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Learn About Your Customers

Discover tactics for learning what your customers want and what they think of your company and its offerings. Then find out how to use your
insights to delight your most important customers.

Get Feedback From Customers

Getting feedback from your customers about your organization and its offerings can help you craft strategies for serving them better.

“Listening posts” make excellent tools for gathering such feedback. Listening posts include:
Your organization’s website. Solicit general feedback on your site and post email addresses for designated contact people. Scan forums on
your site, and look at competitors’ forums to see what people are saying about your company and its offerings.
Social media. Monitor what people are saying about your company and its products or services through social media sites and through
consumers’ websites and blogs.
Market research. Conduct—or hire a market research firm to conduct—studies or surveys on consumers’ demographics, lifestyles,
preferences, opinions, and buying patterns.
Focus groups. Bring together an informal group of customers from a target market to test an initial product or service idea. As the concept
develops, conduct more extensive focus groups.
Customer service process. Analyze customer complaints and use the resulting insights to generate strategies for keeping customers happy.
Follow-up satisfaction calls or surveys. After a transaction, contact the customer to find out how everything went. Ask a few simple questions
about the products and services involved—and about the customer’s experiences with your company.

Learn from Your Customer

Lorraine Fox — Senior Investment Advisor and Head of Palo Alto Office, Clearrock Capital
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Whether your customers are within or outside your organization, you need to know them to serve them successfully. Use these strategies to find out
what their challenges are and how you can help them by providing even better offerings.

Observe customers

Another way to collect valuable data is to go into the field and watch how your customers use your product or service—or those of your
competitors—in real life. You’ll find out what they like, what they don’t like, and how they would improve your offering.

EXAMPLE

At a company that made photocopy machines, observers in the field found that client companies often placed the copiers in storerooms.
People visiting the storerooms to retrieve supplies frequently stood on the copy machines to reach high shelves. Knowing this, product
designers created a copy machine strong enough to support a person’s weight.

To learn how customers use your product or service:

Get out in the field. Send a small team to observe customers. Ensure that the team includes people from diverse disciplines. An engineer may notice mechanical functions, while a
designer may see space and form. Have the team watch as customers carry out normal routines involving your product or service—or that of a competitor.

Capture the data. Have team members capture data through silent observation and through asking a few open-ended questions, such as, “Why are you doing that?” and “What’s
your most memorable experience with [the activity being observed]?” Observers may carry a list of questions to prompt their own observations, such as, “What problems is the user
encountering?” Consider having the observers create videos, audio recordings, or photographs to capture subtle body language, facial expressions, or tone of voice that may convey
important information about what customers are experiencing.

Analyze the data. Look at all the data collected by the team. Consider whether any of it suggests problems or needs the customers may be experiencing. Present the data to
colleagues who did not take part in the observation. Ask these individuals if they see any additional problems or opportunities.

Conduct First-Hand Market Research

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Robyn Bolton — Partner, Innosight

When market research is up close and personal, it can have a deep impact on corporate strategy.

Anticipate customer needs

To learn even more about your customers, consider what else they might want—but don’t yet know they want.

To do this, strive to see your customers’ worlds through their eyes, not yours, using these strategies: *

Understand your customers’ choices. Analyze the range of companies your customers buy from. You’ll gain insights into which offerings
they’re choosing to use and why. You’ll also better understand your competitors, including possible strategic moves they might make.
Track customers’ experiences. Follow customers as they go through every point of interaction with your company—including placing an order,
asking questions, raising complaints, and paying for products or services. Notice any breakdowns in this process. Then use your insights to
improve your offerings or the way you do business with customers.
Learn together with customers. Include customers in learning opportunities such as seminars and conferences. You may gain insights into
their current challenges, which could in turn generate ideas for new offerings.
Foresee customers’ future needs. Use tools like scenario planning to assess what customers might want tomorrow, given changes in their
lives, new technologies, and market shifts.

Position for Future Markets

Tamar Elkeles — Vice President & Creator, The Learning Center, QUALCOMM

Innovations that may not benefit customers today could meet their needs tomorrow.

Identify your target customers

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Successful businesses know exactly who their most profitable customers are—and they focus on creating offerings to please them. If they spend
too much energy chasing the wrong customers—for instance, those who switch from company to company, lured by the cheapest prices—they
stray from what they do best. They also risk alienating their profitable customers.

You and others in your organization need to determine who your target customers are and what they expect—and then strive to delight and
retain them.

