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One of the most pressing questions in marketing is: How can a brand reach its target audience?
Answering that effectively means first going through trials and tribulations aimed at intimately defining who your target audience is.
One of the most effective ways to do that is through customer analysis.
What is Customer Analysis?
Customer analysis refers to the intimate analysis of a brand’s customer base.
Ultimately, a customer analysis will give a brand an understanding of its customers which can then be used to optimize campaigns and better convert their target audience into paying customers.
There isn’t one clear-cut way to conduct customer analysis, but there are a few general methods that have proven successful. But first, it’s important to know the main objectives of customer analysis.
A behavioral analysis seeks to provide insight into why customers engage in certain buying behavior, which brands then use to predict future behavioral patterns.
There are two primary areas that are studied in the behavioral analysis portion of customer analysis: buying criteria and purchase process and patterns.
In general, there are four major factors that come into play when consumers are making purchasing decisions: price, quality, convenience, and prestige. Conducting a behavioral analysis means researching which of these factors are the most impactful in making a customer choose one product over another.
Purchase Process and Patterns
In some instances, a customer analysis will warrant a deeper understanding of a customer’s decision-making process, going so far as to answer hard-hitting questions that ask why a customer makes certain purchasing decisions. In such instances, researchers will analyze purchase processes and patterns to answer questions such as:
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?
Four Types of Market/Customer Segmentation
Market segmentation is when a company uses research to divide its target market into more manageable groups based on commonalities that each group shares.
Think of segmentation as an opportunity to consolidate a large amount of work into compartmentalized areas of specialty. In doing so, marketers can tailor strategies and campaigns to best align with the customers of each segmentation.
Typically, customers are segmented based on these four categories:
- Geographic– Geographic segmentation refers to defining customers based on pre-defined geographical boundaries. Where a customer lives greatly influences their purchasing behavior, so understanding how and why can help marketers tailor campaigns accordingly.
- Demographic– Demographic segmentation refers to grouping customers based on similarities in defining traits such as age, gender, ethnicity, income, education level, etc. Understanding how defining traits impact purchasing is important for a brand to maximize their advertising campaigns.
- Psychographic– Psychographic segmentation focuses on the intrinsic values that a customer base holds. These can include hobbies, lifestyle, conscious and subconscious motivators, personalities, etc.
- Behavioral– As the name suggests, this type of segmentation refers to grouping customers based on similarities in their buying behavior. For example, a restaurant chain might group customers that buy kid’s meals or customers that only come in for apps.
As with any study, it’s important to have criteria in place, and segmentation during customer analysis is no different. That said, there are five segmentation criteria that aid in helping you segment customers for maximum research results.
- Measurable– Your analysis should always take into account the size of a segment in order to decide if a specific segment is worth solely focusing on. If a segment makes up a small niche portion of your customer base, it may not be worth investing resources in.
- Distinguishable– There needs to be clearly defined differences between customer segments in order to accurately assign results to each one.
- Substantial– Each segment needs to be sizable enough to warrant the investment of resources. If it’s not, you may want to define other parameters for your customer segments.
- Financial– The costs of marketing to several groups will be more than targeting one group. It’s important to project those costs and allocate budget accordingly.
- Accessible– Marketing should be accessible to different groups and should speak directly to that specific customer segments’ needs.
Learn Customer Needs
The best way to learn about your customer’s needs is by asking.
You can do this by fielding surveys, asking or creating discussion boards, or consulting the internet for research regarding what’s been done before, how customers have responded, or other industry best practices.
How you learn customers’ needs isn’t as important as making sure that you actually do, so you can understand their pain points and use them to offer solutions with your products or services.
How Does Your Brand Meet Those Needs?
Based on customer feedback, analyze how your brand may or may not be effectively meeting those needs.
Set out to resolve any outstanding concerns with your customer base, or adjust your marketing strategy to actively listen to your customers rather than try to solely sell them something.
Customers rely on you to hear them out just as you rely on them to stay afloat.
Benefits of Customer Analysis
Customer analysis presents immeasurable benefits for a company and is virtually always worth the investment when done effectively. Some of the biggest benefits are:
Marketing Efficiency– Customer analysis allows you to know your customers on a deeper level, which allows you to perfect your marketing strategy with your specific customer base in mind.
Customer Retention– Customer analysis equips a business with the knowledge of why past customers have left so you can intervene.
Increased Sales– Knowing what the customer wants allows you to target your sales by offering discounted shipping, bundle discounts, etc.
Improved Profit Margins– With customer analysis, you can focus on attracting lifetime customers by better understanding a customer’s spending patterns and behaviors. A company doesn’t become sustainable by attracting any customer, but by attracting a committed customer base.
Implementing An Analytics Strategy
You can use the analytics tools you have at your disposal right now to conduct a customer analysis.
1) Analyze Customer Acquisition
Companies tracking customer acquisition are far more likely to outperform their competitors. Take a look at how customers are finding you, their site behavior, etc. and look for key areas of opportunity.
2) Migration to Profitable Segments
Study how long it takes first-time customers to migrate into purchasing on a regular basis. This information will allow you to form a marketing strategy that increases the profitability of your company.
3) Discover Customer Profitability
Track expenses– both direct and indirect– to understand the exact profit margin of your customer base. Use data such as the frequency of sales, cost of product sold, and average sale size of your customers to calculate profitability and sustainability.
4) Explore Opportunities Customer Loyalty and Retention
It costs far less to keep an existing customer than to find new ones. Look for ways you can build customer loyalty based on your type of business. E-commerce retailers benefit from being able to easily pull data on a customer’s shopping frequency and build their digital marketing around that, while brick and mortar retailers can implement customer loyalty programs and rewards to be used each shopping visit.
Customer Analysis: What’s Next?
Conducting customer analysis sounds far more technical than it really is.
In layman’s terms, it’s simply getting to know who your customers are, troubleshooting existing concerns, and creating a marketing advertising strategy that capitalizes on the wants and needs of your customers.