Understand your customers

Building positive relationships with your customers requires you to have a good understanding of their needs and wants. By improving your understanding of your customers, including their purchasing motivations and habits, you can personalise the customer service you provide.

Understanding your customers will help you to:

  • decide on the best price to set your products and services
  • build relationships and rapport with your customers
  • increase your sales and profitability
  • increase how much and how often your customers buy from you
  • decrease the costs associated with attracting new customers.

How to understand your customers

Here are some tips to help you better understand your customers, including profiling them, analysing customer touch points, conducting market research and using your customer data to improve your relationship with customers.

Profile your customers

Customer profiling involves building a description of your customers, or a set of customers, that includes their characteristics, location and behaviour. By segmenting (grouping) them based on their gender, age, where they live, where they work, their family size and how, why and what they spend money on, you can get an idea of how your products and services may best meet their needs.

Here are some questions to consider when profiling your customers:

  • Where are your customers located?
  • What are their spending habits? What motivates them to buy?
  • Do they have a budget?
  • What is their average age, gender, occupation, interest and hobbies?
  • Do they work in certain industries?
  • Are they influenced by seasonal trends?
  • How to they access and use your products and services?
  • Have they used your products or services before?
  • How likely are they to refer your business to others?

Analyse customer interactions with your business

Customer interactions or ‘touch points’ are any aspect of your business that customers may encounter or come in contact with. This may be as simple as the moment they step through the doors of your business, to which pages they visit on your website. Customer touch points are important as they help shape a customer’s impression and experience with your business.

When looking at customer touch points, consider tracking your customers’ experience or journey with your business from start to finish. If you have a website, this could include analysing how customers found your site, which websites they  entered and exited from, how long they stayed on your website and which pages they visited.

Improving these touch points can help improve your customers’ experience and perception of your business. It may even be helpful putting yourself in their shoes and trialling being a customer of your business to gather ideas and identify gaps for improvement.

Conduct market research

You can use market research or the data collected on your existing customers to identify trends and patterns. These trends and patterns can help you understand what motivates customers to buy, and the best approach to take in your marketing activities. It can also be used to help build customer awareness of your products and services.

There are several ways you can conduct market research to understand your customers, including:

  • Setting up customer surveys, scorecards or feedback forms.
  • Conducting focus groups with customers.
  • Giving away free samples and ask for customer feedback.
  • Using mystery shoppers to anonymously buy from your business and report back to you on their experience. Mystery shoppers should not be known to your employees, so that the feedback report you receive is as close to the everyday customer experience as possible.
  • Monitoring online reviews and forums. Depending on your business, customers may have submitted online reviews of your business on forums or other third party websites. These sites may contain unbiased feedback to help you improve your operations.
  • Understanding customer behaviour in your industry. This is important when looking at the factors that may influence your customers buying behaviour and when benchmarking against your competitors. Read our Industry factsheets to get started.

One of the best ways to understand your customers is to communicate with them. Ask for their feedback on your business and ways that you can improve your business products or services to better meet their needs.

Talking to customers directly and asking them questions will help you check and clarify your understanding, build on your existing knowledge, and help build engagement and relationships with your customers. Read our page on Managing customer relationships for more information about communicating with your customers.

Check out our Marketing and Market Research topics for more information on undertaking market research.

Use your existing customer information

You may already have information on your customers that can help you better understand them. This can include sales trends, survey or feedback data, or customer database information.

This information can be useful for identifying customer trends or insights (e.g. more sales during lunch hours, or an increase in sales of a particular item over the summer period). It can also help you in business planning or marketing activities, or when deciding on things like employing additional staff during particular hours or during peak months.

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