“One of the deep secrets of life is that all that is really worth doing is what we do for others.”
~ Lewis Carol
IF THE GOAL in life (and business) is to help others, then a good first step would be to try to understand the people we are aiming to help so that we can figure out who they are and what they want.
Here are 8 things to think about when trying to understand the customer.
1. Identify the customer
In general terms, who is your customer?
What are the important customer segments?
Dividing customers into groups can help you better understand their specific needs and preferences. For example, you may want to segment by:
- age group
- income level
- employment status
- distribution channel
- product preference
- new versus existing customers
- large versus small customers
What is the concentration of customers in the market?
This question is important because of the Wal Mart Effect. Is there one customer in the market who is so big that you cannot afford to ignore them? If so, you may need to play by their rules, or look for a different market where you have a competitive edge.
How big is the market? How big is each customer segment? How many customers are there and what is the dollar value of those customers?
How fast is the market growing? What is the growth rate of each customer segment?
6. State of the Economy
What state is the economy in? What stage of the business cycle are we at?
7. State of Technology
What role does technology play in the industry? How quickly is the state of technology changing?
8. Recent and impending changes
Have there been any recent changes in the industry? Are there any impending changes? For example, new players, mergers & acquisitions, substitutes, technology or government regulations.
9. Industry Drivers
What drives the industry: brand, product quality, scale of operations, or technology?
10. Customer Preference
What do customers want? Do different customer segments want different things?
Have you asked them?
11. Willingness to Pay
What price is each customer segment willing to pay? How price sensitive is each customer segment?
For example, students are extremely price sensitive (i.e. students have a high elasticity of demand). This means that by offering students lower prices for your products you should be able to increase quantity sold enough to boost total revenues.
What is the best way to reach customers? Does each customer segment have a different distribution preference? For example, younger customers may prefer purchasing online while more mature customers may prefer buying products through traditional retail outlets. Here are 6 ways to reach customers:
- mail order
- online store
- factory outlet
- retail store
- department store
- network marketing