Why is this important?

How well do you really know your customers? Many businesses make the mistake of assuming that all their customers have the same wants, needs and attitudes, and that these don’t change. A more successful and sensible approach is to find out as much as possible about your current and potential customers.

When you understand exactly what makes your customers tick, you find it easier to:

• attract and retain customers
• anticipate your customers’ needs
• develop products and services of greater value to your customers
• read and act upon customers’ signals
• create more targeted customer communications
• achieve more on a smaller budget

What to do

1. Getting to know your customers

Regardless of whether your customer is an individual (consumer) or a business, the approach to gaining insight into their needs and behaviour remains the same.

The first step in getting to know your customers is to identify who they are and to develop a profile for each of your customer groups. You can achieve this first step by asking:

• Who currently buys your product/service? How do potential buyers differ? Identify all the different types of customers that currently buy your product/service and group them accordingly. Next, think about your potential buyers and see whether you can identify any other groups that are not on your current radar.
• Is the buyer the person who uses your product/service? The buyer of a product or service isn’t always the person who uses it. For instance, mums are the most likely purchasers of kids’ lunch box snacks but, ordinarily, they are not the consumers. Similarly, while the Logistics Manager might purchase a forklift for the warehouse, the storeman uses it.
• What are the characteristics of your current buyers and users? Do these differ from the characteristics of potential buyers and users? If so, how? Think about how each of the groups you just identified vary according to geography and demography, as well as in terms of personal attributes such as preferences, attitudes, opinions and interests. For example, one customer segment might be males, older than 45 years of age, living in Sydney, with an interest in outdoor activities. A business customer segment may be characterised as franchise real estate firms, specialising in commercial sales, and servicing the Central Coast.
• Are these characteristics going to change in the future? As customers mature and market conditions change, your customer base composition is likely to change as well. For example, businesses that have been established a long time have different characteristics to start-up businesses.

2. Understanding your customers’ buying process

All customers (with the exception of impulse buyers) go through a similar decision-making process when it comes to purchasing a product or service. By gaining insight into this process, you can position your business to more effectively target customers; thereby delivering the right message at the right time to enhance the purchase experience and increase your overall performance.

A customer’s buying process (also called a 'purchasing cycle' or 'customer journey') usually involves five stages:

1. Problem recognition
2. Information search
3. Identification and evaluation of alternatives
4. Purchase decision
5. Post-purchase evaluation

Problem recognition

The buying process starts with a customer becoming aware of a specific problem or issue. This awareness is generally driven by a need – rational or emotional – and can arise suddenly or gradually, as a reaction to an event or prompting by a third party (My toaster just broke and I need a new one) or through proactive interest by the customer (I want to ensure my website remains current and ahead of the game.)

By understanding your customers’ needs, you can position your business at the start of the buying process, appearing with the answer to their problem with impeccable timing. Marketing tactics focused on educating your market about the issue or problem that your offering addresses can be particularly beneficial at this part of the process, especially if the awareness stage is quite lengthy.

• What problem/need or use does your product or service solve/fulfil? Think laterally when answering this question and consider both the emotional and rational needs of you customer.
• Consumer example: a simple wristwatch fulfills the practical or rational needs of telling the time wherever you are. It can also be a timer. A watch is also an accessory and can fulfill the emotional needs of image creation and status. Swatch became legendary in the 1980s by focusing on the aesthetic design of watches and turning them into fun fashion statements.
• Business customer example: A fully integrated Customer Relationship Management solution would fulfill the rational need of more time and better productivity as well as the emotional need of wanting to look good in front of the board and customers.
• How does a customer prioritise these needs? Not all needs hold the same weight for your customers, so it is important to learn how your customers prioritise these needs and, then, to tailor your marketing message accordingly.
• Example: A function venue may find that quality food, fast service, cleanliness and fresh atmosphere are the key needs of their customers. Business customers looking to hold a conference with very short break times may then prioritise these needs as: 1. Fast service; 2. Cleanliness; 3. Quality food; and 4. Fresh atmosphere. In contrast, a couple looking to hold their wedding at the venue may prioritise these as 1. Fresh atmosphere; 2. Quality food; 3. Fast service; and 4. Cleanliness.

Note: Priorities do change and are not going to be the same year in year out. You need to regularly revise this information in line with customer insights in general.

Information search

After problem recognition, the next step in the customer’s buying process is the information search. By understanding how your customers search for solutions to their problems, you can position your business in all the right spaces.

How do your customers search for information to solve their problem(s)? There are many ways in which a customer searches for a solution to their problem. This type of fact finding can take many shapes and forms, including (but not limited to):

• asking a friend or family member or perhaps a colleague or business associate for advice
• conducting an internet search
• consulting a business directory (print or online)
• looking in the local paper
• checking the community noticeboard

Identification and evaluation of alternatives

After your customer has found a potential solution, more than likely they want to consider their options and compare your product with alternatives. A number of factors are used in their evaluation including specifications, price and brand. Ask yourself:

• How price sensitive is each customer group? Price sensitivity not only varies between products but also between customer groups. Customer groups with higher price sensitivities are more likely to respond to marketing campaigns that incorporate discount offers.
• What do customers think of your business, service, product and brand? How does this compare with potential customers’ opinions? Customers’ perceptions of your offering determine how they respond to your marketing tactics and whether they make the purchase or not. That reason is why collecting feedback (good or bad) on customers’ perceptions is essential to ensuring your message remains current and appealing.
• Do perceptions of your business match your brand positioning? If perceptions don’t match your branding (see build your brand), you need to either implement a strategy to improve alignment or consider changing your positioning to reflect perceptions. Any inconsistencies between perceptions and your brand can weaken your overall positioning and performance.

