Customer Analysis

Customer analysis is a way of analyzing and using customer data while strategizing an
organization’s business plan. Customer analysis is a key element of customer acquisition
strategies of marketing and advertising campaigns. It provides valuable insights about your
prospective customers (like their purchasing behavior, preferences, demographics, decision
making, etc), so you can segment customers while running marketing campaigns of
a product or service to optimize sales growth and customer retention

You can only fulfill the customer’s requirements if you know what the customer wants.
When you understand your potential clients, you determine who your target customers are
and decide how you will attract them to buy your products. The key objective of customer
analysis is to gain insight and have a deeper understanding of buyer persona to optimize the
company’s business plan and brand positioning in a personalized and result-driven manner.

Table of Contents

What is Customer Analysis?

Definition: Customer analysis is defined as the inclusion of qualitative and quantitative

research methodologies used for understanding customer’s journey and their buying
behavior to optimize the decision making process to make a successful marketing plan.

It tells the customer needs of your active customers, current customers, or new focus
groups to offer products and services in a customized manner for enjoying increased sales
and optimized brand loyalty.

Customer analysis helps in-

 Identifying who your customers are

 Finding out their needs and their pain points

 Making profitable segments of customers as per similar traits and customers

behavior

 Creating a profile or buyer personas of your ideal customer(s)

 A better understanding of purchasing decisions patterns of new customers

 Designing personalized content and marketing strategy on best-suited

marketing channels

 Extended decision making by suggesting significant modifications so product or

service meets customer needs

Importance of Analysis of Customer Base

Customer Analysis is described as a way to comprehend clients, customer base, or target
market of a business to optimize marketing efforts and customer acquisition. It is an
essential function of marketing analysis.

Customer analysis takes place when a company researches its potential customers and their
requirements. Customer analytics, as well as customer surveys, are the focused studies of
the customer behaviors that come into play while addressing the pain points of target
audiences and boosting total sales.

Before the customer starts to buy, businesses examine certain factors to find out the buying
criteria of their target audiences. Total market capacity would be among the most critical
estimations. Other factors considered are the marketplace, choices, economic situation,
cost elasticity, etc.

The aim is to know the preferences of the significant number of target customers and why
would they choose your product. What would motivate them to purchase your product?

Through buying behavior of the customers, businesses pay attention to the ways customers
focus on the products or services, and accordingly, they decide their segmentation criteria
to run personalized campaigns to target audiences of specific segments
like geographic location, age range, inclinations, etc.

Customers tend to select products or services that have a good brand image and are
positively reviewed by other customers. Customer analysis helps in guiding businesses in
fulfilling the specific needs of the target audiences.

Behavioral Analysis of Customer Base – Analyzing Purchase Process and Patterns

Customer Analysis at times needs a detailed understanding of how exactly a customer

decides to buy a product. It is not as easy as it seems. It requires a thorough study of the
customer’s buying patterns.

Through this analysis, a firm tries to understand the customer by determining certain
elements, such as –

 The steps that the customer takes in determining the product

 The information sources are considered by the customer while deciding the product
to buy

 The amount of time the customer takes to determine their purchase

 Would the customer consult other people before purchasing the product

 The person who makes the final decision

 Does the target customer seek multiple bids

  Do some customer segments need modification in product or service

Behavior analysis can additionally concentrate on activities, like the kinds of products that
were bought. It identifies the number of times the products were purchased and the time
interval in which they were purchased.

To distinguish the shopping patterns and preferences of the customers, one must have an
answer to the following questions-

 The purpose/event for shopping?

 How many times will the customer buy the product?

 The frequency of the purchase and the time interval between two purchases?

 The total number of goods acquired?

 How much time did the customer take to decide what to buy?

 Where did the customer buy the product, and where do they use it?

Steps to Conduct Customer Analysis for Optimizing Marketing Efforts

Customer Analysis is a time-consuming task and requires a proper execution strategy. Below

are the steps of customer analysis –

1. Examine your current customer database and segment customers

The first step would be to understand the data of your existing customers. The preferences
of your existing customers can help you understand their likes and dislikes. They can be
segregated into different sections based on their age, gender, location, choices, income,
frequency of buying, etc.

Dividing the customers into different groups will help to focus on one group at a time. That
would help gain the attention of the potential customers and will help in boosting the
business.

Different categories in which your target customers can be segmented are-

 Demographic such as age (range), income, gender, etc

 Geographic segmentation which is location-specific

 Psychographic segments based upon values, interests, beliefs, personality

 Technographic segments that depend upon the device/platform a customer is using

 Behavioral segmentation methods associated with the habits and frequent actions

  Needs-based segmentation criteria related to the needs that a product satisfies

 Value-based segmentation generally measured by Customer Lifetime Value (CLV)

 Industry based segmentation related to the industry the customer belongs to

 Business size segments based upon the number of employees or the revenue size or
the average sale size

2. Recognize your potential target market segment & valuable customers

The second step is to identify your important customers. The customers that are most likely
to get attracted to your products should be your focus. Through analyzing customer
behavior patterns, you can find your target customers.

