As a business owner, you know that you can’t survive without your customers. But how much do you actually know about your customers? Furthermore, what do you do when you’re halfway through the year and the situation that your customers are facing is completely changed to that of 6 months ago?
In this blog we will look at the importance of customer analytics (understanding who your customers are), and how this can benefit your decision-making in a challenging business environment.
What challenges are you and your customers facing?
It’s important to be aware of the challenges that your customers may be facing, some of the predicted and current key challenges and opportunities that New Zealand business owners and your customers may face in the year ahead include:
By thinking about the challenges before they truly come into play, you can be on the front foot managing the potential impact and identifying which challenges can be turned into opportunities.
Understanding who your customers are
An easy way to analyse your customers is to pull your customer/sales information from your accounting system. You can then identify what categories make sense to group your customers in (e.g. size, location, industry). We’ll share an example below:
Looking at the above example of a signwriter who has among their top customers a Real Estate Agent, Construction Company, Panel Beater, and Property Developer; if they have an even spread of revenue coming from each of those customers then they may feel that their key customer exposure risk is at quite a comfortable level. However, as you can see from looking beyond their immediate customer to the customers’ customer, 3 out of the 4 customers are selling to the same end customer group (House Buyers). This example shows that their customer sector risk exposure is high, given some of the challenges house buyers are facing at the moment, for example, higher interest rates, house prices, government policy, etc.
When you analyse the House Buyer group (your customers' customer) through the lens of challenges they are currently facing or will likely face in the future, you can quickly identify that group of people is/will be highly impacted and poses a great risk to the future expected sales of the signwriter.
So, while you might have an even spread of income across your top customers, and therefore be feeling quite confident in your customer risk exposure, you may need to consider other ways to group your customers such as by their industry to understand what may be driving their buying behavior. It’s not enough to just think about the challenges you are facing – you need to go beyond that and think about your customers and your customers’ customer. Understand your customer risk exposure levels and think about what challenges are impacting them, and therefore what impact it may have on your business.
Challenging your decision-making
Once you understand who your customers are and what may be impacting their buying behaviors, you then have the opportunity to reassess your decision-making. For example, will you continue to target a particular customer group or industry if you can see there may be a slowdown, or should you focus on an alternative customer group or change your offering to replace lost sales?
Like all things, changing strategies works best if we look ahead, plan, and prepare for the change before the change is forced upon us.
Some challenging questions to ask yourself:
1. Is what I am selling still relevant, desirable, and attainable for my key customers?
2. Can I change who I sell to, what I am selling, or where I am selling it?
3. How hard are my sales going to be hit and which changes will be most effective in reducing the impact?
4. Do I need to implement 1, 2, or all of these changes?
5. What changes do I need to make in my business to shift the focus to the right areas?
In Example Two below, you can see how these challenge questions may change the focus for a kitchen design and manufacturing business.
Example Two
Once you’ve worked out the above, you also need a plan to communicate these changes with existing customers as well as new potential customers – what, where, and how to say it. Getting a clear, effective marketing strategy in place will save you from wasting time and potential revenue.
Understanding who your customers are and what is impacting them enables you to make decisions and changes in your business before your sales are impacted by their changing buying behavior. Knowing your customers well also enables you to take advantage of opportunities, such as new products or services, that are created by changing customer behavior.
If you would like our support to conduct a customer analysis or refresh your business plan, please get in touch with Velocite
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Download our free business planning toolkit here.