One eternal truth in marketing is that you have to know your customers. After all, how will you provide them with a product or service that meets their needs if you don’t know what they value? How will you reach them with your marketing messages if you don’t know where to find them? How will you convince them to give your brand a try if you don’t know what messaging will engage them?
Many of our clients like to believe that they already have a good understanding of their customers. Sadly, this is not usually true. It’s hard for internal stakeholders to understand the motives of external stakeholders, such as customers.
I can think of one client who defined their customers as “anyone within 30 miles of one of our locations” and provided a laundry list of why customers chose their products. There are two problems with this client’s outlook. The first is that they are defining their customers too broadly to gain meaningful insights. The second is that the laundry list of reasons was from their view, and the only perspective that matters is the customers. Customers buy for their purposes, not yours, and until you ask them, you are likely incorrect as to what those reasons are.
Knowing your customer is knowing your market
You may have heard that over 20% of businesses fail in the first year and that 50% fail within the first five years. You may not know that most of these businesses fail because of what the Bureau of Labor Statistics calls “No market need.”
Providing a product or service that meets a market need is something entrepreneurs refer to as Product-Market Fit. One popular tool used to develop a Product-Market fit is the Value Proposition Canvas. At the center of the Value Proposition Canvas are two components, Value Map and Customer Profiles. Only by understanding your customers can you create a value proposition that meets their needs.
As the former chairman of Tampa Bay Wave, a Tampa based startup accelerator, I have had plenty of opportunities to mentor young entrepreneurs. Many of these entrepreneurs were in what Tampa Bay Wave refers to as the Build phase. Companies in the build phase were still working toward achieving product-market fit. The companies who achieved a product-market fit and progressed from the Build phase were those who spent a lot of time learning about their customers and adapting their value propositions to what they learned.
Knowing your customer means adapting to changing needs
We already discussed the importance of product-market fit in the success of young companies, but what about more established companies. There have been many high profile examples of established and successful businesses, even one-time market leaders, failing due to losing sight of the market. These failures are often considered failures to adapt to changing market demands. How does this happen? By not knowing your customers.
Knowing your customer means knowing where to reach them
From the earliest days of business, merchants and craftsmen knew it was essential to reach their customers and inform them about their products or services. In ancient times this was relatively simple as there were not many channels for their messages, and they rarely had to reach people farther than their town.
Today’s consumers split their time between the real world and an online world and consume media from an infinite number of providers. It is no longer possible to reach customers without understanding their habits. When you know your customers, you know what media they use and how best to reach them with messages about your product or service.
Once you know your customers, most media can provide useful information about their consumers. For example, magazines and newspapers have long provided potential advertisers with audience insights. Television shows can provide viewership statistics. Online channels such as social media, blogs, and websites can give detailed information about their visitors. Advertising research firms can provide insights into audiences if you are still uncertain about where to find your customers.
Knowing your customers means you speak their language
For any advertising to succeed, you have first to gain a viewer’s attention, then provoke interest, stimulate desire, and finally prompt action. All of these are easier to do this when you know your customer’s interests. Are you customers into sports, then maybe a sports-themed ad would catch their attention. Perhaps an endorsement by a star athlete would provoke interest.
Think of an advertisement as a one-time chance to impress someone (such as a boss or potential love interest). Sure you could go in cold and hope that what you have to offer is enough for them to spark an interest. However, wouldn’t you be more effective if you knew something about their interests and goals beforehand?
Knowing your customers help you build strong customer relationships
Conventional wisdom dictates that it is more costly to acquire a new customer than to keep an existing customer happy. Customer experience and customer satisfaction have become focus areas for many companies wishing to maximize their customers’ lifetime value. Companies that know what their clients want and expect can also customize the customer experience to create loyalty and repeat business.
Business is not easy, and there are many challenges to overcome. Many of these challenges arise from not knowing your customers as well as you think. Developing a full picture of your customers grounded in actual data is vital for any business that intends to succeed. One of the first steps you should take to build your customer profiles is to determine your primary target audience.