The High Price of Not Knowing Your Customer

Author: Beth VanStory, Veritac Group Managing Partner

In today's fast-paced, competitive market, understanding your customers is the essential foundation for creating relevant messaging and effective campaigns that drive real growth. Knowing your customers’ age and income won’t tell you why they ignore your emails, abandon their carts, or choose a competitor. With demographics, you are marketing to their statistics, not their purchase drivers.

If you are a Chief Marketing Officer or a VP of Sales and Marketing, you’ll want to read this article. In it, we share why relying solely on demographic data is no longer enough to drive profitable growth. You'll learn how to harness psychographic insights—such as the motivations, values, and emotional drivers behind customer behavior to enhance customer engagement, improve retention rates, and drive profitability. You will be better equipped to create effective sales and marketing strategies that resonate deeply with your target audiences. Without this knowledge, you risk deploying ineffective messaging and wasting resources across unproductive channels.

While demographics such as age, gender, and income can provide valuable insights, relying solely on these metrics is not enough to win in today’s competitive marketplace. To connect with customers and prospects in a meaningful way, you must delve deeper into what drives their behavior, decisions, and loyalty. These cognitive and behavioral traits are referred to as psychographics. According to Gartner, organizations that utilize consumer behavior analysis may see a 5% increase in customer retention, and lead to a profit boost of 25% to 95%.

The Limitations of Demographics

While demographics such as geography, education, marital status, etc. offer a broad overview of your target market, they don’t consider the motivations and preferences of individuals. For instance, two customers might share similar demographic profiles, but have vastly different purchasing behaviors based on their personal experiences, values, and beliefs.

Consider two women who live next door to one another, are nearly the same age, are married, have kids, and work outside the home. One is highly concerned about health and nutrition, while the other maintains a sedentary lifestyle. A company that delivers healthy foods to cook at home would likely waste money targeting solely based on demographics because its offering only appeals to the health-conscious woman. In summary, focusing solely on demographics can lead to stereotypes and assumptions – generalizations which may hinder effective marketing strategies.

Understanding Customer Decision Drivers

To connect meaningfully with your audience, it's essential to explore the following aspects of customers and prospects:

Psychographics: Aim to understand their interests, values, goals, lifestyles, opinions, and attitudes. For example, a brand that aligns with sustainability can attract environmentally-conscious consumers regardless of their demographics.

Pain Points: Identify the specific challenges and pain points your customers and prospects face. What problems are they looking to solve? Uncovering their needs can lead to better tailoring of your products and marketing messages, showing customers that you genuinely care about their needs. Research indicates that 80% of consumers consider the overall experience as important as the products themselves when making purchases (Quid, 2024). Customer satisfaction surveys, social listening, and feedback from salespeople and customer service reps are effective ways to collect this information.

Customer Journey: Map out the entire customer’s journey, from awareness to purchase to loyalty to becoming an advocate. Anticipating their likely concerns and questions at each stage can inform your marketing strategies and ensure you create a seamless experience that enhances customer satisfaction throughout their purchase journey. For example, when a consumer submits a request for a vehicle to a car dealer, their two biggest concerns are usually whether the dealer has the model they want and what the price is. Later in their journey, they may want information on the trade-in process. Understanding their information needs at each step provides useful insight into creating the right messaging and actions.

Emotional Drivers: People often make purchasing decisions based on emotions rather than logic. Understanding the emotional triggers that influence buying behavior can help you craft compelling narratives that resonate with your audience. Are your customers motivated by fear, desire, or aspiration? Harnessing these emotions in your messaging can create deeper connections.

Motivations: Getting beyond the “what” of decisions to the “why” uncovers a key component of customer insight for devising impactful messaging. Understanding motivation also helps identify the level of urgency for a decision.

The table below captures some differences between demographic and psychographic customer data.

Gaining Insights

Augmenting your existing customer information with progressive profiling – gradually capturing customer data over multiple interactions - can be an effective way to build a more complete view of individual customers and enable segmentation beyond demographics. There are several ways to capture psychographic data. Companies such as Resonate provide robust databases of consumer psychographics. In other cases, you may be better served to conduct market research to uncover your customers’ needs and preferences. But not all research is the same.

