Customer Analysis

Customer Analysis

Definition:

Customer Analysis is used to understand who your customer is so that you can provide products and services to them in a way that they will be attracted to doing business with you.

What it is: Customer analysis can be for an individual customer (common in B2B customers) or for a target segment of customers (more common in retail and online businesses). Attacking, Converting, and Monetizing customers requires an intimate knowledge of them and their buying behavior. See Customer segmentation in this library to see how to form targeted customer segments. The analysis is to provide your company with information about who the customers are, where they are, what they want, how they make decisions, and what drives their behaviors.
What does it do: Understanding all of the above about your targeted customers will allow you to create a marketing and service plan that will provide the products and services your customer's want in a way they want to buy them. The customer analysis provides a template of who the customer is so that the marketing and sales organization can lay out a plan to Attract, Convert and Monetize (see the document in this library by the same name) the target customers. Achieving customer satisfaction by meeting the needs, wants, and desires of your customers will create repeat customers that will drive the future profitability of your company.

Uses:

How is it used: Customer analysis is a critical part of a marketing plan and the business plan of a company. Understanding what your customers want, and how they will make the decision to buy from you, will allow you to target all of the activities of the company to drive customer revenues. But prioritizing your company's activities to focus solely on your customers will allow the creation of attractive product offerings and the elimination of costs that do not create customer satisfaction and increase profits. Common uses include (From Marketing 91 see additional resources below)

Identifying WHO your best customer is – Customer analysis can help you identify who your customer is and thereby improve the segmentation targeting and positioning process. Remember – 80% of your business will come from 20% of your customers. It is important you know who those customers can be.
Planning out retention plans for your new customers – New customers are important but so are returning customers. Thus customer analysis can help convert your first-time customers into returning customers
Inducing further buying from your existing customers – Cross-selling, impulse purchases are some of the methods which increase purchasing by your existing customers. For example – if you know customers who have bought jogging equipment, you can cross-promote other jogging related fashion to them.
Improving customer service – Once you know who your customer is, you can know what kind of services will they demand. Thus customer analysis will also help in service deliverability.
Effective campaign planning – The demography and purchasing habits of your customers will help you with planning a highly effective campaign thereby improving your target.
Increasing market share – What if while doing customer analysis you recognize a set of customers that haven’t been targeted by you? At the same time, you also establish procedures better than the competitors. The effect – Increase in market share.
Increasing overall profitability – Businesses are established for profits. And overall profitability as well as well being of the organization increases once its customers are satisfied. And customer satisfaction will happen only through customer analysis.

Where: Since all activities in a company should be focused on satisfying the customer and driving profits, customer analysis can be used in every function of the company. Some of the more common groups who will use the customer analysis include:

Marketing plans: By understanding what the customer wants and how they make their decision the marketing group can focus their advertising, product offerings, channels, pricing, etc. to delight the customer and create repeat purchases.
Manufacturing: Knowing the needs and desires of the customer can allow the manufacturing group to design and produce the right product at the right time in the right quantity for the target customers.
Finance department: Providing the right credit lines for the target customers and the appropriate working capital, the customers and departments in the company can have the right financial resources to drive future revenues and profits
Supply Chain: Having the right products in the right place at the right time can be critical to customer success. Buying the right raw materials that will meet the customer's needs at the right pricing is a critical element of purchasing.
Sales Organization: Knowing how a customer makes a decision and what drives their behavior will allow the sales team to focus their efforts on actions that will drive revenue growth and profitability

Why: Focusing all of the efforts of the company on what the customer wants will assure the company that their activities will grow customer market share, and increase the potential for profitable growth

Limitations:

Where it shouldn't be used: Customer analysis is always valuable, if you have targeted the right customer or customer segment. Choosing segments that are too small or customers or segments for which you can not gather information or take action on the information you have gathered is a waste of time.
Any restrictions: Analyzing customers that you can not reach or serve will cause your company to waste time and resources and diminish profitability
Warnings: Be careful to accurately analyze both the actual behaviors and the drivers of the behaviors. If you accurately define the behavior but inaccurately identify the drivers, you may expend resources and drive the wrong behaviors. Determining the actual drivers may take test marketing, focus groups, and surveying that targeted determinant drivers and not the stated drivers. When you ask a customer what is important to them they will normally tell you the qualifiers that determine the minimum viable product. They often don't even know how they make their decision to buy from suppliers who all meet the minimum viable requirement. Determinant statistical analysis or conjoint analysis can help identify underlying drivers of the purchase decision.

Demonstrations:

Writing the Customer Analysis Section of Your Business Plan:

Writing the Customer Analysis Section of Your Business Plan

Step-by-step process:

Gathering data: Customer data is continuously gathered through transaction data, customer feedback, focus groups, and product testing.

Geographic: eg: location, population size, or climate.
Demographic: eg: age, gender, family size, family life cycle, or income.
Psychographic: eg: social class, lifestyle, motivation, or personality.
Behavioral: eg: product benefits, a frequency of use, or brand loyalty.
Determine the individual customers or target customer segments you will analyze (see the customer segmentation document in this library)
Identify how your customer uses your products and what needs are unique to each customer segment
Determine what they are willing and able to pay for your products to determine your pricing and profit potentials
Identify what your customer values so that you can target your marketing mix
Determine the target market/segment characteristics:

Analysis of data: Complete market research and other activities that will allow you to summarize customer characteristics by individual customers or target segment:

products and services and their customer fit;
customer profiles;
customer characteristics; and
customer needs and wants.

Interpretation of results: Take each customer and or segment that has been analyzed and create a unique marketing mix to serve that customer or segment
Presentation of results: Present the results by a PowerPoint showing each unique customer or segment and the associated marketing mix that will be used