffee: Overall, Haire (1950) found that the Maxwell House Coffee shopper was depicted frequently in a positive manner. Shoppers with this product on their list were more often viewed as a good housewife by respondents than those who had Nescafé instant coffee on their list. Respondents viewed the Nescafé shopper as lazy, sloppy, and an inefficient household planner and scheduler. Moreover, almost half of the respondents indicated that Nescafé shoppers were indolent and lacking organizational skills. Based on the substitution of Maxwell House Coffee for Nescafé instant coffee (and vice versa), respondents readily altered their perceptions of the female shopper. The prefeminist attitudes expressed about women who buy instant coffee certainly sound extremely dated now, but the basic point remains that Haire was able to get insights that he couldn't have gotten if he had asked the women directly. Sources: http://marketresearchexpert.co.uk/2010/12/15/top-10-projective-techniques/ http://web.utk.edu/~rhovland/PTsandCR.html

One way is to talk to people/potential customers and listen for their problems (ie http://www.amazon.com/Customer-Development-Entrepreneurs-Products-ebook/dp/B00GCTYHQG/) “By far the most common mistake startups make is to solve problems no one has.” - Paul Graham Identifying a problem worth solving can lead to great startup ideas. Solutions to clearly defined customer pain points make for the the most compelling value propositions. You don’t need to start with a “startup idea.” By learning what problems people have you can begin to formulate solutions. “Why do so many founders build things no one wants? Because they begin by trying to think of startup ideas.” - Paul Graham Starting with a customer segment you want to serve, as opposed to a specific product idea, has both strategic and personal advantages. For example, finding customers to interview/sell to/market to is hard and time consuming. If you keep cycling through different ideas for different customers, finding customers can be extremely time consuming. If you focus on trying to serve one customer segment, you just have to find them once and follow up. Examples of questions you can ask to get customers to tell you about their problem include: What are the top 3 challenges you face in your job? What are some unmet needs you have? What’s the hardest part about being a [demographic you’re serving]? What tasks take up the most time during your day? What product or service do you wish you had that doesn’t exist yet? What could be done to improve your experience as a [demographic you’re serving]? Another way to learn about problems worth solving, is simply to be observant to what people complain about. Wiley Cerilli, Founder of SinglePlatform used this technique to get the http://www.huffingtonpost.com/michael-b-fishbein/how-wiley-cerilli-used-cu_b_3631671.html for SinglePlatform. Be observant of your own behaviors and processes and be conscious of what’s hard or time-consuming. You can also look for solutions that people are “hacking together” themselves. If they’ve taken the effort to make something themselves, such as a spreadsheet, it’s a sign that it’s an important problem for them. To learn more about this topic, check out http://www.amazon.com/Customer-Development-Entrepreneurs-Products-ebook/dp/B00GCTYHQG/

One of the better ways I have found to discover latent customer needs is  through contextual interviewing. The contextual interview is the fourth  step of the Value Innovations process. See Dick Lee's Value Innovation Works:Move Mountains.... In order to perform such an interview you need to know who to  interview. So back up and define the product space's value chain and  the most important customer in that chain. It will also help to know a  little about what solutions may exist in that space and how they may be  addressing a perceived need. With  these bits of information you can more accurately target your subjects.  Seek to identify the "job to be done." See Clayton Christensen's Innovator's Solution for more on this. The results of several interviews will yield common  patterns and needs. Some that are actively known and addressed. Others  that are not. Here you will find your latent customer needs. After  identifying these patterns follow up with your previous subjects.  Review your findings with them and solicit their feedback about how  close or far away you are on what you believe some areas for improvement  are. Part  of this follow up can also be to have the needs prioritized by the  customer so that you are working on the most important need first.  Again, more on this process is covered in Dick Lee's Value Innovation Works:Move Mountains.... One  parting comment, the H. Ford quote is a misquote. Ford actually never  said that. Secondly, it is often used when someone finds it easier to  put forth their idea as the right idea with limited homework behind it.  See HBR article by Patrick Vlaskovits article titled Henry Ford, Innovation, and That "Faster Horse" Quote

One way to identify latent needs is to observe or collaborate with Emergent Customers, Lead Users, or Creative Consumers.  See for example: http://ariegoldshlager.wordpress.com/2009/10/28/how-do-you-identify-the-right-consumers-for-product-development/ http://sloanreview.mit.edu/improvisations/2011/11/14/how-to-find-innovative-lead-users/ http://itdepends4.blogspot.com/2011/02/creative-consumers-whats-your-stance.html

You identify latent needs by understanding your customers - whether they are actual or potential doesn't matter.  You need to have a deep understanding of what they want to achieve and why they want to achieve it.  Personally, I find nothing at all wrong with asking people what they want, so long as you follow it up with "why?"  That one word is the key to all of the "mystery" and "magic" of Product Management, if you ask me. Knowing when and how to ask "why" is the fundamental core from which everything else flows.  And it's the only reliable, predictable key that will unlock the treasure trove of unstated needs, problems, and desires in your customers.

Clearly the identification of latent consumer needs is a challenge for marketing research. Fifteen years ago, Zaltman wrote a seminal article (in Journal of Marketing Research) "Rethinking Market Research: Putting People Back In" on this topic and proposed a new method for reaching unconscious (ie. latent) needs: ZMET (Zaltman Metaphor Elicitation Technique). He deals with metaphors, especially with the relationship between metaphor and its impact on the mind. He says that deep metaphors are unconscious "basic orienting structures of human thought" that affect how people process and react to information or a stimulus. ZMET focuses on explaining the "why" behind the "what" of consumer (knowing what vs knowing why) behavior, allowing it to be used in a variety of applications from product development to communications evaluation. [See also his besteller : "How Customers Think" (must read!)] Marketers also underestimate the scope of the consumer experience. They believe that this experience consists to responses to specific events. Co-creation (namely SD logic and Von Hippel's lead user theory) and customer-centric strategies are better approaches. The visual anthropology methods and phenomenologic interviews represents a way to capture the latent and unconscious needs.

To add to the many great answers here already, take a look at experience sampling. It's a user research method that can systematically uncover what people need. https://medium.com/backchannel/googles-secret-study-to-find-out-our-needs-eba8700263bf#.is8ki2axlAlso, user research should never be about asking people what they need directly. That's what the Ford quote aims at, and quite frankly a sign of bad user research.

Depending on the type of problem you are trying to resolve, the best method of the customers latent needs discovery is to observe them in a process of doing that "job". The second best method is to let them describe their experience in their own words, as openly and completely as they care to do it. Careful analysis of these first and/or second hand "observations" are likely to produce some ideas for improving (i.e. simplifying) this customer group experience. When volume of such feedback is sufficiently high, probability of finding latent needs that matter to large segment of potential customers, increases substantially. Of course the effort, i.e. cost, of analysis starts to increase as well, but there are tools to manage that.

There are actually literally hundreds of ways to do this, and it's the stock in trade of insights professionals (aka marketing researchers, innovation consultants, and so on). There is no one best method -- it truly depends on your budget and the nature of the challenge / problem you are trying to discover latent needs about. The key to it all is getting as close as possible to your target audience and figuring out what it is they are trying to do and why. You are right, that asking people directly "what do you need" is not productive for latent needs. (although it can actually work quite well when there are problems, such as improving the touchpoint experience.) I call this listening at right angles. It's about observing, or setting up situations, activities, exercises that help you find the thing you are looking for without asking directly.