“Know your customer” is a great, if somewhat cryptic, piece of business advice and in some industries like finance and banking, it is an actual legal requirement. Knowledge about customers, both future and present is so valuable that big internet companies like Facebook and Google collect so much information about their users that they are the reason why privacy on the internet has become such a contentious issue in the modern age.
Why you must know your customer
Besides banks and other institutions, which must collect information on their customers because they are compelled by the law to do so, there are still plenty of other excellent reasons why many businesses do this of their own accord. One of the most commonsensical reasons for collecting customer information is so that you can send them promotional offers, information about new products etc. In many cases, it costs much less to market to a returning customer than a completely new one. Collecting customer contact information is one of how you can proactively ensure that you get return business.
Much of the advice on starting your own business recommends that you choose a market segment to target early on. However, there are plenty of stories where the business owner was pleasantly surprised (or less so) after discovering that a significant amount of demand for his/her products or services was coming from an unexpected segment. As an example, imagine that you open a business meant to target low-income households but you discover that you are also proving to be popular among higher earners. If you do not have a system for collecting and organising information about your customers it may take you longer for you to spot such a trend.
Knowledge about the income level of your customers will also inform your pricing decisions and the kinds of products which you carry. These are just a few out of a countless number of reasons why information about your customers matters.
Consumer-facing companies tend to collect and keep far less customer information than their peers which serve businesses. However, there is a lot of information which these businesses can still collect to improve customer service, facilitate targeted marketing and proactively increase customer loyalty. Some of the information which business-to-consumer companies may find worthwhile enough to gather is the following.
Depending on the nature of your products or services this piece of information may serve any of several purposes. At a minimum, you know whether to address your customer as “Sir” or “Madam” in your communications. Some businesses may use this information to send the appropriate promotional material to their customers—a clothing shop will save a lot on printing if they only sent catalogues containing ladies’ clothing to women and vice versa. This information can also be used to see if your business is unintentionally attracting disproportionate numbers of members of one gender over another. E.g. if it is mostly men who are frequenting your establishment and this is not by design you will have to investigate the reason why your premises are so uninviting to women.
The age of future and present customers is a very important piece of information. Organisations can use this to see how their customers are distributed across age groups. They can then tailor their marketing messages to better target those age groups which seem to be under-represented. Youths and pensioners have very different needs; know which ones make up the bulk of your customers.
The spending habits of married and unmarried people generally differ, especially for higher-value purchases. Single individuals are more likely to impulsively buy expensive items on the spot than their married counterparts who may have to go home and consult with their partners before committing.
Knowledge about customers’ income is one of those pieces of information which most business people will agree to be potentially useful. Modern technologies like email and SMS allow you to send product and price updates to customers among other things. Knowing what your customers can and cannot afford gives you an edge when marketing to them using these channels.
You will realise that all the other items on this list can simply be asked from the customer, but income can be a bit tricky. So how does one go about obtaining this kind of information? Easy—many businesses gain access to this information whenever they ask for payslips and bank statements from customers e.g. during the application process for hire purchase agreements. If you do not have a plausible reason for outrightly requesting customer income information, you can instead try to track their buying patterns.
Due to their generally smaller numbers of customers, companies which serve other businesses generally keep more information on their clients. This practice is mostly necessitated by the reason that most B2B clients are considered to be higher-value customers than their B2C counterparts and are usually far more difficult and costlier to find or replace.
Contact employee information
When dealing with companies, there is usually only a limited number of employees whom you can interact with. Depending on the size of the company, initially getting in touch with these people can be next to impossible. So once you establish a line of communication to the company through them, record information like their names, contact information and positions within the organisation.
For organisations you can collect and record information like the company name, the industry it is in, its size and revenue.
Handling the information
Digitizing customer information makes it easier to use and manage. While a simple spreadsheet can contain your entire customer database, it is more advisable for you to use tools designed for the task like customer relationship management systems (CRMS). Remember that even tiny and seemingly inconsequential pieces of information about your customers, if used correctly, can give your bottom line a much-needed boost.