5 Ways to Know Your Customer Better Than Your Competitors Do

If superior customer insight is the goal, how do you get it? Below are five simple steps almost any manager can take to gain an advantage. But since most managers won’t take these steps, the advantage is richer for those who do.

Step 1: Spend Time Talking to the End User

Most businesses classify themselves as business-to-business (b2b) operations, meaning they don’t sell to the end users of their product. Yet these businesses would benefit from interacting personally with the end users.

Take YouTube. YouTube has three types of customers: (1) its content creators, who make videos, upload them to YouTube, and interact with their fans on the site; (2) its advertisers, who pay YouTube to reach their target audience while they are watching videos on YouTube; and (3) its end users, or the people all over the world who come to YouTube to watch free videos.

While the YouTube team knows it is critical to be well-connected to the needs of the “business” customers who pay them, they also spend time directly with their end users, attending events like the annual VidCon conference. This attention to the needs of end users recently led YouTube to launch “Channel Memberships.” This feature enables content creators to interact with fans directly, providing them with “insider” perks like exclusive videos, unique badges, and member-only posts for a nominal subscription fee.

Even many of the companies that consider themselves “consumer marketers” don’t have much contact with the end users of their products. For example, they sell kids’ shoes to a parent or assisted-living housing to the adult children of senior citizens. Companies that sell products for kids’ school lunches usually spend most of their research dollars asking parents about what they like to pack, even though they would get different insights by asking the kids what they want to eat. Even better, they could spend a week sitting in school lunchrooms and cafeterias. Here they would get the clearest picture of what kids bring, what they actually eat, what they trade to others, and what they throw away.

Step 2: Spend More Time with the Customer Than Your Competition

When it comes to understanding your customers, spending quality time with them is important—but spending “quantity time” matters even more. Decision makers who spend enough time seeing the day-to-day lives and challenges of their customers have a level of understanding that staged drop-ins cannot provide. In addition, they get the “credit” that comes from being the supplier that is willing to walk in its customers’ shoes.

A decade ago, most marketers came to understand customers by first working a stint in sales. For example, in the 1980s and 1990s, new marketers in the pharmaceutical and medical-device industries often spent 9 months in a sales territory before they began their headquarters-based marketing position. They would spend serious time in the hospital, in the operating room, with the doctors. They would come to understand how customers at several levels—hospitals, doctors, insurers, and patients—engaged with the firm’s products and used their ancillary services.

However, today most firms don’t take this approach. Marketers generally spend no more than a few days a year face to face with those who buy their products. Typical brand managers might spend a day or two a year in retail stores, and less than that at the account headquarters where their products are actually sold to their retail partners. They spend a few more days talking to their consumers in sterile focus groups but rarely venture into their kitchens, living rooms, and bathrooms where their products are actually used. Engineers and product developers, people in the R&D part of these organizations, get even less exposure to their actual customers.

In addition, executives who make decisions for their firms often suffer from an additional disadvantage, since their status and positions make them so different from their typical customers. A study at a leading food company was revealing. At the time, the U.S. Bureau of Labor Statistics indicated that the typical household unit of 2.5 people spent approximately $60 per week on groceries and another $43 on food eaten away from home. The executives of this firm were embarrassed and humbled to admit that many of them spent over $40 per week on Starbucks alone. They took on the challenge of trying to feed their families for a full week on $103, and found that it gave them a whole new perspective on their consumers’ challenges.

This consumer insight is best gained by frequent, face-to-face contact with consumers and customers. However, it can also be augmented through short, inexpensive surveys with quick turnarounds, such as those offered by Survey Monkey Pro, Google Consumer Surveys, Survata, and Amazon MTurk. Monitoring social media using listening and sentiment tools like Crimson Hexagon can also be a useful way to keep a pulse on customer attitudes. These techniques are not a substitute for actual customer contact. However, the knowledge gained and hypotheses generated from frequent surveying can make your physical time with customers much more productive.

Step 3: Watch Consumers Buy Your Product

Before consumers can use your products, they usually have to purchase them. There are many insights that can be gained from watching consumers as they attempt to do this.

