Pulling From the Right Data Source: Understanding How to Understand the Customer

Every business wants to understand their customer better. A good share of your business’s success hinges on pleasing the customer. Only by knowing what your customer expects of you can you hope to deliver what they want. 

That understanding can take many forms. Whether it is what orders have been placed, what grievances customers have or what sort of personalized journeys interest them, the heart of the matter is customization. Unfortunately, what understanding the customer means is a bit evasive to many businesses. 

Know Thyself

Although it may seem sort of counterintuitive, understanding a customer’s needs starts with understanding what you want to do for your customer. Maybe you want to launch a new product. Perhaps you want to offer a discount or open a new store near a hot spot of online ordering. Only then can you hope to have a clear direction in knowing what you want to understand. In order to understand what your customer wants, you need to understand who they are. That starts with getting a clear idea of what kind of company you are, what you are trying to achieve. 

Once you have that, you can begin to establish what sort of information you need about your customer. Customers reveal information about who they are and their preferences in a variety of ways. Once you know what insight you are seeking, you can begin to suss out where you need to look.

Different Buckets

Data on customers can be collected in a variety of ways. These types of data are broken down by how far they are from the source — the customer. 

Zero-party data is data your customer gives you. Maybe they fill out a form on your website or answer a survey. First-party data is data your systems collect as customers navigate your brand on your website or mobile app with resources like cookies. Second-party data comes from collaborations with other companies, where you exchange information about your respective customers — with their consent, of course. Finally, third-party is when similar to second-party data, but instead of trading information, you buy it from another, unrelated, company.

All these data sources have a function. Some data is demographic, i.e., who your customer is: their age, where they live, their sex, their income or maybe even their political views. Other data is what they do, their behavior, i.e., preferences they express: products they browse or buy, what interests them. 

Leveraging these different data sources and knowing which to use in order to capture the data you need is key to understanding your customer. 

A Helping Hand

There is a balancing act at play when considering zero-party data versus first-or-second-party data. It is easy to assume that information that comes straight from the customer is stronger than information from elsewhere. This isn’t necessarily true. 

While zero-party data comes straight from the horse’s mouth, sometimes, depending on what you are trying to understand, it isn’t as strong as data that captures their behavior. If a customer shows you they like something by purchasing it, it is safe to assume that information is valuable to you regardless if they directly told you they wanted the product in question. This phenomenon is known as delineating between stated preference from revealed preference.

This is just one example of something an experienced partner can help with when trying to understand your customer. Knowing where to capture which information you need, or indeed simply knowing what information is relevant to you, isn’t always as straightforward as it may seem. 

With extensive knowledge of data sources, how they are captured, what they forecast and how to make sense of each type of information is an experienced partner’s business. Armed with such knowledge, you can position your business to truly understand your customer and give them the level of service they expect.