What is Customer Analysis?
Customer analytics refers to the exact array of business analytics that mainly works with metrics devised to help you know more about your customers. Financial and operations analysis, using only their traditional spectrums, only help you gather an idea about what’s happening strictly inside your business. It gives internal information and feedback, whereas customer analysis focuses on the exterior of your business, giving outside information and feedback.
Customer analysis deals with where your customers come from and how they make decisions, thus being extremely important for you due to having the big potential to help your business grow steadily if applied correctly. For example, for those running an eCommerce website, customer reports are paramount. You need to have in-depth knowledge of who your people are: how they behave on your website, how much they spend, how often they buy from you, who’s new around there and who keeps on coming, and so on. This way, you won’t be losing any more time and money on wrongly placed and targeted promotion efforts.
To be able to know who your customers are and what are their behavioral patterns, to better understand how they like to be approached, and what makes them want or not want a certain product or service has become crucial for many of today’s businesses to be considered successful.
If you are looking for ways to gather more information about your customers and improve upon your business relationship with them, and both your marketing plans and marketing strategy, you may want to take a look into what is called the customer segmentation process, which has proven to be successful, time and time again, being considered a major part of the customer analysis set.
Customer segmentation refers to when you perform customer separation of your customer database into smaller, much easier to manage and impress, customer segments. It’s part of finding your buyer persona. This is done with respect to parameters such as RFM (Recency, Frequency, Monetary value), or by taking your customers’ traits, habits, preferences, location, into careful consideration.
Segmenting your customer database will net you unexpected results that will shift your entire focus on creating a much more optimized marketing budget. Having access to all of these details about your customers and correctly identifying people that form segments with similar values, preferences, or buying patterns, allows you to directly improve the quality of their experience, create more effective and personalized offers, and overall, improve your sales and revenue.
The Importance of Customer Analysis
As stated, traditional analytics only helps you gather an idea about what’s happening strictly inside your business, giving internal information and feedback, whereas customer analysis focuses on the exterior of your business, giving outside information and feedback.
Customer analytics can help you improve your business in the following ways:
1. It improves your marketing efficiency
Catering to individual customers is almost impossible in today’s day and age. It would drain all of your marketing resources without getting any major profit margins to increase in return. But being able to cater to groups through careful customer analysis and knowing your best social media marketing channels will net you the highest value over time. You’ll see increased order sizes, higher customer retention rates, and much better profitability.
2. It allows for better customer retention
As it is known already, customer acquisition is much more expensive and complicated, marketing-wise, than customer retention. Through customer analysis, you will find out what drives your customers to leave, and knowing this will allow you to prevent such unpleasant business episodes in the near and distant future. Having an early warning that existing customers may leave is of top value to any successful shop or company.
3. It will help you see increased sales
With customer analysis you will find a new and better understanding of your customer’s purchasing patterns – and this particular piece of information is vital when you want to start making decisions to increase your sales. With precise analysis, you can identify those factors that have positive or negative effects on the potential customers’ conversion and transactions. By precise we mean taking into consideration all kinds of factors, such as shipping times, customer service quality, or even the customer’s location or income.
4. It improves your overall profit margins
That some customers are more profitable than others is another rule of the thumb in eCommerce customer Analysis. What’s more, some customers may be even costing you more money than they earn you. How do you find this out? Factor in their order size, cost of delivery, or even their time spent servicing the account.
Afterward, you can either take direct action against such unprofitable customers or even better, you could use gathered data in order to learn what detracts these customers in comparison to what attracts your more profitable ones. As such, you will be able to shift your focus to attracting higher-value customers while retaining and enhancing your less profitable ones.
To put it simply, there are more benefits of customer analysis, but perhaps the most important factor in a good analysis is customer segmentation, which directly increases your CLV (Customer Lifetime Value) and your revenue. More about it later on.
How to Do a Customer Analysis:
● Who are your customers?
Your customers are the bread and butter of your business – this is one of the first, sometimes forgotten, business tips. Without them, a business couldn’t exist, and getting to know them better will make your business more successful than ever before through increased sales of products and services. Customers, driving revenues, are the very essence of a business. Without them, businesses can’t survive.
Businesses should frequently study their customers’ profiles through customer analysis in order to better fine-tune their marketing approaches and tailor their inventory to attract the most customers. In customer analysis, customers are segmented with regards to their demographics, such as race, gender, age, or geographic location, and income level. Companies can create deeper customer relationships using this piece of information, thus reaching other consumer populations to increase their traffic.
What needs to be remembered is that the reason behind the people’s decision to buy and use certain goods and services instead of others is what impacts companies and economies worldwide. Understanding customers enables businesses to create effective marketing and advertising campaigns, deliver products and services that address needs and wants, and retain customers for repeat business.
● Segment your customers
And try your best to use your current marketing budget to migrate to these specific market segments, as in, tend personally to these customer segments. Each group profile is special and comes with its different needs. You can’t convince a 60 years old female to buy something the same way you’d convince a 15-year-old youngster.
In order to realize which of your convincing marketing strategies work best for each group and how to create better ones, you must get a general feel on the number of new versus existing customers in each of your profit tiers. The segmentation criteria of your customers are important for any company, as it allows you to divide your target market into more manageable groups based on similarities and common buying tendencies.
