A graphic with the word 'customer' in capital letters with a magnifying glass hovering over the middle of the word 'customer'.
Understanding your customer

Knowing your customer

Customers are the lifeblood of a business. Whether the customer is an individual or another business, without them the business simply won’t be successful. Marketing is about understanding exactly who your existing and potential customers are and striving to meet their needs.

Not knowing your customers explicitly will result in you consistently failing to meet their personal expectations, and their switching to a competitor who can. Some customers stop using a business not because of the product, but because they become frustrated with the poor customer service.

In contrast, knowing your customers and understanding their wants and needs allows you to treat them differently from one another, rather than adopting a ‘one-size-fits-all’ approach. This can not only result in your customers coming back to you time and again, but it will also help to attract new customers as a result of your reputation, allowing your business to be successful and to grow.

An example of a successful firm understanding the importance of differentiation is the American retailer Home Depot, which sells products in the ‘do it yourself’ market. They say that:

Each of our primary customer groups – DIY [do it yourself], DIFM [do it for me] and Pro [professionals] – have different needs and expectations […] If we do not successfully differentiate the shopping experience to meet the […] needs and expectations of a customer group, we may lose market share with respect to those customers.

(Home Depot Annual Report, 2015, p. 8)

This statement shows the importance of understanding not only the needs and expectations of customers (those who pay for goods or services), but also the fact that these needs can vary between different customer groups (including those who use free services, such as online advice or guidance).

In the case of Home Depot there are customers who want to buy products they can use themselves for home improvement, and their needs and expectations will be different to the customers who are likely to engage someone else to do the work for them. Additionally, these two groups will be quite different to Home Depot’s business customers, the building professionals.

So how well do you know your customers?

  • Who are they?
  • What do they want to buy?
  • Why do they buy it?

Some of this information may be held as internal data (i.e. within your organisation) that you can access to answer these questions. It can also be very beneficial to talk to your customers and, depending on the size of the business, this could be achieved through informal discussions with your customers or through more formal market research in the form of focus groups or questionnaires.

It is also important to think about how you meet customers’ needs. What makes you unique? Why will customers want to buy from you and not your competitors? Make sure you are clear on what your unique sales proposition (USP) is. This could be something like offering free delivery, a loyalty card programme or extended access to customer services.

Your USP is what sets you apart from other businesses, defining what customers won’t get from your direct competition and providing an important reason why they may want to develop and maintain a relationship with you. It is acceptable for your USP to change over time as your business develops, but it is important to keep in mind that your USP should address something that the customer wants and will influence their buying decision.

Share this article:

This article is from the free online course:

Business Fundamentals: Customer Engagement

The Open University