Analysis for Managers: Customer Analysis
As we begin our first functional post on analysis, let’s begin with a simple definition. One simple definition is:
“ [A] detailed examination of the elements or structure of something, typically as a basis for discussion or interpretation.”
With that in mind, today we’re going to examine our customer base and interpret their interactions with our business.
The two main things we recommend are 1) building and maintaining a detailed customer base and 2) talking to your customers.
Building a database will help you to discover patterns in your customers’ purchase behaviors so you can better understand who they are. With each new customer, find ways to gather information on them, i.e. a membership profile on your website, a loyalty program, using traceable tender (i.e. card numbers) or simply by taking time to watch who your customers are and taking hand notes on them.
Search for things such as: age, gender, race, income, where they live, what they like, why they came in who referred them, how they heard about your business, etc. Then start with some simple bucketing of the data, perhaps tied to how much they spend. Ask questions like:
- Who is coming in? Older folks, millennials, families, higher/lower income, etc.
- What percent of my business comes from each of these demographics?
- Who spends the most or buys/uses your most premium products/services? Least premium?
- How do most people hear about you?
- What is the job that my product or service is being hired to perform?
- Etc…
In the bestselling book, The Innovator’s Solution, authors Clayton Christensen and Michael Raynor teach that understanding a pattern in customers’ behavior is not enough to predict how they’ll act, rather it’s though the understanding of why they behave the way they do that you can begin to meet best their needs. That said, as we’ve now identified patterns, let’s develop theories as to why they emerge.
This is best found in two ways: 1) asking yourself why a pattern exists and 2) talking to your customers directly.
One great model for talking to your customers is by holding focus groups, or small sit downs with a few customers, to ask them questions (perhaps offering free things in return for their time) and then taking what you learn from a small sample to build a survey to send to larger groups. This can either be sent via email or simply filled out in person and put anonymously into a box. Everything helps!
Analyzing your customers this way will help you understand their wants/needs, identify who your target customers are and how better you can serve them. Good luck!