Voice-of-customer interviews can provide in-depth insights into customer needs and opinions, but are directional, not projectable. To gain statistically valid data, consider utilizing surveys or polls based on input from 1:1 or focus group feedback. Social media listening and analytics can provide additional insights into how customers engage with your brand.

Utilizing a customer data platform (CDP) that collects and centralizes customer data from multiple sources is a valuable tool to include in your martech stack. Uniphore’s Action IQ, Redpoint CDP, and Hightouch are three recommended by Gartner Research. In addition to basic data gathered through solicitation, a robust CDP will integrate with systems that capture behavior and actions such as viewing a product page on an e-commerce site or downloading a whitepaper on a B2B software site.

Using customer insights to inform and develop your strategies, offerings, and messaging will help you align with your customers' evolving desires. One last note, market research is a science. To get the most accurate feedback, consider engaging a professional market researcher. If you need assistance finding the right resource, reach out to us for a complimentary call, and we can make a referral.

Implementing a Customer-Centric Strategy

Now that you have insights, it’s time to apply them in your marketing. Here are two ways to do that:

Personalization: McKinsey found that between two companies using the same tactic, the one that personalized their efforts drove 40% more revenue. Use data analytics to deliver personalized content, recommendations, offers, and experiences. Jewelry retailer, Blue Nile, was a pioneer in this area. By collecting information from their buyers around gifting, they could make highly targeted, relevant suggestions. For example, if a man bought his wife a necklace for her birthday (the company would elicit the purchase occasion at the time of purchase), Blue Nile would propose matching earrings as an anniversary gift (again, by collecting this customer-specific data at the time of purchase). By providing personalized experiences, brands also strengthen customer loyalty.

Segment your Customers Based on Engagement with the brand: Sometimes it is inefficient or challenging to target at the individual level. That’s when creating customer segments can enable targeting with greater scale. Segmentation by values or attitudes can be extremely effective.

Building personas by segment provides a detailed picture of the segment. Adding psychographics, such as personality traits, assists in devising effective messaging by persona and reaching them in the channels they use. For example, if research showed that people who join wine clubs also have an interest in golf, travel, and fine dining, you could create unique segments with very specific messaging and offers by each interest and advertise in channels related to those. According to an article in CMSWire, providing more relevant messaging and experiences drives loyalty and advocacy – the holy grail of retention.

Don’t Forget: B2B Customers and Prospects are People Too!

A study by Google shows that emotions play an important role in B2B decision-making. Connecting with them in a meaningful way can provide a competitive advantage. Often, B2B decisions are made by a group. Each group member has a different perspective and reason for approving or blocking the purchase decision. Their priorities, motivations, and personalities play a role in the final decision. Understanding the psychographics of each individual can lead to better messaging, conversations, and negotiations.

Leverage AI and ML to Glean Psychographic Data

Artificial Intelligence and Machine Learning excel at taking large sets of data, analyzing them, and distilling information such as patterns of behavior. Try utilizing these tools to analyze your customer data and segment your customers by attitude, values, and/or lifestyle.

Analyze historical data to predict future behavior and ensure you offer the experiences and messaging to address customers’ needs.

Tools such as natural language processing can quickly review large volumes of data such as transcripts from 1:10 interviews, survey responses, customer service records, and more, and summarize key themes and provide sentiment analysis. Coloop.ai is a specific tool used by many market researchers to do this.

Conclusion

To grow your company through impactful marketing, you must understand your customers at a deep level. It requires moving beyond demographic facts. It requires diving deep into their motivations, pain points, goals, and emotional drivers. By employing a customer-centric approach and committing to ongoing research, you can build lasting relationships with your customers, improve acquisition efficiency, inspire loyalty, and drive business success. Embrace the complexity of your customers and let it guide your strategies for the future.

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About the Author

Beth VanStory is Managing Partner with Veritac Group, a consultancy focused on helping mid-market companies increase enterprise value rapidly. Beth has deep expertise in customer and competitive research, having conducted numerous qualitative and quantitative studies for clients. To schedule a complimentary call with her, click here or email Beth@VeritacGroup.com.

About Veritac Group

Veritac Group works with PE-owned portfolio companies' sales and marketing teams to improve their go-to-market effectiveness and efficiency. Our consulting team allows those clients to realize their full potential.