How Well Do You Really Know Your Customers?

Most businesses know their customers. At least, they think they do.

Ask a golf course operator to describe the people who play there and you’ll probably get an answer without much hesitation. They might say their golfers are mostly middle-aged, reasonably affluent and drawn from the surrounding communities. A restaurant owner may picture young professionals and families. A fitness center might describe health-conscious adults. An event venue may know that it attracts some combination of businesses, families, tourists and entertainment seekers.

Those descriptions may be largely correct. People who spend years interacting with customers accumulate real knowledge about them. The problem is that, over time, measured facts, repeated observations and reasonable-sounding assumptions have a tendency to blend together. Eventually, the business has a well-established picture of its “typical customer” without necessarily knowing where that picture came from.

That matters because businesses make decisions based on those pictures. They influence marketing, programming, partnerships, services and sometimes entire growth strategies. They also shape how businesses describe themselves to potential advertisers and sponsors.

Before collecting more customer data, it is worth asking a more basic question: What do we actually know, and how do we know it?

Consider the golf course again. Management believes many of its customers are homeowners between 35 and 64 who work in professional or management occupations.

Perhaps membership records contain some of that information. Maybe customers supplied it through a survey. Some of it may come from years of conversations in the clubhouse. And some may simply fit everyone’s mental picture of the kind of person who plays golf there.

Those are all sources of information, but they aren’t equivalent.

The distinction becomes more important as the description gets more specific. Knowing that many customers work in professional occupations does not automatically mean they control corporate budgets. A higher-income audience isn’t necessarily interested in luxury products or wealth management. A customer living in an affluent ZIP code isn’t necessarily affluent.

These may be reasonable hypotheses in the right circumstances. They aren’t facts about the audience until there is evidence to support them.

Audience profiles tend to become unreliable gradually rather than dramatically. One known characteristic supports a plausible assumption, which supports another, until a surprisingly detailed customer has been constructed from relatively little evidence.

A better approach is to keep track not only of what you believe about an audience, but why you believe it.

Some characteristics may be measured through records, transactions, registrations or surveys. Others may be observed consistently through real customer interactions. Some are reported by people with direct knowledge of the audience. Others may be inferred from available evidence using a reasonable analytical method.

And some things are simply unknown.

Most businesses already have the beginnings of an audience profile

The good news is that understanding an audience doesn’t necessarily require launching a major research project.

Businesses already collect a surprising amount of customer information simply by operating.

A golf course may have years of tee-time reservations, membership records, tournament registrations, ZIP codes and point-of-sale transactions. A venue has ticketing and event-registration records. A gym may know membership tenure, visit frequency and class participation. Restaurants increasingly have reservations, loyalty programs and online ordering histories. Associations may already have professional information alongside membership and event attendance.

None of those systems was necessarily designed for audience research. Collectively, however, they can reveal quite a bit about who actually interacts with the business.

That makes an inventory of existing information a better starting point than immediately creating a survey.

What information is already being collected? Which customers does it represent? How current is it? Is it captured consistently? What can it actually tell you?

The last question is particularly important.

A booking system might reveal frequency but nothing about household composition. A membership database might describe long-standing customers well while saying almost nothing about occasional visitors. A point-of-sale system may tell you what was purchased but not who ultimately used it.

Customer data becomes useful when its limitations are understood along with its contents.

There may be no such thing as your “typical customer”

Even accurate customer data can become misleading when everything is averaged together.

A golf course might serve long-standing members, occasional local golfers, corporate-outing participants, destination golfers, tournament players and guests. Combine all of them and it is easy to produce a statistically precise description of a customer who bears little resemblance to anyone actually walking through the clubhouse.

The same issue appears across businesses. A restaurant can serve a very different audience during weekday lunch than on Saturday night. A venue’s audience may change completely with the event. A downtown district can simultaneously serve residents, office workers, shoppers and tourists.

Age, household characteristics, income and occupation can all help describe these groups. But so can the nature of their relationship with the organization.

A weekly member and a once-a-year visitor may look identical in a demographic table while having entirely different relationships with the business. So might a participant and spectator, a local customer and destination visitor, or a new customer and someone who has returned for a decade.

This is where an audience profile becomes more useful than a description of an average customer. Instead of forcing everyone into a single portrait, it can begin to reveal the different groups that make up the business.

It also raises a more consequential question.

Your typical customer isn’t necessarily your best customer.

