Too many small business owners are losing out by not using some of the data they have readily available. I am always surprised at how many small businesses are missing huge opportunities to learn about their customers from accounting, finance, and other data they have readily available. While small businesses certainly don’t have the amount of data that would constitute “big data”, they have enough where they can drastically improve their marketing, services, and products.
Let’s briefly walk through three questions you can answer using customer data you most likely already are gathering from your accounting and other systems.
- Where are your customers coming from?
Odds are you are collecting location data from your customer in some form. If they are ordering online, you are getting customer data with their shipping or billing information. If you have a retail setting, there are ways through loyalty programs you can collect zip codes. If you have a Facebook presence, you can get data about where your followers are located. Even some point of sale systems collects this data automatically. This data can then be used for many purposes. Let’s discuss a few quickly.
First, by knowing where your customers are coming from, you know where to better market your product. For instance, we have a client who has multiple locations that offer swimming lessons for kids. By looking at their customer data, we were able to pinpoint where their marketing efforts were reaching their target customers and where they may need to focus more on marketing. Using this data, their marketing team was able to better target their marketing using Facebook and Google Adwords.
Second, by know where your customers are coming from, you can determine where to expand your business. There are many examples to give for this, but here is the less obvious one. When operating my indoor playgrounds, I knew that approximately 75% of my customers came from within 10 miles or less. Further, approximately 50% of them came from between 5-10 miles. By looking at the demographics within that 5-10 miles stretch, I could then look at other areas that gave my business the best chance to succeed if I expanded.
Lastly, knowing where your customers come from can give you an idea of who your customer is. Are they high-earners? Do they come from low-income areas? Is there competition they are driving past to get to you? Are there more kids or what is the average median age? Do your customers typically own homes? This information is gold to anyone who does marketing for your business.
- How often are your customers using your service/product?
There is a lot of data out there that will tell you how much more expensive it is to acquire a new customer than it is to sell to an existing customer. By increasing customer retention just 5%, you can increase profit by greater than 25%. In many businesses, it is therefore important to be able to measure how well you are doing “creating better customers”.
The first step is to determine how much and often your average customer buying. For instance, if you have an online retailer, how many times is a customer coming to you each year? Bain & Co. studied the shopping habits of 522 customers and found that in the apparel category, a customer’s 5th purchase from a vendor was 40% larger than it’s first. The tenth was over 80% more than the first!
This then begs the question, what are you doing to increase loyalty and therefore purchases from individual customers? Once you put a plan in place, how are you able to measure how successful it is? If you can figure out the key to maximize customer purchases over a period of time, your business will become substantially more profitable.
There are many ways to track this. Whether your point-of-sale system naturally tracks this or you have implemented some sort of loyalty system, you are most likely tracking this already.
- How are customers using your service?
When operating our indoor playground, we booked a lot of birthday parties. One of our store’s hosts over 1,400 parties a year. Once we had about 700 parties logged into our new party scheduling system, we started mining the information to see what we could learn about our parties. So, what did we learn about our parties?
- 68% of our parties were in what we considered, our low-cost pricing packages
- The average time someone booked a party was 32 days before the date booked
- The average age of the birthday child was 5 years old. Over 70% of our parties were held for 3, 4, and 5-year-old children.
- 75% of our parties were booked online
- Unlike our open play, weekday visits, 2/3 of people traveled from over 10 miles away.
- 44% of people who had parties with us, had never been to the store before
We learned a lot more information for instance what area of town most of our customers were from and how they learned about us. The amazing thing is, we learned most of this information by just using the system already had in place.
Armed with this information, we started making business decisions. Marketing to our current customers for parties started going out 45 days in advance of their child’s birthday. We began to look at our offerings to see how we could expand to get more 6 and 7-year-old parties. We expanded our marketing for birthday parties because we now were armed with information that people were willing to travel from further away. We also now knew we needed to market more and better to our current customers. How was it that 44% of people had never been to our store before but were booking parties? Did that represent an opportunity to better market to our current customers? We also enhanced our online experience since most of our parties were being booked online.
These were amazing tidbits of information that made our business better.
Conclusion
Small business owners have tons of information to make their business better and the best thing is that you don’t have to do much in most instances to harvest that data. Most of this information is just sitting in accounting and other business systems. What an owner needs is someone with an analytical mind and a knack for looking at their systems to figure out how to utilize the data. This is where a true financial professional comes in. At Krieger Analytics, one of the ways we help our clients is by analyzing their business in ways they might not think of. Contact us now to have a quick call to discuss your business. Why not contact us? Calls are always free with Krieger Analytics.