How Knowing Your Customers Can Help Grow Your Business
Business has changed. Even twenty years ago, most of the sales were made physically, with a seller recommending the product to the customer and the customer deciding whether he wants the product or not. But the internet changed that. The Internet changed everything.
Today, nearly 20% of all retail sales are done online. But if you think about it, the internet has a major role to play in offline sales as well. We see more and more ads online, when we are interested in a product, we search for it online and look at online reviews.
The internet changed the playground completely, as it gave customers a lot of insight into the product they are buying and into the company they are buying from. A buyer today may even know more about the product than the seller himself. That means, sellers no longer hold all the cards in their hands. The playing field has balanced itself out.
So how can a company gain back the field advantage that it had until the 2000s? It seems the answer is hidden in the customers. Specifically, the company has to know its customers better than they know themselves.
Michele Ferrero was the Alpha and Omega of the chocolate empire that produces Nutella. Ferrero is famous for an interview he gave a while ago.
When asked »Mr. Ferrero, how do you make business decisions? How do you decide whether to make Nutella sweeter or change the colors of the packaging or whether to make a special Christmas edition or not?«
To which he replied: »Simple. I ask Valeria whether she would like that or not.«
The journalist, visibly perplexed, asked: »Who is this Valeria?«
»Valeria is every mother, every wife, every grandma, every aunt that goes grocery shopping and decides what the family is going to be eating the next days.«
Ferrero summarized it perfectly. He grew his business by knowing who the decision-maker in the family is and appealing to that decision-maker. He knew, that if he managed to convince the decision-maker, he would make the sale.
When we first started the Creative Solutions brand, we did not put much emphasis on this. We knew we had the technical skills and expertise to create great products, so we thought clients would come naturally. All by themselves walking into our office, offering their money in return for awesome VR and AR services. Oh, how wrong we were.
After a while, when no client came knocking on our door, we started scratching our heads and thinking about what we could be doing wrong. We started to think about our clients and how to get to like us. So we decided to introduce ourselves and wrote our first mailing campaign. We wrote to about 450 people, expecting to get 3 or 4 deals out of it. Of course, the success rate was exactly 0%. Looking back at things, we were sending e-mails with the wrong content to wrong employees who worked for wrong companies. Btw, our timing was probably off as well.
So we decided to change things around. We started collecting data. Researching client profiles on social media, writing down information during phone calls and generally getting to know our customers better. In time, this helped us get a very good understanding of who is a good client for us and who isn’t. This has sped our workflow considerably and our cold emailing campaigns have a much more sensible 1% conversion rate as well.
How big corporations are changing
Interestingly, you could put our failures down to lack of experience, but it turns out, big corporations had similar problems as well.
For example, Apple was a product company just ten years ago. They manufactured and sold iPhones, iPads, iPods. But Apple had one big problem, that could ruin their entire company in a heartbeat. They knew very little about their clients.
This proved to be a major obstacle. Firstly, how do you plan next year’s features if you have no idea what people want? Secondly, Apple had no way of knowing whether next year’s phone would sell like crazy or if the sales will be lower than on this year’s model. And businessmen don’t like unpredictability.
Apple knew, their competition would catch up and pass them if things didn’t change. So they started collecting more data from their customers. They created Apple Music, Apple Arcade and lots of other subscription services. And the trend continues in 2019.
Why subscriptions? Because subscriptions renew every month. That means you get monthly data, whether your customer is happy or you are losing him to a competitor. And knowing that is a game-changer.
If you identify a problem with the customer, you can ask him for feedback or send him personalized content in order to persuade him to stay.
Along with calculating your churn, subscriptions are a great way to gain additional data as well. Simple in-app questions can provide valuable insight into your customer’s thinking. Additionally, you can monitor the user’s in-app behavior, learning more about his habits and preferences. That can help you predict not just next year’s sales but can give you a clear vision for the next decade.
Apple is just one of the companies that made the switch to subscriptions and recurring revenue. You can find other examples, like Fender, the iconic guitar producer. Fender had a problem as 90% of first-time guitar players quit within a year. Fender found, most newbies learn three chords and then quit.
So they started making online lessons for guitar players helping them overcome that three-chord plateau. The results were immediate. The lessons are not free, the subscription fees start at $9,99, but even with the additional cost, the churn rate fell immediately, giving Fender more money and more insight into their customers.
The bottom line
Small startups waged war against major corporations and won because they had a better understanding of their customers. Large corporations fell because they didn’t have their customers’ best intentions in mind. And even giants like Apple and Fender are changing the way they work in order to better understand their customers.
Just like 20 years ago, knowing your product was the best way to sell it, knowing your customers well can be a difference between success and failure today.
Andrej Persolja is a VR artist and a co-founder of Creative Solutions. Creative Solutions partners with creative agencies to help their clients raise the presentation of their products to the next level.