Why this idea means business : We explore how customer understanding helps you guide ideas through your business. Learn how to use it to handle common internal issues. Read this to learn how to use customer understanding to make better-balanced business decisions.
Customer understanding is where marketing starts. That’s why we wrote about it in our very first article, and many times since. (e.g. see our customer feedback and marketing data plans articles). You build it by collating and using your data, market research and insights. You can’t build brilliant brands if you don’t understand your customers and what they need.
Seems obvious, right?
What businesses do to customers
Yet, it seems many businesses don’t understand customers at all. They’re all “Yeh, yeh, we get it”, and then they do things like :-
- shrinkflation – reducing the pack size while keeping the price the same so the customer gets less value.
- above inflation price rises – maximising their profits while customers suffer from rising costs.
- unasked for product changes – deleting a variant, changing its design or performance and mucking around with the packaging.
- weird innovations – launching new products that were clearly invented in a brand workshop rather than from a meaningful customer need.
- bland advertising – filling our screens, pages and walls with half-witted headlines and dull stories.
Customer understanding helps you avoid all this marketing mediocrity.
Where does customer understanding go wrong?
No genuine marketer sets out to annoy customers. They follow the market research process and the brand development process and gather all the data, research and insights they need to understand their target audience.
Most of these activities usually start as a good way to support customers. Where it goes wrong though is what happens next.
There’s a journey from understanding customers to creating and offering something they need.
This is hard to do as it involves working with other business functions. Mostly the ones who “make” things rather than “market” them.
For example, you share with the Research and Development team what customers are looking for. And they tell you that it isn’t physically possible. Or that it’ll take years to develop.
Then there’s your Supply Chain and Operations team. They have to work out where you’ll source the materials you need to make your idea happen. Plus, how they’ll set up an operational process to continually and consistently deliver those products and experiences. All while trying to keep your current operations running at maximum efficiency.
And finally, there are our old friends in the Finance team. You know, the ones who act as if the company’s money is their own personal life savings. They’re constantly on your back to justify every last cent of the investment you need to deliver your idea.
Commercial priorities
It’s not that these functions don’t get the importance of customer understanding. They’re not stupid. Logically, they get that the company has to produce something that someone (the customer) will pay for. And that you have to understand who that someone is and what they need.
The challenge comes from the competing pressure of the other priorities those teams see as important.
So the R&D team prioritise finding more efficient materials and processes to lower operational costs.
Similarly, supply chain and operations are rewarded for keeping efficiency high and costs low.
And of course, finance runs on setting sales targets and managing investment and profit levels. Your brilliant new idea for customers has to hold its own against these competing commercial priorities.
How do you balance customer and commercial priorities?
Businesses say they put customers first, but you can’t always give customers everything they want.
We’d all be driving around in cheap Ferraris drinking bargain-priced champagne if that was the case.
There’s always a balancing act between what the customer needs and what your business profitably and sustainably can deliver to meet those needs.
It’s an ongoing challenge to balance customer and commercial priorities.
Generally the stronger you can make your brand, the more customers will be willing to pay for it. (See our why brands matter article for more on this). Strong brands face fewer challenges from R&D, supply chain, operations and finance. However, you’ll still face some internal challenges and you need customer understanding to help convince the blockers to get out of the way.
There’s no guaranteed way to solve these challenges. It differs in every company. But here are 3 thought-starters we’ve used in the past which can help :-
- customers mean money in.
- always be testing.
- make customer understanding a habit.
Customers mean money in
Most of the commercial challenges are around managing the shape of the profit and loss. Those other functional teams want to make sure there are healthy profit margins by focusing on efficiency.
However, you should point out that the profit at the bottom of the P&L only works if there’s money (i.e. sales) coming in at the top. And that’s driven by customers. Growth comes from increasing market share and going after new markets and customers. (See our Ansoff matrix article for more than this).
So when internal teams start to push you for cost efficiencies and margin improvements (this is often what’s behind ideas like shrinkflation and big price rises), remind them that the business answers to the customer, not the other way around. Use your data, research and insights to show the impact their bad ideas will have. And the impact your good ideas will have.
It’s hard for them to argue against fact-based, objective customer understanding. So use your customer segment profiles to bring customers to life for these teams so they understand and buy into the impact of every idea and decision. (See our explaining marketing to non-marketers article for more on how to engage other functions).
Always be testing
It’s also worth setting up a testing process with these other functions to run separately from their day-to-day operational efficiency-driven processes.
This testing process should have targets for idea generation and how it manages ideas throughout the business.
This means you can test new ideas without disrupting current operational efficiency. So it might be that the factory sets up a separate line to run tests. Or if you’re a retailer, you set up a few test stores to try out new ideas.
It also often means creating new “innovation” roles in those teams. You appoint someone who understands the operational and commercial realities but is agile and open-minded enough to work as part of a separate innovation project team. Their focus is on looking to the future. How to create and integrate new ideas and best practices to improve what those functions do for customers.
That’s where marketing can help by sharing their customer understanding. They can share their insights into what customers will want in the future. Then work with those other functions to test how best to meet those future needs.
Make customer understanding a habit
To get past that “Yeh, yeh we get it” and then doing something that shows you don’t barrier, you have to make sure customer understanding stays fresh and top of mind. So, set yourself targets to regularly learn something new about your customers.
For example, go where they go. Listen to what they say. Whether that’s in real-life buying situations, or online in forums and on social media. Talk to your customers and ask for feedback.
Act on that feedback so that customers feel understood and listened to.
Look for ideas from other areas. For example, explore behavioural science and design psychology. Use these for prompts and insights into what makes people tick. The experts in these areas have deep customer understanding and do it for a living. So take the opportunity to learn from them. Make customer understanding a good habit in your business.
Conclusion - Customer understanding
Customer understanding is at the heart of all good business decision-making. But as we’ve shown, even with the best of intentions, other commercial priorities often get in the way.
The result is that you launch things customers don’t want or need, and you lose business.
It’s not about giving customers everything they need, but about finding the right balance. Offering what they need in a way that ensures your business is profitable and sustainable.
It takes time to build customer understanding and educate the rest of the business on why it matters. You start this education by reminding people that customers drive the top line in the profit and loss. Without them, there is no bottom line. It helps to set up a separate testing process for new ideas so it doesn’t interfere with current operations. And of course, you should always keep an open mind about learning ideas from other areas that help with customer understanding.
Check out our customer feedback and importance of market research articles for more on this. Or get in touch if you need help building your own customer understanding.
Photo credits
We hear you : Photo by Jon Tyson on Unsplash
Man shouting at phone : Photo by Icons8 Team on Unsplash
Counting cash : Photo by Sharon McCutcheon on Unsplash
Legal scales : Photo by Tingey Injury Law Firm on Unsplash
Customer Experience Coffee Shop : Photo by Patrick Tomasso on Unsplash
Two people with macbooks and notepads : Photo by Scott Graham on Unsplash
Hypnosis Pocket Watch : Photo by MK Hamilton on Unsplash
