A step-by-step guide: Understanding your existing customers

In order to effectively engage and target your customers, it is crucial to have an understanding of their characteristics, behaviours, and preferences. The way to tackle this is through a process of gathering data, conducting an analysis and generating insight.

These are the steps that enable you to create a deep understanding of your customers (TL:DR at the bottom of the page); build their profiles and personas, create targeted communication strategies and ultimately provide a better experience for your customers.

Step 1: Gather your data

Collate all of the available data you have on your existing customers. Look through your CRM systems, website analytics, surveys or anything else that can provide customer data. If you have a quoting system or a platform for managing customer issues you should consider this as being in scope too.

Step 2: Increase data volumes

Make sure your data is as complete as possible with the key characteristics, behavioural and segmentation data that you have, for example have as many email addresses as possible, even though you won’t have them all. Sometimes external data enhancement exercises are needed to increase the completeness of your database. In the B2B space it is relatively simple to add insight such as number of employees, company turnover, number of sites, etc. Consumer data is more difficult and typically more expensive.

Step 3: Identify outliers

Outliers are those data points that create distortion or bias in your data, such as those top 5 customers that spend 20 times more than anyone else or the social sharers that don’t buy much but love the brand. Identifying outliers will give you a more accurate understanding of your customers and target audience as it focuses you on the majority, not the minority. Don’t ignore outliers completely though as they have their own story and valuable insight, you just don’t want to make important decisions based on biased data.

Step 4: Analyse the data

Analyse the data to help you to identify patterns and clusters based on metrics like average spend, products purchased, engagement and other characteristics. Lots of these metrics are going to be based on what is important to you. Look at clusters of customers based on these data points and metrics, then examine the overlaps and differences to determine if they have any significant meaning.

Step 5: Conduct customer research

Conduct additional research to add more depth, colour, and story to your data. It will help with understanding the nuances in spend behaviour and engagement. When you know the segment or transactional or lifecycle segment, it means you can analyse the research through the lens of the customer behaviour which gives you greater depth of understanding. For example, the answer to the question “Why did you choose ABC Widgets?” creates different understanding and insight when you know that answers came from new customers, occasional customers or regular spenders.

Step 6: Create profiles

Use the insights from your analysis and research to create customer profiles or personas. The profile should be used to help you to understand motivations and considerations alongside transactional analysis, understanding characteristics with the customer journey and customer communications. This will help you to understand how to best serve these customers and why they choose you.

Step 7: Understand how to communicate

Determine which channels your customers use and how they engage with them. This will help you to tailor your communication strategies to effectively reach and engage with your target audience.

Step 8: Use all this insight

After following the previous steps, you will have gathered a lot of valuable insights. It’s time to add them into your existing database or CRM system. Create flags or markers to make it easier to select, target and report on specific segments using these understandings. As much as documenting all of these characteristics and profiles establishes pictures of customers in the mind of your organisation, you now have information that can be actively used as part of managing and targeting customers more effectively.

Step 9: Continuous learning

To ensure your strategies remain relevant and effective, you should regularly update your customer understanding. Things change, life happens. Your customers and customer types evolve over time and peoples preferences change, that’s without considering the life changing factors such as having children, inflation, etc. It’s really important to consider these factors as they significantly change people’s attitudes to spending money.

By continuously gathering data, analysing patterns, and staying informed about your customers, you will be able to make informed decisions and provide personalised experiences that meet their evolving needs. Remember, understanding your customers is a continuous process that requires dedication and attention to detail, but the rewards are well worth it in terms of customer satisfaction and business success.

TL:DR

Customer understanding is important, here are the 9 steps to follow to really understand your customers: