If you are a small business owner or manager, by now you’ve probably started to wonder if you should be investing in some kind of customer data. If you own a restaurant or retail business, you’ve almost certainly been approached by a company selling big data in the form of loyalty card programs or access to consumer databases.
Perhaps you’ve been resistant. No one out there could possibly know your customers better than you do. After all, this is YOUR business. And you’re likely the one dealing with those customers day in and day out.
But without a method for capturing this feedback, you can self-select certain customers. Often, those are the customers that confirm what you already believe or are the most like you. But you are not your customer.
As the gap between the companies that have access to data and those who don’t grows wider, the struggles of small business ownership will continue to increase.
Four ways customer data will help your business
- A structured approach to planning.
Customer data that’s properly analyzed can help refine your entire business plan, allowing you to feel more confident in your budgeting and decision-making processes. This can impact everything from which promotions to run to when to pull a hiring trigger.
Determining your key customer groups are and what products they want is only the first step in creating a more efficient market strategy.
With the right data in hand, owners and managers are more prepared to make predictions about what will happen next and are more prepared to address issues and opportunities as they arise.
- No more playing Follow the Leader.
One of the biggest challenges faced by many of the small businesses we work with is that decision-making is driven primarily by the past experience of the owner or manager. While that historical business insight is useful, it’s only relevant as long as the needs of your customer base are stagnant. That is rarely a reality and rarely a good thing.
A recent study from Harvard Business School found that owners and managers of small businesses were more likely to copy competitors when times get tough.
If you’re always playing Follow the Leader, you are inherently behind.
In the same study, businesses who had access to customer data were more likely to find opportunities for creating new services or offerings for specific customer segments, allowing them to capitalize on niche markets their competitors didn’t serve well. They were also able to be more efficient with their resources.
- Reduce uncertainty
No one can predict the future, but good analytics can give you a better idea of what it will look like.
In the Harvard study, small companies aren’t using customer data as a replacement for their reliance on past experience. Instead, the owners and managers were often able to confirm or disprove their hunches about what to do next, removing much of their doubt and reducing the instances of second-guessing.
Small business owners often have no shortage of ideas, whether it’s stuff they’re thinking of or stuff friends, family and everyone else pitch them on a day-to-day basis. The hard part is choosing from that scattered collection of ideas to pick the right one. It can feel too much like gambling. But it doesn’t have to. The more you know your customers the easier it is to pick winners and weed out losers.
Which brings us to….
- More efficient with resources
Very few businesses succeed at being all things to all people and that’s an especially challenging position for small businesses with limited budgets and capacity.
Access to smart insight from customer data supports the tactical allocation of money and human resources. If you know which markets have the best opportunity for growth, you can spend more time and money targeting them. And, in most cases, you can do it in a more cost-effective manner than the scatter-shot approach of mass marketing.
For example, a business may have historically relied on billboards and print ads to build awareness of its brand. But the expense may have done little to yield the type of loyal customers they hope to attract. Instead, for less money, they found that by sponsoring or participating in certain civic and charitable events, they created a much more meaningful contact with a type of customer that was more likely to visit the shop, make a purchase and stay loyal. Spending less, while generating a stronger return. But how to know what events would be the right fit, for both the business and the customers? Rich customer data.