As the Pareto Principle suggests, for a company, around 80% of the business comes from
20% of customers, so it is crucial to find out your valuable customers first. Some of the
customer metrics that will help you in checking the patterns in your customer database to
measure customer retention are-

 Customer Lifetime Value (CLV)

 Repeat Purchase Rate

 Customer Retention Rate

 Redemption Rate

You may also try some of the key methods to measure customer loyalty towards your
brand. You can do this by using the following methods-

 Repurchase Ratio

 Customer Loyalty Index (CLI)

 Upselling Ratio

 Customer engagement numbers

Customer database can also be used to find out valuable insights about the personal
information of target audiences to know their age and background, so you can use the right
ways of communicating with those audiences.

3. Communicating with new and existing customer

 It is essential to create a bond with your customers that they do not forget. A customer
stays loyal to a brand, through which they have received excellent products and their
requirements were acknowledged by the brand efficiently.
You need to know what the customer wants precisely to target them. It would not be
possible without talking to the customer themselves about their experience. Customers
tend to trust brands that constantly improve according to the customer’s suggestions.

Some of the methods you might try to communicate with your customers during a brand
meet are-

a. One-to-one interviews

It lets customers share their side of the story behind their purchase decisions as well as their
issues or pain points that impact their buying behavior.

b. Customer focus groups

Focus groups incorporate a selection of customers in a room with whom businesses discuss
specific topics.

c. Usability study

It is used to observe how the use of a product or service by a few customers can uncover
the issues associated with a product or service of a brand.

4. Collect voices/opinions of existing and new customers from the field

Interviews may have some sort of selection biases, therefore, businesses might try to collect
customer voices or opinions directly from the field. Some of the ways you can try for this
are-

a. Service conversations

The customer services or support departments are perfect for channelizing service

conversations with customers in the field. Here, pain points, pain points,
improvement/modification suggestions can be directly taken from customers. Use of live
chat or support emails can also assist in this.

b. Social media – sentiment analysis

Businesses can also use sentiment analysis on social media channels. The use of unrestricted
surveys on social media forums can be quite useful in this. Different tools like Brandwatch,
Lexanalytics, Critical Mention, etc can be helpful in this.

c. Review sites

Different review sites like Capterra and G2 can also provide more concrete insights in
comparison to the social media forums.

d. Conduct survey
Since talking to customers as well as collecting customer voices from the field are qualitative
ways of gaining customer insights, running surveys is considered a quantitative way of
finding customer sentiments and inclinations. methods. Different ways of conducting
surveys are In-app surveys, Long email surveys, Post-service surveys, etc.

e. Conjoint analysis

This one is known as a choice-based survey method that asks target audiences to give a
value to a product or service feature by using some hypothetical questions. Some of the
resources that can help you in this are QuestionPro, Conjointly, Qualtrics, etc.

5. Identify how your brand can satisfy the customer’s needs

After understanding the customer demands, the subsequent step would be to implement

measures to meet the customer’s needs. Finally, resolve the issues the customer might be
facing. The goal is to enhance the customer experience as much as possible.

The next step after segmenting your customers is to use all the insights from the above
steps to create customer personas of your target customer(s). These buyer personas include
the details about your customers’ demographics, behavior patterns, motivations, goals, pain
points, etc.

Making a customer journey map as per the change in the behavior of customers at different
stages of their journey is another important step businesses need to take here. You can
understand the customer journey map as a visual representation of different touchpoints
and interactions customers go through to make their purchases.

For creating customer journey maps, you should list all the touchpoints and all possible
actions along with the charting of emotions for every action and identifying pain points for
each of the customer personas.

Role of Customer Profiles in Customer Analysis

Considering several factors like age, gender, location, background, income, choices, hobbies,
language, and education, businesses can create customer profiles.

Every customer will be placed in separate sections to which they belong. What these
customer profiles would do is, it would help the brand to focus on a specific group at a time,
recognize their needs, identify their problems and solve them.

In addition, it helps in creating a clear picture of the requirements of the customer, hence it
will alleviate the tasks of creating buyer personas.

Benefits of Customer Analysis

1. Boosts marketing performance via personalized content

Customer analysis helps in determining the proper steps to be taken to build up marketing
strategies. Knowing about a customer will result in understanding what would attract the customers
and what wouldn’t.

