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GuidesMarket researchAn introduction to customer analysis

An introduction to customer analysis

Last updated

14 March 2023

Reviewed by

Hugh Good

If you wanted to impress someone you liked, what would you do?

Most people would try to learn everything they could about their crush. They would find out their favorite hangout spot, best food, best movies, and whether they are night owls or morning people. Having this information makes it easier to impress the person.

The same applies to the relationship dynamic between companies and customers. For your business to win over your customers, you must have an in-depth understanding of their lives.

You need to understand their biggest pain points, goals, and what makes them tick. Accessing this information is possible through customer analysis.

Customer analysis can help your business reach the right customers, market to them in relatable ways, reduce churn, and earn their loyalty.

Our guide explores what customer analysis is and how to use it to provide customers with better experiences.

What is customer analysis?

Customer analysis is the practice of collecting qualitative and quantitative customer data to better understand your consumers. This data helps your company arrive at meaningful conclusions that inform how to market and connect with customers.

Customer analysis reveals crucial data such as:

  • Your customers’ greatest needs

  • The most significant hurdles to fulfilling these needs

  • The marketing channels and strategies customers respond best to

  • Why customers buy or don't buy your products

  • Demographics and purchasing groups your customers belong to

  • Your ideal-customer profiles

With access to this data, companies can iterate their marketing efforts and align marketing strategies with customer needs.

Importance of customer analysis

Customer analysis is the foundation of great marketing. Marketing without customer analysis data is akin to starting a journey without a plan—it's bound to fail.

Here are some specific benefits of customer analysis.

Improving the customer experience

Customer analysis is a potent tool that uses key data to help you improve the customer experience. With concrete customer data, you can personalize all your marketing messages. The customer analysis data also helps you understand which messages work for which customers.

What’s more, customer analysis ensures you are marketing to the right target audience, minimizing risks and financial losses.

Increasing customer retention and reducing churn

Churn refers to the loss of customers, and it happens when your product fails to satisfy customer needs. A high churn rate can also happen when the experience customers have with your company doesn't align with their expectations.

However, you can reduce customer churn by conducting customer analysis. The data you collect can give you the insights you require to tailor experiences that align with customer needs. In turn, more customers will choose to stay.

Increasing revenue

Customer analysis can lead to better personalization, more relatable marketing, and ultimately an increased number of customers. In turn, your business will win over more customers, enjoy repeat business, and improve overall revenue.

Types of customer analysis

While there are myriad different forms of customer analysis, we will focus on two of the most useful:

  • Behavioral analysis

  • Demographic analysis

Let's look at what each type entails and how you can leverage them within your business.

Behavioral customer analysis

This type of analysis encompasses two elements of customer behavior:

  • Buying criteria

  • Purchasing patterns

In buying criteria, you try to understand the features and products your customers appreciate most. Analyzing the buying criteria of your target audience also reveals unmet needs and the price customers are willing to pay. This way, you can align your marketing to highlight these features.

Purchasing patterns, on the other hand, explore the following:

  • Frequency of purchases

  • The type of products customers buy

  • The sales channels customers use to buy products

  • The time between a customer’s initial interaction and their purchase

This data helps you market to customers in ways relatable to them, and via channels they frequent.

Customer demographic analysis

This analysis evaluates data such as gender, age, income, location, and education levels to determine the type of marketing that would resonate best with your target audience.

For instance, if you find out that most of your customers are aged 18–25, the best marketing channels may be platforms such as Instagram and TikTok. Your messaging would likely be more casual, relatable, and conversational, to align with expectations from this age group.

4 steps to running an effective customer analysis

There are several steps to embarking on customer analysis. Here are the four most important ones:

1. Structure your existing customer base

Your database of current customers can provide incredible insights when structured correctly.

For example, even if you offer a single product, your customers buy for different reasons. For instance, if you sell accounting software, you might segment your customers into:

  • Small businesses

  • Medium enterprises

  • Freelancers

  • Solopreneurs

  • Personal use customers

All these groups of customers have different traits, pain points, and goals.