Purchase decision

The fourth stage is not as simple as it sounds. It involves getting your customer across the line, how they consume the product/service and how the transaction takes place. Questions to ask here include:

• Are there any events, situations or factors that may affect the purchase decision? Events such as marriage, pregnancy, holidays or anniversaries for individuals, and legislative or infrastructure changes such as road bypasses for businesses can alter the buying process. Consider what factors (often called 'triggers') could affect your customers and find a way to use this information as a marketing opportunity.
• Is your product a low or high involvement product/service? Each purchase decision requires a certain amount of risk or involvement to be taken on by the customer. Generally speaking, a customer becomes more involved in making their purchase the higher the price, the more they depend on the product/service or the greater their emotional attachment is to the product/service. High involvement products/services generally require extensive information searches and encourage brand loyalty. In contrast, customers purchasing low involvement products are more likely to make faster decisions and to exhibit random behaviour in their decision-making process, and possibly to experiment with alternatives because the cost of switching is low.
• Understanding this behaviour allows you to customise the message to heighten its appeal. For instance, in marketing a luxury car, the message is better received by the target group if it is emotionally appealing and if it highlights values such as superiority. To help increase loyalty to a low involvement offering, the key is to link it to a high involvement issue – introduce an important benefit or characteristic to the offering that will cause more customer involvement, or utilise advertising that draws on the customer’s values. Highlighting the dolphin friendliness of canned tuna is one example of increasing the involvement required by a customer in an otherwise low involvement decision, and reducing your carbon emissions or reducing your impact on the environment is another.
• What does the purchase involve? The purchase experience depends largely on the offer. If the purchase is a product, it is more likely to be transactional in nature; however, if the purchase is a service, the delivery could be quite long and complex.
• Product purchase example: In purchasing a bed, a customer is more than likely going to have to place an order and get it delivered.
• Service purchase example: During the process of completing your tax return, your accountant may first ask you to complete a form, and then meet with you to discuss the details before providing you with an estimate and requesting payment before lodgement.
• How does your customer make their purchase? Would they prefer an alternative method? This double-ended question is looking at the transactional side of the purchase decision. Consider the when (actual time of day/week, etc, and whether it is on receipt of goods/service or at the time of order), where (online or in person, etc) and how (payment methods).

Post-purchase evaluation

The last stage in the buying process involves your target (consciously or otherwise) assessing their customer experience. To ensure their satisfaction, and to encourage loyalty and repeat business, think about ways to maintain the purchase euphoria, eg post-sales customer service or easy to find FAQs online.

This last stage is an important time for reaffirming that your customer has made the right decision. It is also a good time to obtain feedback on the customer’s overall experience so that you can learn more about their buying behaviour and fine tune your performance.

3. Conducting your research

With a firm understanding on what to ask and how you can use this information, here are some valuable sources for collecting customer insight:

• Ask your customers. When next speaking with a customer, ask them for their feedback. Questionnaires are another popular tactic, and focus groups can be an effective way of involving your loyal customers and letting them know that you value their opinion. Blogs can also provide valuable insight.
• Watch how your employees operate and listen to them. As the first point of contact with your customers, your employees are in an excellent position to gauge the mood of the market and notice shifts. Encourage your employees to report thoughts they may have on the market. They may see something you are missing or not considering.
• Keep accurate sales records and study them closely. This procedure can help you focus your market research strategies. It may be that a particular region is unprofitable for you.
• Contact your local Chamber of Commerce for demographic reports for your market. These reports are also available in trade journals. Government agencies and association websites can provide other forms of demographic information.
• Conduct mail and telephone surveys. Make sure you do not contact people who have explicitly requested not to be contacted. Beware of spam laws if using electronic mail.
• Visit trade shows and don’t be afraid to ask questions. This approach offers a valuable way of learning about your competitors and what differentiates the successful companies from the not so successful ones.

4. Identifying who to target

After you collect all available information on your customer segments, you are in a good position to identify which groups are most valuable to your business.

Remember: Segmenting your customers is only profitable if your target groups can be effectively accessed and targeted by marketing efforts, and then adequately serviced. If you cannot reach your target market or deliver suitable levels of service, you need to rethink your segmenting structure and marketing strategy.

To help identify and prioritise your most valuable customer groups read How to prioritise your customers for easy wins.

Source: The 10-day MBA: a step-by-step guide to mastering the skills taught in top business schools, Steven Silbiger, Piatkus, 1999, pp 8–11.

Where to go for help

Do it yourself

Online resources

There are a number of free online resources that can assist you with getting to know your customers. Try:

• Australian Bureau of Statistics: www.abs.gov.au
• NSW Department of State and Regional Development: www.business.nsw.gov.au or www.smallbiz.nsw.gov.au
• Local government: www.alga.asn.au/links/associations.php
• Austrade: www.austrade.gov.au

Online survey solutions

If you’re thinking about conducting customer surveys online, visit www.surveymonkeys.com. This business offers basic online survey solutions for free, as well as professional versions for a small monthly fee.

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