2. Customer loyalty and customer retention

It is required to understand what can cause the customers to move away from the brand. Customer
Analysis enables us to understand what the buyers prefer. Having loyal customers help in increasing
profits.

3. Revenue Increase

Meeting the customer demands would result in the overall growth of the company. In addition, it
would lead to a boost in sales which means the revenue would increase.

Conclusion!

Applying principles of customer analysis to your business will optimize your

business performance and make it more result-driven in the following ways-

 Through detailed Customer Analysis, you can get to understand customer behavior and their
shopping patterns, as it helps you learn about your target customer to the core.

 Dividing the customers into separate groups is beneficial since it will help in strategizing a
marketing plan for a specific group at once.

 The customer data is divided based on several factors like age, location, gender, language,
etc., and then their requirements are identified.

 Personalized marketing campaigns will lead to customer loyalty that will help in prospering
the business.

https://www.marketing91.com/customer-analysis/#Benefits-of-Customer-Analysis

Customer analytics can help you improve your business in the following areas:

1. Marketing Efficiency

Focusing on the individual customer takes your marketing analysis beyond just knowing your spend
and the eyeballs you received in return. Knowing which marketing channels bring the highest value
customers in terms of order size, retention rate and profitability allows you to either cut marketing
costs or expand your reach more efficiently.

2. Customer Retention

Customer acquisition is expensive, so it's important to understand what causes customers to leave.
Customer analysis can help you identify common denominators among lost customers and give you
an early warning that existing customers may be in danger of leaving if you don't take corrective
action.

3. Increased Sales
Understanding customer purchasing decisions is the key to increasing sales. Use customer analysis to
identify factors that have both a positive and negative impact on sales. This could include shipping
times, how customer service interactions are handled, whether you have a minimum order or
bundled discount, or the customer's location or income.

4. Improved Profit Margins

Not all customers are equal. Some customers are more profitable than others, and some may even
cost you money. Factors that affect customer profitability include order size, cost of handling the
order, time spent servicing the account and returns.

Amazon has gained notoriety for issuing lifetime bans to customers who cost the company money by
returning too many items. Customer service representatives at banks have varying discretion to
waive fees and grant other policy exceptions depending on how profitable a customer is.

If you don't want to take direct action against unprofitable customers, you can learn what attracts
these customers versus more profitable ones so you can shift your focus to attracting higher-value
customers.

How Do You Implement a Customer Analytics Strategy?

Customer analytics requires a combination of data collection, sound management decisions based
on the data and a willingness to experiment with alternative strategies to create new data. Your
controller services can help you generate customer analysis reports. Key measures to track and try
to improve on include the following:

1. Customer Acquisition

Customer acquisition measures include cost, conversion rates, and breakdowns by marketing
channel and campaign. According to the DataMatics survey, businesses tracking customer
acquisition KPIs are 23 times more likely to say they are outperforming their competitors in this area.

2. Migration to Profitable Segments

Many businesses offer service or product tiers where the lower tiers may have lower margins or
even be unprofitable. The goal is to move customers up to a higher tier.

To find out if this strategy is working, you need to know the number of new versus migrated
customers in each tier, how long it took a migrated customer to do move, what causes customers to
migrate, and if any of your sales or marketing efforts make migration more or less likely.

Companies tracking these measures are 21 times more likely to report as outperforming on
migration to profitable segments.

3. Customer Profitability

Tracking customer profitability measures leads to being 18.8 times more likely to report as

outperforming competitors on profitability per customer. Income metrics should include total sales
to the customer, average sale size, time between purchases, and what specific goods or services the
customer purchases.

Expense metrics should include both direct and indirect expenses. Direct expenses include things
such as the cost of goods sold, shipping costs and losses due to returns. Indirect expenses include
hidden costs such as the time sales reps have to spend with each customer or the need to divert
resources to fulfill unusual requests.

4. Customer Loyalty and Retention

Customer loyalty and retention is divided into two parts — identification and tracking.

First, you must be able to identify individual customers. This is easy when you have service accounts
or collect shipping information for online orders, but it becomes more difficult in a retail setting. One
of the easiest and most common ways to track retail customers is through loyalty or discount cards.

Once you know your customer, tracking retention is a matter of determining the average amount of
time between a customer's first and last order and how many customers don't place a second order.
To improve your retention rates and times, you can mine the data to look for trends that separate
customers retained for a long versus a short period.

Loyalty can be tracked through the average time between orders and what specific items the
customer purchases. This can help you determine whether a customer is loyal to your brand, price
shops between competitors or finds you inconvenient to deal with due to distance or long shipping
times.

The more you understand your customers, the better you'll be able to predict and meet their needs,
and increased sales will naturally follow.

Setting up accurate reporting is a big step in understanding your customers and a key component of
comprehensive controller services.

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business-analytics