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There are many reasons why businesses treat customers poorly. One of the most common and costly explanations – and the easiest to fix – is a lack of understanding of the customers.
There are many reasons why businesses treat customers poorly. One of the most common and costly explanations – and the easiest to fix – is a lack of understanding of the customers.

Want to make more sales? Understand your customers!

How well do you really understand your customers? MICHAEL HINSHAW encourages you to ask the big questions about your business.

There are many reasons why businesses treat customers poorly. One of the most common and costly explanations – and the easiest to fix – is a lack of understanding of the customers.

This gets at the core of two basic business questions that many businesses either don’t ask or don’t share effectively across the workforce.

• Who is our customer? Knowing your customers means having a clear picture of who they are. This includes information such as age, income, expectations, and beliefs.

This should all be articulated in your customer experience strategy and be understood by your employees.

Not knowing who your customers are means that you are consistently positioned to fail when asked to give them what they want at any given time. Your business will fail to grasp opportunities to satisfy or delight them – and you can forget about increasing sales.

One tool that can help create this ‘vivid picture’ of your customer is research-based personas. Long used in software design, companies such as Best Buy use clearly defined personas to significantly change customer experience in areas such as store design, products, employee training and more.

• What are they worth to us? Most businesses have customers that fall into one of a series of ‘value buckets’ or segments.

Typically, the top 20 per cent will deliver the lion’s share of profit, just as the bottom 20 per cent will consistently cost you more to serve than the profit you can make on them.

Then, falling into two or three ‘middle’ buckets, you’ll have customers that could be worth more – some, a much more. Not knowing this means you’ll unknowingly push your most valuable customers away while potentially expending massive resources to keep a customer you’re losing money on.

Segmentation strategy through the lens of ‘customer lifetime value’ is one of the most common approaches to understanding customer value.

There are some critical questions you should ask of your business. Are you spending too much to better serve your least valuable customers? Who exactly is your customer? And what precisely is their value to you over time?

Without definitive answers to these questions, everyone in your business is ‘flying blind’ when it comes to increasing profits and delivering quality customer experiences.

"Failure to effectively answer these questions means a few things, and none are good."

Failure to effectively answer these questions means a few things, and none are good. The most obvious is an inability to keep the customers you’ve worked so hard to acquire.

In short, a lack of customer understanding at the individual level makes it hard for your business to effectively give your customers what they need when they need it.

This means consistently failing to give customers what they want at any given point and failing to grasp opportunities to satisfy or delight them.

We know that not all customers are created equally. Some are worth more than others; that’s why it’s so essential for a business to answer these questions.

Not knowing which customers are in which buckets means that you might indiscriminately dissatisfy all your customers, not just those who may have little value but those whose value to your business is significant. Alternatively, you’ll over-invest in delivering experience to customers you’ll never make money on.

If your business is experiencing these issues, you’ll need to take on an outside-in approach, focusing on the perception of your business among customers. Once you understand where you’re failing to meet their expectations, you’ll find that issues are easier to resolve.

With that said, you need to start by understanding who your customers are. Not just in a broad sense but also in a segmented, prioritised sense.

Many businesses have a hard time answering these questions – many of which have the resources and data to figure it out. I’m constantly surprised by how many businesses I encounter falling short in this vital area.

Maybe marketing is using segments to target promotions, or personas are being used to design websites – sometimes finance tracks customer value.

While your business may be getting it right in a few specific areas, when it comes to a shared view of how to serve critical customers across groups or divisions, sadly, there’s often no clear picture.

Even though not all customers are created equally, they all have high expectations and strong opinions. Effectively managing their expectations can only occur after a clear understanding of what those expectations are is articulated.

There’s little argument to be had regarding the importance of improving and better managing the customer experience. But when it comes to doing so, looking at your customers through the dual lenses of ‘inside-out’ and ‘outside-in’ is where you need to start.

After all, if you don’t know who your customers are, you won’t know what they need. And if you don’t know what they need, you can’t give it to them.

 

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ABOUT THE AUTHOR
Michael Hinshaw

Contributor • McorpCX


Michael Hinshaw is president of McorpCX, which focuses on customer experience management. Learn more: mcorpcx.com

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