Learn about your existing customers
If you’re already running a business, you might already know quite a bit about your customers, and you’ll often have direct contact with them.
You can get to know them better through informal interactions, but planned research is the best way to learn more about your customers.
Use surveys, observations and existing data to learn about your customers’ behaviour. You can offer a reward to encourage customers to take part in research – for example a discount, free product or gift voucher to thank them for their time.
Examples of surveys are:
- short surveys at the point of sale
- asking questions face to face
- building questions into the online buying process.
You can observe customer:
- lifestyles and cultural trends
- buying patterns and what affects them.
Learn about your potential customers
If you’re starting a business or introducing a new product or service, spend some time building an image of your ideal customers. For example:
- look at what people want from similar businesses
- look if similar businesses have customers’ reviews
- check what products people search for.
Exporting
If you’re thinking about exporting, research your potential customers overseas as well.
Create personas
Personas are fictional profiles of the types of people most likely to buy your products or services. They represent your ideal customers.
Using personas can help you:
- picture who you want to sell to
- refine your products and services
- engage better with customers
- boost sales.
Once you know more about your different customers, organise them into groups. Think about what each group needs and who to target. Create a persona to represent each group.
For example:
- urban professionals aged 40+
- young families struggling to organise busy lives on a budget.
To add more detailed information about your ideal customers, try to answer these questions in a persona’s description:
- Where does this person live, or not live?
- How old are they?
- How much spending money do they have?
- Why do they buy from you?
- What languages do they speak?
- What are their favourite websites?
- How often do they buy from you?
- What are their worries when buying?
Building customer personas
Transcript
Video transcript: Building Customer Personas
[Audio/Visual: Gentle music starts playing with a shot of the presenter in the centre of the screen seated in an office space. Music continues to play throughout the entire video.]
They say that every successful business solves a problem.
[Visual: A graphic of hand holding a puzzle piece inside a purple circle appears on the right-hand side of the presenter and disappears after a few seconds.]
And knowing whose problem, exactly, you’re solving is a big part of that.
[Visual: The white text “Who is your ACTUAL customer” pops up in the central bottom of the screen. The word “ACTUAL” is circled for emphasis and then the text disappears after a few seconds.]
So, ask yourself, who is your actual customer, and emphasis on the actual. These profiles need to be based on the facts and figures of who is actually buying your product.
[Visual: A graphic of a laptop screen showing a bar and line graph trending upwards and a hand-held tablet device showing a donut chart inside a green circle appears on the right-hand side of the presenter and disappears after a few seconds.]
[Visual: The screen changes to show a customer in a shop writing down information at the shop counter.]
Are they male, female, non-binary?
[Visual: The screen changes to show a person in a gym setting talking to a personal trainer.]
How old are they? Where do they live? How do they spend their time?
[Visual: The screen changes to show a close-up shot of a barista making coffee. The screen changes to show a wider shot of a café and the barista handing the coffee to a customer. The screen changes to show the customer drinking their coffee.]
What are their interests and values? What do they do for work?
[Visual: The screen changes to show an employee behind the counter in a clothing store taking a card from a customer purchasing something. The screen changes to show the customer leaving the store with their purchase.]
How much do they earn?
[Visual: The screen changes to show an employee in a sporting goods store talking to a customer and handing them a shoe.]
What level of education have they reached?
[Visual: The screen changes to show two customers in a bar drinking beverages. The screen changes to show a wider shot of the bar and bartender.]
Are they married, single, parents? What's their ethnicity?
[Visual: The screen changes to show a family of four in a floating circular covered boat on a lake.]
What kind of personality traits do they have?
[Visual: The screen changes to show a person in an apron in a workshop setting talking to someone. The screen changes to show a close-up shot of an EFTPOS machine and someone using the contactless payment function. The screen changes to show a tray of food being handed to an employee in a restaurant.]
What does a normal day look like to them? Are they busy, always in a rush?
[Visual: The screen changes to show two people surveying a house and look at a hand-held tablet device.]
What are their goals, aspirations, and motivations?
[Visual: The screen changes to show an employee behind the counter in a homeware store taking an item from a customer and wrapping it up. The screen changes to show the customer smiling and talking to the employee.]
What are their challenges, pain points, and frustrations? (exhales) That was a lot!
[Visual: The screen changes to show the presenter in the centre of the screen. A graphic of four joined puzzle pieces inside a pink circle appears in the centre of the screen and disappears after a few seconds.]
But for you to create a complete picture of your customer, you need to be able to answer every one of those questions and then some. It's the acute awareness of your customers that should drive your every decision going forward. Wondering what products to stock in your shop? Well, what would your actual customer like based on your personas? Wondering how to caption a Facebook ad? Well, how does your actual customer express themselves on social media?
[Visual: A graphic of the seven different Facebook reactions (Like, Love, Care, Haha, Wow, Sad and Angry) appears in the centre of the screen and disappears after a few seconds.]
Wondering why your sales have dropped?
[Visual: A graphic of a bar graph and the dollar symbol with an arrow pointing down inside a pink circle appears on the left-hand side of the presenter and disappears after a few seconds.]
Well, do your customers have changing needs that you're failing to satisfy? But as well as knowing your customers up here, nothing beats getting the information down on paper.
[Visual: A graphic of a piece of paper and pen inside a yellow circle appears on the left-hand side of the presenter and stays in place. A graphic of four joined puzzle pieces inside a pink circle appears on the left-hand side of the presenter beneath the other graphic. Both graphics disappear after a few seconds.]