The largest segment isn’t automatically the one that contributes the most to the business. A smaller group may visit more frequently, spend more, maintain longer relationships, participate in more services or simply represent the direction in which the business wants to grow.

Demographics alone won’t answer that question. Identifying a “best customer” requires defining what best means for the business and finding evidence connected to that outcome.

But you can’t make that distinction intelligently until you understand who is there in the first place.

Where customers come from can be as revealing as who they are

Geography adds another dimension.

Businesses naturally think about location from the perspective of where the business sits. Customer geography reverses the question: Where are the people who actually use the business coming from?

Suppose a course discovers that a disproportionate share of its recurring customers comes from five ZIP codes. That immediately makes those places interesting. Perhaps they’re simply the closest communities. Perhaps they share characteristics that make the course particularly attractive. Perhaps existing members have created referral networks there. Perhaps there are historical reasons nobody has considered.

More interesting still may be a nearby community that looks similar but generates relatively few customers.

That doesn’t automatically make it a growth opportunity. It makes it something worth investigating.

External geographic and demographic data can help provide context, but this is another place where disciplined interpretation matters. Census data may describe the population surrounding a business or the communities from which customers originate. It doesn’t describe a particular customer merely because that person lives there.

The distinction is simple but important:

Used together, they can help a business ask much better questions about where its customers come from and where additional opportunity might exist.

Better audience data should lead to better questions

There is a temptation to think the purpose of audience analysis is to produce answers: a polished profile, a set of charts, perhaps a handful of customer segments.

Its greater value may be in exposing questions the business hadn’t thought to ask.

• Why does one community generate so many repeat customers while another seemingly similar one does not?
• Why does one customer group visit more frequently?
• Why are families common in the surrounding market but relatively uncommon among current customers?
• Why do weekday and weekend customers behave differently?
• Has the audience changed over the past several years?
• Which customer groups have the longest relationships with the organization?

None of these patterns automatically tells management what to do. They create hypotheses to investigate. Sometimes the explanation will suggest an opportunity. Sometimes it will reveal a constraint. Sometimes what looked interesting in the data will turn out to be meaningless.

That is still progress.

Audience intelligence shouldn’t manufacture recommendations from every pattern it finds. It should help a business recognize which patterns are worth understanding.

The audience itself may be one of the assets you’ve built

Most businesses spend a great deal of time thinking about assets they can see: facilities, equipment, inventory, websites, customer databases and intellectual property.

Many have spent years building another asset without thinking about it in quite the same way.

Their audience.

A golf course may have spent decades developing a community of members, repeat players, tournament participants, corporate groups and visitors. A venue may bring together thousands of professionals, families or entertainment consumers each year. A business district may sit at the center of recurring populations of workers, residents, shoppers and tourists.

Understanding those audiences creates options.

It can improve the business’s own marketing by showing where customers come from and which groups have developed stronger relationships. It can expose gaps in whom the business currently reaches. It can raise better questions about programming, services, partnerships and retention.

And for some businesses, it can reveal commercial value that has largely gone undocumented.

Advertisers and sponsors aren’t ultimately buying a sign, screen, tee marker, event sponsorship or naming right. They are buying an opportunity to reach people.

There is a meaningful difference between saying:

The advertising inventory hasn’t changed. The understanding of the audience surrounding it has.

That understanding is what makes the opportunity easier to evaluate.

You don’t need to know everything

None of this means a business should start collecting every possible piece of information about every customer.

Quite the opposite.

More data isn’t automatically better data, and collecting information that has no clear purpose creates cost, complexity and privacy concerns without necessarily improving a decision.

Start with what already exists. Determine what it can legitimately tell you. Identify the important gaps. Then collect additional information when there is a reason to do so.

Sometimes that may mean adding a few questions to an existing interaction or distributing a short anonymous survey. In many cases, a business doesn’t need a respondent’s name, email address or phone number to learn something useful about the composition of its audience.

Over time, operational records, customer research and observed behavior can build on one another. Assumptions can be tested. Unknowns can become known. Weak evidence can be replaced with stronger evidence.

The objective isn’t perfect knowledge of every customer.

It’s progressively better knowledge of the audience as a whole—and better decisions because of it.

A stronger understanding of an audience can eventually help a business understand whom it serves, identify gaps, improve what it offers, explore where growth may exist and communicate the commercial value of the audience it has built.

But all of that comes later.

The first question is much simpler: