Knowing your customers and managing customer relationships
Welcome to the third part of our Business Model Canvas Series. I hope that by now you are well acquainted with what the BMC is (Part One), and are equipped with the essentials of developing your Value Proposition (Part Two). We are now ready to take a deep dive into the building blocks that are centric to not only startups, but to every company- i.e. who your CUSTOMERS are, and how you can develop effective CUSTOMER RELATIONSHIPS.
Often times we hear that businesses fail- and not because the product is not fancy enough, or because the technical team developed a flawed product. The most common reason, and the one that hurts a founder the most is that there are not enough people who want to buy his/her product. In other words, the product is not ‘customer-centric.’
How do you develop a customer-centric product? Its very simple-know WHO your customers are, and know them so well, that you are actually able to draw their sketch, paste it on your wall, and sing the mantra day in day out, that these are the people who will be using my product.
How can a founder develop an in-depth understanding of its customers? The key lies in defining your CUSTOMER PERSONAS. Defining your customer or buyer persona helps you target your ideal customer. A customer persona is a detailed description of someone who represents your target audience; a fictional person who embodies the characteristics of your best potential customers. You will give this customer persona a name, demographic details, interests and behavioral traits. You will understand their goals, pain points and buying patterns. All this will be done through Market Research, in the form of survey questionnaires, and interviews. The idea is to develop hypothesis on your potential customers and validate by stepping out and talking to real people. Different groups of people might use your product differently, or for different reasons. So, you might need to create more than one buyer persona. Many Customer Persona Templates are available online which founders can use to define their customers (You can access some useful templates from here).
Once you define your customers, the next question that would pop up in your mind is how do I convince these people to buy my product, and not just make a one-time purchase, but come back to me again and again? Now your CUSTOMER RELATIONSHIP STRATEGY will come into play. In simple words, you will strategize how you will ACQUIRE, RETAIN and GROW your customers.
When deciding upon your Customer Acquisition Strategy, you need to determine the feasibility of acquiring a customer- simply put you will figure out whether the CUSTOMER LIFETIME VALUE (the amount of money a customer is expected to spend on your product in his lifetime) is much greater than the CUSTOMER ACQUISITION COST (the cost to acquire that customer). Once you determine which customers are worth acquiring, you will develop tactics to facilitate them in their journey towards trying out your product at least ONCE. You will do this by taking the customer step-by-step through the AWARENESS-INTEREST-CONSIDERATION-PURCHASE process. Consider the following example- you drop your product brochure to a potential customer. The brochure should have the necessary information to excite the customer and communicate your Value Proposition to him. If the customer takes interest in your product, he would want more details. Your brochure should have a website URL or details of another channel the customer could access. Whatever channel you wish the customer to choose, it should be easy to navigate and should readily provide the desired information to the customer- this CUSTOMER JOURNEY MAPPING done rightly, coupled with an exciting VALUE PROPOSITION targeted to the right audience, will result in PURCHASE and your company acquiring a CUSTOMER.
An acquired customer needs to be RETAINED and encouraged to GROW his purchases with your company. Rule of thumb-maintain consistent product quality to retain your customer; continue to deliver what you have promised in your value proposition, and often times delight or excite the customer through loyalty programs and incentives. Grow your customers through cross-selling and up-selling techniques and offer sales and discounts to loyal customers.
The tactics you use in your Customer Relationship Strategy are directly dependent on the CHANNELS you use to communicate with your customers and to sell your product. What are the different online and offline channels which you can use? Stay tuned for our next article to find out.