Forming a concrete, complete picture of that person or persons is key.
[Visual: A graphic of a laptop screen with the Facebook “Like” and “Love” reaction and a comment box inside a blue circle appears in the centre of the screen and stays in place. Graphics of the Facebook “Like” reaction float down on the left-hand side of the presenter, and graphics of the Facebook “Love” reaction float down the right-hand side of the presenter. All graphics disappear after a few seconds.]
Who comments and shares your social media posts?
[Visual: A graphic of three heads with three stars above inside a purple circle appears on the right-hand side of the presenter and disappears after a few seconds.]
Who are your most loyal customers, the ones who tell all their friends about you?
[Visual: The Google Analytics logo appears on the left-hand side of the presenter and disappears after a few seconds.]
Who does Google Analytics show clicks through to your website and hangs around the longest? Identify the traits that these people share and sum them up in a profile. Let's check out an example.
[Visual: The screen changes to show an example of a profile for a persona called “Nerdy Nina”. The profile includes Nerdy Nina’s name, quotes, demographics, goals, reading habits, favourite books, frustrations, the technology she uses, the hashtags she uses and a picture of Nerdy Nina including adjectives used to describe her.
Nerdy Nina is the customer persona created by a Brazilian bookshop. See just how much detail there is there? This is how well you need to know your customers.
[Visual: The screen changes to show the presenter in the centre of the screen.]
Even the hashtags you think, or know, if you're a good stalker, they use on Instagram are a good insight.
[Visual: The words #fashion, #happy, #instagood, #photooftheday and #beautiful appear in white text around the presenter and disappear after a few seconds.]
So, what are you waiting for? Make your customer persona or personas today and start basing your business decisions on fact, rather than fiction.
[Visual: The blue outro screen appears with the white Digital Boost logo in the centre of the screen. Under the logo are the words “Want to know more?” and “Visit digitalboost.co.nz”. In the bottom right-hand corner of the screen is the New Zealand Government logo.
[Video ends]
Add details to your personas
Once you have your generic personas, add details from your research. Give them names, pictures and catchphrases. Here are some fictional examples to show how it can be done.
Meet Ara, Bhavani and Joe
The busy parent
Ara is a busy young mum, living in Christchurch. She is on a budget, but gets a treat once a week, and buys clothing twice a year in summer and winter. She values her community and tech skills. She is motivated to do tasks quickly and save money. She is anxious about wasting her time. Ara represents 25% of my customers and 15% of my sales.
The urban professional
Bhavani is an urban professional, living in Auckland. They are aged 50+ with assets and spends spontaneously, buying clothing every month, both online and in-store. They value good ethical production and brand loyalty. They are motivated to be seen as eco-friendly and supporting New Zealand-made goods. They are anxious about keeping up with their friends. Bhavani represents 10% of my customers and 50% of my sales.
The university student
Joe is a university student, living in Taranaki. He has a medium budget, and spends enthusiastically, buying clothing every season, especially for sale items. He values hanging out with friends, and living life to the fullest. He is motivated by sport, sharing and inspiring others. He is anxious about authenticity to a cause or movement. Joe represents 25% of my customers and 20% of my sales.
Understand your customers' needs
Follow these steps to build a strategy for understanding your customers’ different needs.
Segment
Divide customers into groups with similar preferences and needs – for example by age, location, lifestyle or buying behaviour.
Target
Identify which segments bring most value to your business and which segments to focus on.
Position
Create a product your target segment cares about. Find the price they’re willing to pay. Promote the benefits they are most likely to care about.
Analyse key marketing metrics
Use these common metrics to plan marketing campaigns and make effective business decisions.
Customer acquisition cost
The customer acquisition cost is the cost to gain each new customer.
To calculate this, divide the amount you spend on marketing by the number of customers you gain as a result.
For example, if you spend $450 on a marketing campaign and gain 30 new customers, each new customer costs $15. Include costs like wages and a share of office space, as well as the direct costs.
Compare the cost per customer from different campaigns to see which method gives you the best value for money. Then decide how many customers you want to gain from a campaign and work out how much to spend on this marketing campaign.
Customer lifetime value
The customer lifetime value is the total revenue you earn from a customer over the whole period of your relationship with them.
The cost to gain a new customer doesn’t tell you how much profit you make while they remain a customer.
To calculate this, estimate how long you will keep a customer and how much they are likely to spend during that time. Calculating the lifetime value helps you understand which customers to focus on.
For example, a one-off customer who spends $70 compared to a loyal customer who regularly spends $50. It might cost the same to gain both customers, but their lifetime value shows the benefit in catering to the lower-spending loyal customer.
The ideal ratio of customer lifetime value to customer acquisition cost is 3:1. This means your total revenue from a customer should be at least 3 times what you spend on acquiring them.
Customer retention
Customer retention is the ability of a business to hold on to its customers. This is usually calculated as a percentage. It shows if a business holds on to customers over time, which can depend on industry, market position and what they sell.
For example, a business serving people who come back year after year may retain 80% of its customers. A business that gains and loses customers each month might retain 20% of its customers.
The more customers you retain, the fewer new customers you’ll need to make up for the ones who leave.
This is good because:
- gaining new customers is usually more expensive than retaining existing customers
- retained customers usually buy more often and spend more than newer customers
- loyal customers are more likely to refer you to friends and family and bring in new customers.
You can also measure customer loyalty through your net promoter score (NPS), which shows how likely your customers are to recommend you to other people.
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