Setting a strategy to cater to the different needs of your customers starts with grouping them together – also known as segmenting. 

You might need different strategies for each segment. For example, you could use one social media channel for customers aged 15 to 30, and a different channel for customers aged 45 and above.
Build up your strategy in three steps:

1. Segmenting: divide customers into groups with similar preferences and needs, for example, by age, location, lifestyle or buying behaviour.
2. Targeting: identify which segments bring most value to your business and decide which segments to focus on.
3. Positioning: create a product your target segment cares about. Find the price they’re willing to pay. Promote the benefits they are most likely to care about.

For example, a pest control business might identify young families as a promising segment. These potential customers want to keep their children safe from pests and from harmful chemicals – and are happy to pay extra for a non-toxic but effective service. The business could promote itself using a family-safe promise and testimonials from other young families. 

Creating your own space in the market

Understanding how customers compare products or make decisions helps you work with their behaviour instead of against it. Customers make decisions for a mix of rational and emotional reasons.

Sensory appeal

What customers experience affects how they act. For example, good lighting and music may encourage people to buy clothes. Tasty aromas like fresh-baked bread can tempt people into a bakery.

Memory and emotions

Offering rewards to loyal customers can help people build up pleasant memories and positive associations with your brand. For example, giving your customer their tenth coffee for free.

Needs and wants

What motivates customers to buy what you offer? A basic product targets people’s needs. A premium product should meet needs, but may also attract people who want a respected brand or aspire to a certain lifestyle.

Understanding the journey your customers take to buy your product or service will help you create appropriate marketing content for them.

A customer journey or buying process involves four basic steps: researching, shortlisting, choosing and buying. 

1. The customer explores options through research or word-of-mouth: During this step, you need customers to be aware of you and your product or service. Your advertising, promotions and social media channels can all help here.
2. The customer makes a shortlist: During this step, people seek information to help them select possible options. Examples include reviews or product features. 
3. The customer chooses one shortlisted option and decides where to buy it: During this step, it’s important to stand out. If you know what customers like and how they make these decisions, you can work on being more appealing than your competitors. Examples include:
   • offering delivery and pick-up options
   • selling on an online marketplace preferred by potential customers 
   • improving the in-store experience or customer service.
4. The customer buys the product or service: This step needs to go smoothly, including how people book services or receive products. 

These steps can look very different depending on your brand and product, and the market you’re selling in. For example, your customers may:

• carefully compare alternatives online, wanting to see details and specifications
• look out for your latest products and services
• be under pressure and trying to solve a problem with as little fuss or cost as possible.

It’s easier to attract customers if you understand the rational and emotional ways they behave. 

For example, a customer may need your product to solve a problem, or want it because they aspire to a certain lifestyle. After a sale, customers may move on quickly because their problem is solved. Or they may continue thinking about your brand as they enjoy their purchase. 

Finding out the specific details of your customer journeys will help you meet their needs with your products and the buying process.

It may help to get professional advice or training to deeply understand customer journeys for your business.

After your customer makes a purchase

Your interest in the customer doesn’t end after these four basic steps.

After the purchase, customers form their opinion of what they bought. So, it’s important to gauge customer satisfaction. Ask for feedback. How likely are they to buy from you again or recommend you to friends and relatives? Also, look out for negative feedback, which could affect public opinion of your business.

Every product or service has its own version of the buying process. 

Studying the journey your customers take could show you how to improve their experience. 

What you learn could help you:

• create a better product or service
• support customer with better information 
• reach people with more effective promotion.

For example, customers seeking quick tyre repairs are probably under time pressure and anxious to get back on the road. 

From a repair business, they need:

• easy-to-find opening hours and contact details
• a friendly, efficient purchase process to help reduce their stress.

A related service, replacing ruined types on the spot, could help them get moving again if repairs are impossible. This service adds value, even if it’s not exactly what they searched for.

Customer personas help you understand the journeys your customers follow towards buying. Once you identify key customer journeys, you can make improvements.

Start with a customer persona and a clear map of their customer journey, for example, as a diagram or a set of steps. 

If you don’t have a map yet, start with the six basic stages each customer goes through:

1. Trigger
2. Researching
3. Shortlisting
4. Choosing
5. Buying
6. Follow-up.

Trigger: There is always something that triggers a potential customer to look at your product or service. Think about what’s happening before they get to your shop front.

Researching: They’re likely to shop around, looking at different options, so you need to sustain their interest in your product or service and give them the information they are looking for.

Shortlisting: Next, you need to convince your potential customers to consider what you offer. Your customer personas can tell you what they might be looking for.

Choosing: At this stage they focus on what matters most to them about the product or service. Think about how you can help narrow down their options.

Buying: Make it easy for your customers to start and complete their purchase.

Follow-up: Think about how you’ll keep in touch with your customer after purchase.

Using these common metrics can help you plan marketing campaigns and make effective decisions in your business.

Customer acquisition cost

The customer acquisition cost is defined as the cost to gain each new customer. To work this out, divide the amount you spend on marketing by the number of customers you gain as a result.

For example, if you spend $450 on a marketing campaign and gain 30 new customers, each new customer costs $15. Include costs like wages and a share of office space as well as the direct costs.

You can then:

• compare the cost per customer from different campaigns to see which method gives you the best value for money
• decide how many customers you want to gain from a campaign
• work out how much to spend on this marketing campaign.

Using the example above, in which each new customer costs $15, planning to gain 50 new customers will need a marketing budget of at least $750 ($15 x 50 = $750).

Customer lifetime value

The customer lifetime value is defined as the total revenue you earn from a customer over the whole period of your relationship with them.

The cost to gain a new customer doesn’t tell you how much profit you make while they remain a customer. To work this out, estimate how long you will keep a customer and how much they are likely to spend during that time.

Calculating the lifetime value helps you understand which customers to focus on.

For example, a one-off customer who spends $70 compared to a loyal customer who regularly spends $50. It might cost the same to gain both customers, but their lifetime value shows the benefit in catering to the lower-spending loyal customer.

Customer retention

Customer retention is defined as an ability of a business to hold on to its customers.

This metric is usually calculated as a percentage. It shows if a business holds on to customers over time, which can depend on industry, market position and what they sell.

For example, a business serving people who come back year after year may retain 80% of its customers. A business that gains and loses customers each month might retain 20% of its customers.

Calculating customer retention helps you manage your business. The more customers you retain, the fewer new customers you’ll need to make up for the ones who leave.

Gaining new customers tends to be more expensive than retaining existing customers. Also, retained customers typically buy more often and spend more than newer customers.

Loyal customers are also more likely to sing your praises and refer you to friends and family, bringing in new customers free of charge.

Another way to understand customer loyalty is to calculate a net promoter score (NPS), which shows how likely your customers are to recommend you to other people.

Your NPS is based on customers’ responses to a question like: “On a scale from 0-10, how likely are you to recommend our company/product/service to a friend or colleague?”

Net promoter score