What You Don’t Know About Your Customers, Will Kill You

Entrepreneurs and small business owners are usually quite good at telling you some general insight into their customers. They will have a good idea of their general demographic as well as what they like to buy from their existing product or service range. If they have an online presence, they’ll even tell you how often they visit online, what proportion return, and even which landing pages they prefer. It’s a statisticians dream.

Yet, the tendency is to focus far too much on what you already know about your customers, which tends to generate, well, more of the same. Instead, we should be more focused on what we don’t know about our customers – that’s the really interesting question – rather than tracking the very one-dimensional “unique visit” on our website.

What don’t you know?

If you’re a business leader, entrepreneur, or business owner you enjoy certainty. It means less risk and greater predictability, which in turn means it’s easier to run your business. So it’s no surprise we take comfort in all the things we already know. However, there’s a lot of we don’t know about our customers and the sooner we close that gap the better.

More than a few businesses have been caught flat-footed by this, think RIM or even Kodak. The former failed to anticipate the shift from software to hardware, while the latter thought (incorrectly) that they were in the film business. They were actually a photography company.

Ask yourself what your customers actually use your service/product for. What else would they buy from you if they could? Do they come in just to grab a coffee and leave? Or are they using it as a place to relax and meet-up with friends?

By trying to understand more about what you don’t know about your customers, you can quickly identify and evaluate new opportunities to better add value.

For instance, take the example of the coffee chain. If you decided that your customers were focused on speed in the morning, perhaps you would look at ways to speed up the process from order to delivery. You might also look into smaller stores in order to save on rent because your customers just love the coffee and have no interest sitting around.

What’s more, if they’re using it as a substitute for having breakfast at home perhaps you should look into expanding your range of food items to go?

Banks – A History of Misunderstanding

Sometimes the best way to understand how to do something is to examine how not to do it. Enter the banks. Think how differently the banking experience would be if banks actually understood how their customers used their services?

For most banks, they define it in terms of what they need. Put simply, they need money (set-up retail banks to take deposits) and then they need to make money (set-up divisions to then loan that money and related advisory services).

Somewhere lost in that shuffle is what customers actually need from their banks (hint: it’s more than an ATM). Their customers need help to manage their money. Much of this need could be filled by providing proper software to help manage spending online, instead of simply displaying balances and transactions. This has taken banks years to figure out and they’re still behind.

The success of Mint.com is a perfect illustration of the huge gap that remains between banks and their customers. Mint provided an easy way to manage your personal finances – by linking to your bank’s data! More recently, the lack of small business support from banks has been duly revealed by the amount of traction from Toronto’s own Wave Accounting. They’ve built an app to empower businesses to better track, manage, and fulfill the tax requirements by tapping into – you’ll never guess – your own bank’s data.

For regulatory reasons, banks continue to enjoy a certain amount of protection from the true wrath of the free market. Yet, the cracks are on display.

How will you go about finding the answer?

Given we’ve established the importance of understanding what you don’t know about your customers, how do you go about identifying the unknown? This is much simpler than it may appear – use any excuse to talk to your customers. There’s a well-documented story that Paul Graham told about Airbnb in their early days in which the founders learned some key insights into how their customers were using their service. While they had originally envisioned it as a community to find a place to crash, they were surprised to find out how many of their users were actually using the service to help pay their rent.

You won’t always be in a position to discuss in person, but use whatever means necessary. Send out newsletters, create meetups, conducts polls, leverage a messaging platform – anything.

Aside from talking to your customers, try and better define what business you’re actually in. In his seminal text “Marketing Myopia”, Theodore Levitt argues that most business fail to correctly identify the business they’re in. For instance, is Air Canada in the airline business or the transportation business? Is Amazon an online book store or an e-commerce destination? You can imagine that their priorities and goals would be extremely different depending on how they answer these questions.

After you’ve started to collect all this information, decide whether there are any patters and how they might fit into the overall goal of your company. If it’s completely contradictory to what you’re trying to build, ask yourself why.

You’ll notice that Airbnb successfully integrated this feedback from their users into a major promotional tool that helps to broaden the appeal and benefit of their service with a “Could you pay your bills with Airbnb” calculator.

The least interesting and important information is what you already know – it’s what you don’t know that will truly help to define and shape your business in the future.