Start with customer segmentation by categorizing customers into groups, according to:

  • Demographic: age range, gender, income

  • Geographic: location-specific

  • Psychographic: values, beliefs, personality, interest

  • Technographic: based on the device or channels customers prefer, e.g., mobile vs. desktop, email vs. social media

  • Behavioral: habits, frequent actions, usage, and purchase behavior

  • Employment status: applies to B2C customers

  • Industry: applies when your audience is B2B

  • Business size: also common for B2B customer segmentation

  • Needs: the type of need customers are looking to fill

  • Value to the company: based on the customer lifetime value (CLV), repeat purchase rate, customer loyalty index

Some of this analytics data will be accessible through platforms such as Google Analytics and engagement reports from social media and email.

Once you have a feel for the different segments within your customer base, it will be easier to understand the right marketing strategies, timing, and messaging.

2. Interact with your customers

Hard data is great, but your customer's voice is also a vital component of customer analysis. However you go about it, the goal is to hear the customer's perspective.

There are several customer analysis methods you can employ here. Examples include:

  • Email

  • Social media customer surveys

  • Telephone interviews

  • Focus groups

  • One-on-one interviews

Talking to your customers lets you understand their emotions, pain points, and purchase behavior with greater clarity. Speaking to these emotions during marketing is critical because there is evidence to suggest that 95% of customers' purchase decisions happen subconsciously.

You can also find your customers’ voices through other means, such as:

  • Online reviews

  • Social media comments

  • Email marketing responses

  • Customer support interactions (chatbot and call center logs)

3. Create ideal customer profiles

Once you segment customers and run surveys to discover their voice, it's time to create your ideal customer profile (ICP). The ICP represents how your most valuable customer can be characterized. The ideal customer profile provides the demographic data, behavior traits, values, pain points, and goals of your ideal customer. You can have one or more ICPs, depending on the nature of your business.

Knowing your ICP makes it easy to create personalized experiences for your customers because you now know what they look like and expect.

4. Map the customer journey

When does a customer first interact with your business? How long after the initial interaction do they purchase from you? Which channels do they frequent before buying?

You need to ask all these questions to map the customer journey correctly.

Simply put, the customer journey map showcases all the interactions and touchpoints a customer has with your brand. The customer journey map tells a story of the hurdles, emotions, and processes a customer encounters before buying from you.

In most cases, the customer journey moves as follows:

Consideration → exploration → comparison → testing → negotiation

Consideration often happens after the initial interaction. At this stage, the customer decides to put you on their list of brands to check out. If your brand convinces them you’re worth a shot, they will become more invested and start exploring you at a retailer, on a website, or via an app.

From there, the customer moves to comparison, where they read consumer reports, evaluate reviews, and ask friends or colleagues what they think about your products. If the reviews and reports impress customers, they move to testing. This could be in the form of visiting your store to have a feel and sense of the product. It could also be signing up for a free trial of your product or requesting a demo.

The final stage is negotiation. Here, a customer settles on a product, but they conduct further research about the price before buying.

When the customer journey is clearly defined like this, it's easier to deploy the right messaging at every journey step. In turn, customers experience tailored resources that help them decide and settle on a product with more certainty.

Customer analysis is not a set-and-forget strategy

The first customer analytics study you perform should not be your last. For best returns, you must keep updating your customer analysis insights and iterating your ICP as consumer behavior changes.

Updating your customer analysis insights also helps you capture emerging target groups and marketing trends as they crop up.

Now that you have all the critical customer insights, it's time to ensure all the relevant people have access. You can achieve this through a simple Google Drive folder, but this can quickly become messy, and vital insights can slip through the cracks.

The best way to get the most out of your insights is to use a customer insights platform. Such a platform ensures all relevant stakeholders have access by centralizing all your insights into a single platform.

Learn more about customer analysis software

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