EXAMPLE

Some customers engage with particular brands or products, not only in terms of the quantity of their purchases, but also in their
passionate attitude toward them. One study of 124 consumer packaged goods categories found that this type of “superconsumer” on
average represented only 10% of a category’s customers but accounted for 30% to 70% of sales and an even higher share of profits.
Based on this knowledge, a U.S. food company developed a growth strategy focused on a set of its superconsumers that led to new
product launches and generated millions of dollars in additional sales. *

Reconsider customer-loyalty claims *

Evaluate customers on loyalty and profitability *

It’s easy to think that customer loyalty automatically translates into profitability—and that companies should therefore try to keep all their
customers as long as possible and treat their most loyal ones especially well.

But the link between loyalty and profitability is surprisingly weak—and complicated. The fact is, not all loyal customers are profitable. And not all
profitable customers are loyal.

EXAMPLE

A high-tech service provider launched a customer-loyalty program that cost $2 million per year. Five years later, the company
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discovered that half of its loyal customers barely generated a profit. And half of its most profitable customers bought high-margin
products once—then disappeared.

Your target customers should be those who are both loyal and profitable. To assess and predict loyalty and profitability, for a given purchase
period, look at:

Time between a customer’s purchases

Average profit that a customer generates

This information gives you a sense of each customer’s likelihood of buying again and profitability.

Many companies make the mistake of calculating customers’ value based on revenue, not on profit. But when customers buy only low-margin
products, serving them may cost more than the revenue they generate. Thus they won’t be profitable.

Categorize customers

Use your analysis to categorize customers based on their loyalty and profitability. Customers in each category will differ in terms of fit between
your offerings and their needs, and in terms of their profit potential:

Category Profitability/ Loyalty Fit between your offerings and Profit potential
their needs

True Friends Profitable and loyal Good Highest

Butterflies Profitable but disloyal Good High

Barnacles Unprofitable but very loyal Limited Low

Strangers Neither profitable nor loyal Little Lowest

Then customize your loyalty strategies to each of the four categories:

Category Loyalty strategy

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Category Loyalty strategy

True Friends Don’t communicate too often, or they’ll ignore everything.

Reward their loyalty with exclusive access to special events and high-quality, limited-
supply products.

Butterflies For the short time they buy, get as much as you can from them with hard-sell offers.

After their purchasing drops off, stop investing.

Barnacles If you think they have more money to spend, offer them products or services related
to those they’ve already bought.

Strangers Identify early.

Invest nothing.

Create more promoters—and fewer detractors *

What Customer Loyalty Means

Michael Schrage —Fellow, MIT Sloan School of Management

Customer loyalty is no longer simply about repeat business. It’s also about the kind of influence your customers have on your brand and your sales.

Mine your target customers *

Once you have identified your target customers, use surveys, market research, and other tools to mine them for information.
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That means finding out:

What they want

What they need
What they will require in the future

With this knowledge, you can begin to personalize your offerings and your approach. You can also use this information to acquire new customers
who share characteristics with your target ones.

EXAMPLE

A U.S. insurance company formed to serve a specific target market: better-than-average drivers. Working in agricultural states, the
company’s agents were members of the community. They stayed in constant touch with their customers, learning about what they
needed and wanted. The company designed its marketing efforts to attract members of the target market and to keep those customers
happy. For instance, to reward customers’ good driving practices, the firm gave discounts to drivers at the end of three accident-free
years.

Build an emotional connection *

A Selection of Editor's Choice Resources

Articles on Customer Focus selected from Harvard Business Review See all related articles here
https://myhbp.org/hmm12/content/customer_focus/learn_about_your_customers.html#!/learn 7/10
10/1/21, 1:20 PM Learn About Your Customers | Harvard ManageMentor
Articles on Customer Focus selected from Harvard Business Review. See all related articles here.

ARTICLE

The Paradox of Marketing to Caregivers

 5 MINUTES
PUBLISHED 28 SEP 2021

https://myhbp.org/hmm12/content/customer_focus/learn_about_your_customers.html#!/learn 8/10
10/1/21, 1:20 PM Learn About Your Customers | Harvard ManageMentor

ARTICLE

Research: How to Position a Luxury Brand as Sustainable

 7 MINUTES
PUBLISHED 10 SEP 2021

https://myhbp.org/hmm12/content/customer_focus/learn_about_your_customers.html#!/learn 9/10
10/1/21, 1:20 PM Learn About Your Customers | Harvard ManageMentor

ARTICLE

3 Strategies for Managing Your Profit-Drain Customers

 6 MINUTES
PUBLISHED 08 SEP 2021

https://myhbp.org/hmm12/content/customer_focus/learn_about_your_customers.html#!/learn 10/10