If you are selling to shoppers of a large retailer like Michael’s, for instance, consider how consumers can locate your products among the 40,000 different items carried in-store, or the 100,000+ available online. Spend time in the stores, or at least watch camera footage. What does the consumer go through to buy your product? Additionally, use Google Analytics to “watch” how consumers navigate your website. Where do they land, where do they spend time, and where do you lose them?

The Home Depot watched consumers buy for home repair projects. They learned that most homeowners ended up making multiple trips to the hardware store before completing a project. Consumers might trek to The Home Depot for the first shopping trip. However, when they realize they needed an extra drop cloth, a different sized drill bit, or some more caulk, they go to the closest hardware store—often not The Home Depot. The Home Depot realized that helping a consumer think through a whole project from start to finish might result in capturing more of the project’s related revenue and profit. So they provided customers with checklists and how-to videos for common household projects—a strategy that worked.

Similarly, John Deere saw an opportunity after watching landscape contractors get ready for an installation job. They saw these contractors spend hours going to one dealer to pick up sod, another for gravel and stone, and another for topsoil. Then the trek continued: on to pick up paving stones, sprinkler-system parts, and lighting supplies. Since jobs weren’t planned well, many of these outlets were visited multiple times on the same job. From this insight came the formation of John Deere Landscapes, the landscaping contractor’s one-stop shop for not only parts, equipment, and horticulture, but also for landscape design services and consumer financing support.

Step 4: Watch Consumers Use Your Product

Observing consumers as they use your product or receive your service is the perfect chance to understand which features create value, which ones are never used, and which ones actually get in the way.

A game-console manufacturer watched its purchasers struggle to hook up its new machine, for instance, plugging the wrong cord into the wrong outlet, and then going through a time-consuming and frustrating process to try to find their mistake. From watching this struggle came the idea to use matching colors to indicate which cord ends plug into which outlets.

Watching customers use your product can help you make it better; it can also help you develop new products. After watching patients struggle to keep track of their medicines, the entrepreneurs behind PillPack.com designed a product to help patients and their caretakers handle regimens of multiple medications, some of which must be taken several a day at different intervals. Pillpack provides patients with monthly shipments of customized, sealed, time-marked packets for each time when a pill is due to be taken, complete with instructions for taking the medicine. Amazon recently purchased the 5-year-old company for roughly $1B dollars.

Step 5: Engage End Users as Product Designers

Finally, consider putting your customers to work. Stop seeing them as research subjects and instead begin to see them as partners in product development.

This is one area, interestingly, where b2b firms tend to have more experience. These firms often codesign products with key customers, sometimes giving that customer exclusive rights to the purchase of the product for some period of time in return for a guaranteed volume at attractive margin levels. Customer partnerships are also common for software companies, which may employ groups of “beta users” to try out their products and provide feedback for product refinements.

However, today these strategies can be employed in significant ways in a wider range of industries. Crowdsourcing can be a powerful way to give consumers a say in directing your product development efforts. Consumer “co-creators” can vote among options that you are considering or submit ideas themselves. Dell’s IdeaStorm platform, an early leader in the co-creation space, has received more than 16,000 ideas since 2007; Dell claims that it has commercialized 500 of them.

Small companies, too, can make use of this strategy. Boutique diving-watch manufacturer Zelos partnered with a Facebook “dive watch” group, and instantly the 32,000 members of this group felt an affinity for the new diving-watch models, which they had helped to shape and design. Not only did Zelos benefit from the group’s expertise—it also gained the advocacy of leading influencers in that market.

A Word of Warning

Today, businesses have more data than ever. While this is in many ways a great thing, it also creates a dangerous temptation to spend hours and hours analyzing spreadsheets, and runs the risk of confusing quantification for true understanding.

Big consumer firms are experiencing the dangerous downside of being insulated from the consumer. Across many categories, from beer to shampoo to carbonated beverages, huge, well-resourced companies are losing market share to smaller players who are often more closely tied to their consumers. These smaller players quickly know what product features are appealing, what communications are compelling, and what services add value. They also have low-risk ways to test new ideas and to assess return on their spending. The success of ThirdLove (“Bras and Underwear for Every Body”), Allbird shoes (“Comfort That Comes Naturally”) and Casper (a “try it in home” alternative to the ubiquitous Mattress Firm) is evidence of the power of having a close relationship with end users.