Know Your Data, Know Your Customers

Aligning customer needs with your software development solution can be more precise and efficient with the use of marketing data and analysis. The challenge takes root in the understanding how to view data for actionable objectives, which allows you to enhance your software for a better user experience.

Observing Data

When observing data, it is crucial that you have clear and specific definitions of your target customers and market landscape. Creating a Strategy Brief – a concise breakdown of major questions to be turned into processes, is considered a best practice in creating these definitions. Strategy Briefs can be used in a variety of applications because they provide a visual roadmap to answering overarching questions.

Strategy Brief

The contents of the Strategy Brief change depending on the industry and intent. For the purposes of understanding the customer, the brief should contain at least following 6 points:1

1. Identity of the target customer

2. Insight about their behavior

3. Relevant information about the current market

4. Competitor and consumer trends

5. Specific challenges to marketing efforts

An explicit statement of the desired results

Ambiguity within these 6 points requires further evaluation of marketing efforts and the understanding of target customers. It is also important to keep in mind that marketing is an ongoing process. As the software and its role begins to evolve overtime, so too does the target customer.

How to Find Your Target Customer

The target customer should always be the customer that exchanges the most value for your software product or service. However, the most valuable customers don’t necessarily spend the most money. There are many other factors that need to be taken into consideration before establishing your target.

The best way to find your target is to create variable groups of customers based on demographics and consumer information. Groupings can be different across industries, but the most common groupings are:

  • Age
  • Gender
  • Ethnicity
  • Socio-economic Level
  • Job Titles

Consistently narrowing and re-grouping customers based on more specific characteristics – such as interest, location, and spending habits – is the most efficient way to find the strongest correlations for trends.

Giving value to your groups requires the measure and weight of four key metrics. These metrics can be broken down and explored further to find the leading factors that influence these values, but in all they are a good starting point to help you better understand the customers that give the highest value. The metrics are divided into two categories that describe the value exchange – Customer Spend and Spend on Customer:

Customer Spend

  • Average Spend: The average amount that a customer spends on a single purchase. The holistic nature of this value requires highly specific groupings for the most accurate results.

  • Lifetime Spend: The total amountthat the customer spends on your product or service over their lifetime. While Average Spend observes the value of a single purchase, the Lifetime Spend focuses on the total spend that the customer group brings overtime.

Both metrics serve best for different business models. Software as a service (SaaS) companies would find more value in the Lifetime Spend of a customer, where growth is measured in each new customer. Software as a product (SaaP) may see Average Spend as more valuable, as the value of customer slides up-or-down depending on their purchase.

Spend on Customer

  • Cost of Acquisition: The total amount of the resources spent to gain the customer. This value should factor in group-centered campaigns and general marketing efforts for consistent figures. The value should also consist of time and effort spent to obtain these customers.

  • Cost of Retention: The total amount of the resources spent to keep the customer. This is similar to the Cost of Acquisition, but it is focused on post-purchase efforts. This figure more directly speaks to subscription business models, but product business models can also benefit from observing the cost of their remarketing.

These two categories should be weighed with one another to find the target customers. If the values seem low across all groups when compared to projections or industry averages, then re-direction in marketing efforts or changes in the product or service should be explored.

Generating information from data sets can be highly technical and time consuming. At Tiempo Development, our data management expertise creates sophisticated algorithms for easy-to-read business intelligence. For more information, read our case studies on how our specialists worked with SourceThought to generate successful business strategies.

1. Aditya J. and Eduardo G. “Decision-Driven Marketing”. Harvard Business Review. https://hbr.org/2014/07/decision-driven-marketing