Alameda County SBDCOakland, CA

Customer Analysis

Introduction to Customer Analysis

A customer analysis (or customer profile) is a critical section of a company's business plan or marketing plan. It identifies target customers, ascertains the needs of these customers, and then specifies how the product satisfies these needs. A customer analysis can be broken down into a behavioral profile (why your product matches a customer's lifestyle) and a demographic profile (describing a customer's demographic attributes).

A customer profile is a simple tool that can help business better understand current and potential customers, so they can increase sales and grow their business. Customer profiles are a collection of information about customers that help determine why people buy or don't buy a product. Customer profiles can also help develop targeted marketing plans and help ensure that products meet the needs of their intended audience.

Behavioral Analysis (Customer Buying Criteria)

A behavioral analysis of customers (or psychographic profile) seeks to identify and weigh the relative importance of factors consumers use to choose one product over another. These factors, sometimes called buying criteria, are key to understanding the reasons that customers choose to buy your product (or service) versus the products offered by your competitors. The four major criteria that customers use to distinguish competing products are: price, quality, convenience andprestige.

In consumer transactions, price and quality tend to be the dominant factors. However with business-to-business (B2B) transactions (also called industrial marketing), service issues such as reliability, payment terms, and delivery schedule become much more important. The sales transaction in an industrial marketing scenario also differs from consumer marketing in that the purchase decision is typically made by a group of people instead of one person, and the selling process can be much more complex (including stages such as: request for bid, proposal preparation and contract negotiations).

By identifying customer needs through market research and analysis, companies can develop a clear and concise value proposition which reflects the tangible benefits that customers can expect from the company's products. And once the primary buying criteria have been identified, marketing efforts can influence the customer's perception of the product along the four main dimensions (price, quality, convenience and prestige), relative to the competition's product.
 

Behavioral Analysis (Purchase Process and Patterns)

Occasionally, customer behavior analysis requires a more in-depth understanding of the actual decision-making process of the customer purchase. This may be especially true in an industrial marketing scenario. Examples of purchase process questions to be answered here include:

* What steps are involved in the decision-making process?
* What sources of information are sought?
* What is a timeline for a purchase (e.g., impulse vs. extended decision-making)?
* Will the customer consult others in their organization/family before making a decision?
* Who has the authority to make the final decision?
* Will the customer seek multiple bids?
* Will the product/service require significant modifications?

Behavior profiles can also focus on actions, such as: which types of items were purchased, how frequently items are purchased, the average transaction value, or which items were purchased in conjunction with other items. To understand the buying habits and patterns of your customers, answer the following questions:

* Reason/occasion for purchase?
* Number of times they'll purchase?
* Timetable of purchase, every week, month, quarter, etc.?
* Amount of product/service purchased?
* How long to make a decision to purchase?
* Where does the customer purchase and/or use the product/service?

Customer Demographics

 The second major component in customer analysis is identifying target market segments that are predisposed to preferring your products over those of your competitors. A market segment is a sub-set of a market made up of people or organizations with one or more characteristics that cause them to demand similar product and/or services based on qualities of those products such as price or function. A marketing program aimed at individual segments needs to understand and capitalize on the group's differences and use them strategically in all advertising campaigns. 

Gender, age, ethnicity, geography and income are all market-segmenting criteria based on demographics.  

Typical questions to ask when determining the demographics of the target market include:
* What is the age range of the customer who wants my product or service? 
* Which gender would be most interested in this product or service? 
* What is the income level of my potential customers? 
* What level of education do they have? 
* What is their marital or family status: Are they married, single, divorced? Do they have kids, grandkids?
* What are the hobbies of my target customers?

The target market segments are specified by demographic factors: age, income, education, ethnicity, geography, etc. Then by having a well defined set of demographic factors, marketing will be able to identify the best channels to reach these specific demographic segments. 

Customer Analysis Example

There is an example of a customer analysis written through the Yahoo! Contributor Network:
"Example of Customer Analysis for a Marketing Plan" by Chloe Thorn, Yahoo! Contributor Network, January 12, 2009
http://voices.yahoo.com/example-customer-analysis-marketing-plan-2417264...

This is not an exceptionally well written analysis; it has some grammatical and spelling errors, and at least one illogical conclusion . But, it covers most of the elements key to a customer analysis (e.g. buying criteria, customer demographics, etc.)

Customer Analysis References

Market Analysis {U.S. Small Business Administration (SBA) Website's content on Marketing Analysis}
http://www.sba.gov/content/market-analysis

"Analyzing Customers in Your Business Plan" 2011 {Growthink, Inc.}
http://www.growthink.com/businessplan/help-center/analyzing-customers-your-business-plan

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