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The Fourth Commandment of Business: Thou shall know thy customer and cater onto his needs, wants and desires.

Feb 20th, 2013

Businesses are like chocolate chip cookies

Thousands of articles have been written on this subject, seminars held everywhere, the internet wants you to purchase online books about it, consultants want you to spend a lot of money for their expertise about it, and they all tell you the same thing differently. There are as many ways to learn about your customers as there are recipes for chocolate chip cookies. However, in the end, it is your business that is more like chocolate chip cookies. Your customers have choices and if they don’t like your cookies, they will find a recipe they like.

As a side note, Google found 5,190,000 results in .17 seconds for chocolate chip cookie recipes.

So, if your cookies are not what the customer is looking for, how do you find the customers that do want your cookies?

As a Business Advisor, I have talked with many clients about their customers. The conversation usually goes like this:

BA: What kind of business are you starting?

Client: I am going to sell a UFO detector. For $94.95, you can have this UFO Detector on your desk. It monitors the area for any “magnetic and electromagnetic anomalies” and, if it does detect said anomalies, it goes off like crazy. Because that means aliens are approaching.

BA: And who are your customers?

Client: Everybody.

BA: Everybody? What about those that do not believe in UFOs or those that think the product is a hoax? My wife would not let me buy one.

Client: Ah, I was thinking of producing an infomercial…

The question is, “How do you begin to understand and find your clients?”

Customers are defined in many different ways. Most people define their customer profile at the top levels. They are gender, age, geographical location, income, education, race, and marital status. All of this information can be found on the US census website. It is always a good place to start. It is a bad place to stop. This top level information is only the beginning. You need more.

A good example where this information falls short is the income category. Ask yourself, “Where does the income come from?” Income can come from a variety of sources. Two people may make $35,000 a year but one may have a college education and work in an office while the other never went to college and is a plumber. Both make the same amount but may have entirely different spending habits. Now ask yourself, “is my customer a plumber or an office worker?”

Drill down.

If you understand your product and the needs it fills, you may have a pretty good idea as to who your customers are. You just need more information about them. The ISBDC has resources that will help you develop a definition of your customers beyond what the census can provide for you. With regards to knowing and finding your customers, here is a small list of the information that is available to you:

  • Household Budget Expenditures
  • Medical Expenditures
  • Recreation Expenditures
  • Pets and Products Market Potential
  • Disposable Income Profile
  • Retail Goods and Services Expenditures
  • And lots more

In addition the ISBDC can also help determine the geographical area your customers live in as well as give you an accurate personality of the potential customer.

By drilling down you can start to see a more complete picture of the customer and this will help bring them to your business and sell to them. By understanding their background, you learn several things. You learn if your customer lives in your geographical area. If they do, how many actually purchase from you as well as how many could be purchasing from you. Knowing this helps you develop strong financial projections, marketing analysis and strategy.

By learning as much as you can, you will know what to say to your potential customers, where they are and how to reach them. This is called target marketing and it takes less time, money and effort to reach your customers. Every marketing expert agrees that you need to do target marketing and not take the shotgun approach.

So, you have taken my sage advice, done your homework and have determined who your customer is, how to reach them, and what to say to them. Are you done? Of course not. Once they are in the door, customer service, product quality, environment all help to enhance the customer experience. But are they buying? Here is where you need to do more detective work and it can only be done while the customer is in your store.

What can you learn about your customer once they are in the store? Here are some customer personalities that you can only experience firsthand:

The Child believes everything you tell them. They are trusting and open because they are looking for someone to tell them what they need and want.

The Judge walks in suspicious of everyone. He believes that all salespeople are evil and will say anything to make a sale. They judge you by their value system. They prefer you listen while they talk.

The Negotiator will try to beat you down on price no matter what. However, one thing in your favor is that they will ask a lot of questions and listen to your answers before ever discussing the price.

The Bargain Hunter is very much like the Negotiator in that they are motivated by price. The difference between the two is that the Bargain Hunter is more likely to make impulsive decisions.

Is that it? Nope.

After being in business awhile you will discover trends or types of customers that visit you. After a while you will be able to recognize these types of customer and develop sales strategies to increase your chances of them making a purchase.

Loyal Customers are about 20% of you customer base. They may make up more than 50% of your sales. Let them know how much they are valued. Get to know them personally and make them feel that you appreciate their business.

Discount Customers shop a lot but are only looking for mark downs, sales, or the cheapest price. They can contribute to your bottom line because it usually means product turnover.

Need Based Customers are looking for a specific thing. They look for what they want, purchase it and leave. Sometimes they are looking for the lowest price. Needs Based Customers can be converted to Loyal Customers with customer service that respects their purchasing style.

Wandering Customers are just looking for a place to visit. They may or may not have a purchase in mind. In fact, they may be there just to browse. Be aware, even though they may not purchase anything, Wandering Customers are more likely to talk about their experience in your business.  There is such a thing as minimal great customer service.

Is that it? Nope. Learning about your customers is an ongoing process. Keep in touch with the customers. Look for changes in spending behaviors, and be interactive with your customers. People change and you need to keep up with what is going on with your customers. After all, it is your job to make sure you meet your customers’ needs, wants and desires.