| November 25, 2020
Acquiring, converting, engaging and retaining customers is a key driver of business success.
Recent advances in technology available at low cost allow even relatively small businesses to capture significant information on customers. Analysing this customer data can give visibility into every facet of a business, helping to produce data-driven and actionable information which can level the playing field between SMEs and their much larger competitors.
If you have good data about your customer, which is possible if you have the right systems in place, you can gain valuable insights into who they are, why they buy and what you need to do to keep them coming back.
So, if “Knowing your Customer” is so important, what analysis should you be looking to do?
Customer Segments
Even very simple businesses need to undertake some level of sales analysis - this usually involves analysing those sales by the attributes of the customer:
- Geography - where the customer is located;
- Size - both in terms of the customer themselves and their relative importance to you;
- Demographics - in Business to Consumer (BtoC) transactions attributes such as age, sex etc can be extremely useful information.
In addition to these ‘inherent’ attributes, looking at other variables such as how your customers engage with your business, purchasing patterns or seasonality and market sector they reside in are examples of how you might better understand them, and their relationship with your business.
Sales Channels
This is a classic analysis that most companies, no matter how small, can undertake. Having insights as to where you generate most sales, both in volume and value terms, can help you to better target your resources - at the places where you are already successful OR, perhaps more importantly, where you are not currently winning sales.
For example, perhaps you do business via distributors and direct to customer (online or by phone). A sales channel analysis will attribute each sale to its particular channel and, crucially, if you can allocate the direct costs it took to bring this sale in, you have a powerful ‘Value Added by Channel’ analysis to direct effort to where it is going to pay off.
Customer Satisfaction
Knowing if a customer is happy with your product or service is crucial - if you’re meeting their expectations they are much more likely to make repeat purchases or recommend you to their colleagues (in the case of Business to Business) or family and friends if you are selling direct (BtoC). Insights into customer satisfaction are therefore extremely valuable metrics for any business.
From internal order data you can set up up ‘On Time In Full’, or OTIF, reporting as a key measure to start with. Tracking this over time will show trends of delivery performance against customer expectations, that is…. “are we giving our customers WHAT they want, WHEN they want it”.
However, how you interact with customers can also affect other, externally generated, data that you can gather. For BtoC sales in person and online, social media and third-party review websites are a significant source of information on your customers ’likes’ and ‘dislikes’ and your performance against expectations. BtoB is a little more difficult, and usually requires more effort, - but satisfaction surveys and qualitative feedback can be useful tools to gain better insights.
A combination of quantitative and qualitative, internal and external data, is needed to allow you to get a clearer picture on customer satisfaction and allow action to be taken on any failure to perform.
Customer Lifetime Value
This is a tough one and at the top of the food chain when it comes to customer analysis. If you can put together something like this it can be extremely valuable as a tool to drive the business forward.
If you know the long-term value of each of your customers - that is, how long they’ve been a customer, how much and how often they buy, and what makes them stay with you - this will allow you to see sales as a long term relationship rather than a series of discrete transactions. Understanding the impact a customer can have on your business over time will make managing for lifetime value the focus - looking at ways to increase the length of the relationship, maximise its value for both parties, and help evaluate the potential for investments in areas that can increase your business with them.
Summary
Companies are generating more and more data about their customers - there are now lots of tools available to exploit that data that are easy to use and very cost effective for the SME, so there is really no excuse for not doing at least some basic sales analysis. With a little planning and coordination, even smaller businesses can compete with their larger competitors when it comes to being smart in using sales data to gain better insights and make better decisions around the sales process.
And finally…. if you want to know more about how we can help you improve your business through better systems and improved information then do please get in touch via the Contacts Page.