A customer analysis (or customer profile) is a critical section of a company’s business plan or marketing plan especially if company starts a new business or penetrates a new markets.
What is customer analysis?
Generally speaking, the company’s customer analysis identifies target customers, ascertains the needs of the customers, answering the questions how the product or services satisfies their needs.
Any customer analysis consists of a behavioral profile (disclosing why your product matches a customer’s lifestyle) and a demographic profile (describing a customer’s demographic attributes).
What are the types of customer analysis?
Behavioral Analysis (Customer Buying Criteria)
A behavioral analysis of customers (or psychographic profile) seeks to identify and weigh the relative importance of factors consumers use to choose one product over another. These factors, sometimes called buying criteria, are key to understanding the reasons that customers choose to buy your product (or service) versus the products offered by your competitors. The four major criteria that customers use to distinguish competing products are: price, quality, convenience and prestige. Once you understand your customers’ needs and willingness to pay, you can better tailor your product around those needs and price points. If you already have the features they value most, you can put additional effort into highlighting them in your marketing materials.
Behavioral Analysis (Purchase Process and Patterns)
The second part of the behavioral profile is the purchasing patterns of your customers. What are they buying, and how frequently are they buying it? Which sales channels are they using to make a purchase, and where did they arrive from? What is the average time between first visit and first purchase? How long do they stay around before churning? All of these questions can inform your marketing decisions and allow for fine-grained tuning of your messaging and sales strategy.
Questions that customer analysis can help to answer
Occasionally, customer behavior analysis requires a more in-depth understanding of the actual decision-making process of the customer purchase. This may be especially true in an industrial marketing scenario. Examples of purchase process questions to be answered here include:
- What steps are involved in the decision-making process?
- What sources of information are sought?
- What is a timeline for a purchase (e.g., impulse vs. extended decision-making)?
- Will the customer consult others in their organization/family before making a decision?
- Who has the authority to make the final decision?
- Will the customer seek multiple bids?
- Will the product/service require significant modifications?
Customer analysis for B2B or industrial marketing
In consumer transactions, price and quality tend to be the dominant factors. However with business-to-business (B2B) transactions (also called industrial marketing), service issues such as reliability, payment terms, and delivery schedule become much more important. The sales transaction in an industrial marketing scenario also differs from consumer marketing in that the purchase decision is typically made by a group of people instead of one person, and the selling process can be much more complex (including stages such as: request for bid, proposal preparation and contract negotiations).
Customer demographic profile
Demographic information such as age, location, income and education levels, gender, and more can give you a clearer picture of the type of messaging that will most resonate with customers and the marketing channels that can best reach them. The best way to determine which demographics to target for future marketing efforts is by looking at your existing customers. Building a marketing strategy around the types of people who are already purchasing is a great way to maximize the ROI of your marketing budget.
Typical questions to ask when determining the demographics of the target market include:
- What is the age range of the customer who wants my product or service?
- Which gender would be most interested in this product or service?
- What is the income level of my potential customers?
- What level of education do they have?
- What is their marital or family status: Are they married, single, divorced? Do they have kids, grandkids?
- What are the hobbies of my target customers?The target market segments are specified by demographic factors: age, income, education, ethnicity, geography, etc. Then by having a well defined set of demographic factors, marketing will be able to identify the best channels to reach these specific demographic segments.
Key benefits of performing customer analysis for any business
We’ve already touched lightly on some of the reasons that you should be doing customer analysis. Now let’s take a closer look at some of the key benefits to show you just how important customer analysis can be to the sustained growth of your business.
Why should I do a Customer Analysis?
A thorough customer analysis provides the following benefits:
– Supports your market choice and helps you avoid entering too broad a market.
– Increased sales and revenue. When you’re using buyer personas to communicate more effectively to potential customers, and using the other customer analysis you’ve performed, to more accurately address their pain points in both your messaging and your product development, you’ll end up converting a higher number of potential customers into paying customers for increased revenue.
– Enables you to determine which segments to prioritize and how much effort to put into each one. Knowing customer needs is a good way to decide what new features and improvements you should make to your product. By examining customer behavior to see which features are used and which are not, you’ll have a better idea of what category of features customers find most useful, and which areas may need some improvement to increase usage.
– Lower CAC . Increased revenue alone isn’t always a good thing. If you end up spending more to get that revenue, you’re moving downward in profitability. Customer analysis allows you to make every aspect of the customer journey more efficient
– Reduced churn & increased customer retention. Helps you focus on serving current customers rather than trying to find new ones. One of the biggest reasons customers churn is because the product isn’t fulfilling their needs.
– Helps you identify the appropriate marketing strategy and platform to reach these customer segments. The most successful marketing departments create buyer personas for their customers. These are fictional characters that represent the various segments of customers that are most likely to purchase your product.
Customer Analysis Example
Customer Analysis References
Market Analysis [U.S. Small Business Administration (SBA) Website’s content on Marketing Analysis] http://www.sba.gov/content/market-analysis
“Analyzing Customers in Your Business Plan” 2011 [Growthink, Inc.] http://www.growthink.com/businessplan/help-center/analyzing-customers-your-business-plan
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