A Guide to Customer Analysis: Cracking the Code

Using data to improve customer experiences, personalize offerings, and optimize operations can be a real game changer, which is where customer analytics comes into play. Gathering data to identify your target customers and their needs helps you better know your customers and, in turn, offer products and services that satisfy their requirements. The process involves more than just knowing simple demographics. 

While knowing names, ages, and income is beneficial, as a business owner, you should also dig deeper by discovering customers’ hobbies, interests, and more, which can be done through customer segmentation. By learning as much as you can about your customers, you can better understand how to build a relationship with them. 

Continue exploring customer analysis, including why it’s so valuable for helping determine your target customer base, their needs, and how to satisfy them.

What is customer analysis?

Customer analysis is the method of examining a customer's demographics, behaviors, purchasing history, and interactions with your business. It is a way for companies to learn more about their customers and identify potential leads who may show interest in the business but have not made a purchase yet. In addition to gaining a better understanding of current and potential customers, this data can help the success of your business in other ways, including:

• Creating marketing strategies: Use the data you collect by analyzing customers to design marketing campaigns that can effectively reach your target customers.

• Producing useful products or services: By learning about your customers' wants and needs, you can get an idea of what features you should add, remove, or change to your products or services. You can also use the data to learn which new products or services to consider.

• Discovering trends: Use customer data, such as feedback, social media information, and sales data, to analyze and anticipate industry trends. 

• Recognizing areas in need of improvement: By analyzing what your customers want, you can make more informed decisions and find out about any changes or enhancements that can make your products or services better. 

Customer analysis vs. customer segmentation vs. user journey

Customer segmentation is a method used during customer analysis to divide customers into more specific groups by focusing on shared characteristics. By segmenting customers, you can more effectively reach your target audience by marketing more personal content. Customer segmentation allows you to create groups that align with your company’s objectives and then target their needs. It also gives you an idea of what products or services you can introduce to the industry to fill a void. 

Customer analysis framework

Customer service frameworks offer a structured approach to creating business goals that support what your customers want. One popular framework to help you understand customer needs is SPIN (situation, problem, implications, and need payoff). This basic framework allows the customer to answer open-ended questions that help you better understand their needs. Another strategic framework is Porter's Five Forces, a model you can use to analyze any industry’s strengths and weaknesses using five factors: competitive businesses, the threat of new competition to the market, the power of suppliers, the power of customers, and finding substitutes for your product. 

What are the three components of customer analysis?

Customer analysis relies solely on the collection of information about customers to help identify target customers, understand their buying habits, and discover how to market to them. Three important criteria to use in customer analysis include:

1. Customer buying criteria: By identifying customer buying behavior, you can better understand why a customer would choose your product over a competitor’s product. This information is useful for marketing efforts.

2. Purchase process and patterns: This behavior analysis offers a deeper understanding of the actual process that customers use when purchasing a product. Using qualitative and quantitative approaches with the information gathered during customer analysis allows you to extensively look at every interaction your customer makes to help you better understand their behavior.

3. Customer demographics: You can use demographics such as age, gender, geography, income, and more to create a market segment. This market segment can include customers who share similar characteristics and show interest in the products you offer. This helps to create a marketing campaign specifically for a more narrow group. 

How to write a good customer analysis

To be able to use the collected data to provide overall insight, writing an effective customer analysis can help you learn how to meet the needs of your customers. When writing a customer analysis, focus on your current clients and which segment to prioritize so you can come up with a marketing campaign created specifically for them. Some steps to include when writing a good customer analysis include information discovered through:

• Segmenting your existing customers

• Designing a customer survey to find out about what drives their purchases

• Collecting insights from customer-facing team members

• Using information obtained from a customer relationship management (CRM) system

• Creating the ideal customer for your business

• Applying your findings to develop a hypothetical customer profile

Customer analysis example

Many well-known companies use customer analysis to grow sales and run a successful business. Netflix, for example, uses customer analysis to create a customer journey map, which is used to personalize movie and show offerings for its customers. Another example is Amazon, which built its $637 billion business by attracting shoppers by offering them an enjoyable experience, something made possible only by learning about its customers’ behaviors and preferences [1]. Doing so enables the e-commerce giant to provide personal recommendations based on customers’ previous buying habits, a technique that encourages customers to shop for other recommended products.

In an unconventional partnership, the Australian retailer Myer wanted to better understand its customers’ spending habits, even outside its stores. It used Mastercard’s Customer Data Enhancement program to obtain information on customers’ spending habits and the likelihood that they will shop across retail categories. This data improved the company’s target marketing. Myers and other successful companies remain at the top of their game by making customers and their needs a first priority. 

How to use customer analysis for business growth

The insights gained by conducting customer analysis allow you to offer a positive customer experience by knowing the right segment to reach regarding products, updates, and personalized offerings. A customer analysis can help grow your business successfully through:

• Marketing initiatives: Learning the preferences of individual customers helps you align your marketing campaigns to specific channels so you can either save money by cutting marketing costs or reach more of the type of customer that aligns with your business.

• Building sales: Using customer analysis, you can see both the positive and negative effects on sales and build on the positive while eliminating the negative. For example, are your customers looking for free shipping? Is there a minimum order or any bundled discounts? 

• Improving profits: The amount of profit each customer generates differs significantly. Knowing how much profit you earn from a customer can help you decide if the cost of marketing to those people is negatively affecting your earnings. 

Explore customer analysis and develop in-demand marketing skills on Coursera

Understanding your customers can help you learn how to meet or exceed their needs, ultimately driving improved sales. Customer analysis is a way to understand your customers and any changes, so make it an ongoing endeavor to keep your data relevant. Continue exploring the intersection of data and marketing with options such as the Google Digital Marketing & E-commerce Professional Certificate and the Meta Marketing Analytics Professional Certificate, both available on Coursera.