Segmentation allows for reaching a maximum profit in your existing, yet newfound, niches of customers. As such, marketers can create custom strategies and campaigns to best align with these niches.
Customers are usually segmented into the following 4 categories:
● Geographically – Geographic segmentation refers to defining customers based on pre-defined geographical boundaries. Where a customer lives greatly influences their purchasing behavior
● Demographically – Demographic segmentation refers to grouping customers based on similarities in defining traits such as age, gender, ethnicity, income, education level, etc. These traits undeniably impact purchasing patterns and are important to know if you want to maximize profits off your advertising campaigns.
● Psychographically – Psychographic segmentation focuses on the intrinsic values that a customer base holds, such as their hobbies, what is their lifestyle, do they have conscious buying motivators, etc.
● Behaviorally – This particular type of segmentation takes into consideration groupings based on buying behavior similarities, which vary considerably with all the above factors taken into account.
It’s important to have good segmentation in any customer analytics report. For maximum research results, please take into consideration these five analysis criteria:
- Measurable – Take into account the size of a segment when analyzing, in order to decide if a specific segment is worth solely focusing on. Small segments may not be worth investing time and effort in.
- Distinguishable – Draw well-defined lines between customer segments in order to assign results to each one with maximum accuracy.
- Substantial – Each segment needs to be substantial (big enough to make an investment worth it).
- Financial – It’s important to project those costs and allocate budget accordingly to each segment, as marketing costs may become too high.
- Accessible – Marketing campaigns should speak directly to that specific segment’s needs and target their pain points accurately
● Develop their profiles and needs
Developing their profiles and needs helps directly with tracking customer profitability. Your most trustable income metrics should always include your total sales to the customer or customer segment, your average sale size, and obviously, the specific goods or services the customer purchases and in what quantity.
Expense metrics must take into account direct, but also indirect expenses. Direct expenses refer to the cost of goods that you sold, cost of shipping, or losses due to returns. Indirect expenses refer to subtle or hidden costs, for example, the time sales reps take to meet customers and spend time with each of them to help them convert.
● Fulfill your customers’ needs
Customer loyalty and retention is divided into two parts — identification and tracking, and these and their correct metrics have been covered up to this point.
After you correctly identify these individual customers or customer groups that generate the most profit for your business through their buying behavior, usually through service accounts or by collecting shipping information from online orders, tracking retention is a matter of determining the average amount of time between their first and last order. To improve these retention rates and times, you can start offering loyalty bonuses for long-term customers, such as special discounts, prizes, or other kinds of bonuses. It pays off in the long run, even if you have to spend a little more on them.
This will help you determine your customers to remain loyal to your brand, to deter them from comparing price shops between you and other competitors. If you understand more about your customers, you’ll be able to predict and meet their needs much better, and increased sales will naturally follow. Always remember that ensuring customer loyalty is a big part of the process, as customer analysis and customer loyalty go hand in hand. Improving customer satisfaction through gathered customer data will create more loyal segments.
Conducting customer analysis is a crucial step when you want to identify who your customers are, and a key component of comprehensive controller services. And remember, since the customer is king, always listen to the customer feedback coming from any of your customer bases.
Great Customer Analysis with Reveal
Reveal is our free Customer Value Optimization Platform that helps you monitor and nurture relationships with your customers. It is one of the best analysis tools, available in the Shopify app store, and offers you better customer reports compared to most solutions out there, allowing you to extract insights per customer segment and to do cohort analysis. This is a big step in customer analysis
Reveal can help you with segmenting your customers, to better understand your ideal customer profile, as well as their buying patterns and the barriers. Moreover, it offers you an integrated view of how services, products, locations, and brands are all connected with your customer profiles and segments.
Perhaps the most interesting thing about Reveal is that it is also an RFM (recency, frequency, monetary value) segmentation software that allows you to segment your customers in a more effective way and see where the money comes from. Reveal then helps you correlate this data with your catalog, enabling you to see the top-performing brands and products, along with your best buyers. This tool helps a great deal with targeting customers in order to create better customer experiences that increase customer profitability.
Reveal is built on this very principle: being data-driven means focusing on the right data. This is why RFM segmentation is a core part of the platform. For each of these segments, Shopify Merchants can oversee and monitor: the NPS Score, CLTV (Customer Lifetime Value), Cohort Analysis, and the Average Retention Rate. Another great advantage of the platform is that you can see the reports as soon as you integrate the plugin with your Shopify account after it’s done crunching the data. It all sounds very complicated but you’ll see how easy it is to visualize and interpret your most important data with the Reveal custom reports.
A Customer analysis has 3 main stages, first, you have to identify, in great detail, who your customers are. These customers should then be split through customer segmentation into smaller groups, based on similarities and shopping motivations. Afterward, you must find out what are the needs of these smaller customer groups. Finally, you should correlate the products or services that your customers can benefit from most, thus creating solutions to their pain points.
A customer analysis should typically include information such as income, age, lifestyle, location, and purchase history.
Consumer analysis is the same thing as customer analysis. All customers are consumers and all consumers are customers.
Customer analysis It improves your marketing efficiency, it allows for better customer retention, it will help you see increased sales and it improves your overall profit margins.
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