Customer behavior analysis: Step-by-step approach

Understanding the motivations, actions, and desires of your customer base is essential to improving sales strategies and netting more revenue. This is where customer behavior analysis comes in. It helps you determine how customers shop, how often they buy from your brand, and other important factors steering their purchasing patterns.

Knowing these details about your clients allows you to personalize your offerings and interactions to better suit their needs and preferences. This customization is a crucial aspect of commercial success: around two-thirds of Business-to-Consumer (B2C) customers expect it from brands.

Accurate consumer behavior analysis, however, takes intensive research, diligent work, and a close connection to your clientele. So, let’s explore the common tactics, best practices, and marketing platforms companies are using to learn about their customers’ habits. 

What is customer behavior analysis?

Customer behavior analysis is research into your customers’ preferences, wishes, and sensibilities. It seeks to learn key information about your clientele to more effectively position products, create ads, and sell goods and services. Some key factors affecting consumer behavior include:

• Personality traits – A plethora of personal characteristics—including outgoingness, happiness, and more—affect shopping habits and the kinds of products consumers are interested in.
• Psychological response – This involves reading the customer’s mood and motivations to better respond to and mitigate questions and objections. 
• Social trends – From fads to influencers, flash-in-the-pan products to retro revivals, what’s hot and not is persistently changing, and what’s in one day can quickly become obsolete the next. 

Learning how these factors influence your customers allows you to better align your marketing strategies with their desires. It also lets you accommodate your customer’s preferences—a strategy that, as per HubSpot, 82% of consumers already expect from brands. 

With so much customer data available and so many different personalization options for targeted advertising campaigns, customer behavior analysis is crucial for success as a modern digital marketer. But, that begs the question: What benefits does it offer to you and your customers?

Why customer behavior analysis is important

Getting to know your customers on a core level improves a variety of performance metrics and business strategies, including:

• Customer satisfaction – Understanding user behavior powers personalization which, in turn, bolsters your clients’ perception of your local business and its services. Positive, personalized customer experiences fueled by behavioral analyses can increase customer satisfaction by up to 20%.

• Marketing campaigns – Customer behavior analysis provides the necessary data to inform closely targeted marketing campaigns. These types of campaigns simply perform better than their non-targeted counterparts. They can increase brand searches by up to 712% for only about a tenth of the price of running a non-targeted campaign. 
• Product development – 70% of new products fail to meet sales expectations. But, if their development is informed by relevant consumer data, they’re more likely to be appealing and strike a chord with your clientele. 
• Sales and conversion rates – Customers can be fickle and, as mentioned, 82% expect you to accommodate their specific preferences during the sales process. Behavioral analysis gives you the necessary data to inform your customization efforts and drive more conversions.

Methods of customer behavior analysis

Behavioral analysis methods can be split into two camps: qualitative and quantitative. As the names suggest, qualitative methods seek to uncover your base’s characteristics and preferences. On the other hand, quantitative methods aim to establish facts and figures about them.

Some of the leading qualitative methods currently in use include:

• Surveys and questionnaires – Customer surveys and questionnaires give your clientele the opportunity to provide direct feedback on your products and services. If you’re noticing low participation, consider incentivizing existing customers with discounts or freebies for their participation. 
• Focus groups – Focus groups are open discussions about future products, services, campaigns, or other offerings. They provide invaluable insight into the public’s perception of your company and can help steer product development and advertising. They can be held digitally or in person and take usually about 60 to 90 minutes.
• Customer interviews – A few quick questions right after a purchase or appointment can capture your client’s immediate feelings and reactions to your customer service practices. 

When it comes to quantitative customer behavior analysis, some of the most common collection methods include:

• Web analytics – Web analytics track, review, and report user data while users browse through your website. Analytical tools keep tabs on monthly page visits, paths through your site, conversions, repeat and new visitors, time spent on-page, and more to provide actionable insights. 
• Transactional data analysis – When a customer makes a purchase or books a service, the resulting transaction can provide valuable information about the health and profitability of your local business. Transactional data offers insight into product and demographic alignment, total sales volumes, and more to better focus your marketing efforts on the hottest and most profitable aspects of your brand. 
• Social media analytics – Like web analytics, this technique tracks and analyzes traffic to your pages—but, this time, it’s your social media profiles instead of your website. 86% of companies are already using data from social media analysis to inform their commercial strategies, while a whopping 93% of executives state social media insight will be a leading source of business intelligence in the coming years. 
• Behavioral data collection refers to compiling information about your customers’ interactions with your business across various mediums. Nextdoor Ads Manager effectively tracks and segments users based on demographics such as age, home ownership status, and more so you can effectively target these characteristics in ads.
• Google Analytics – Google is by far the most utilized search engine and digital service provider on the internet—and they collect plenty of pertinent data from their billions of users. Companies have been leveraging this actionable insight for years, and leading brands have been able to decrease Cost Per Acquisition by 85% while boosting their conversion rate by 1,800%. 
• Hotjar – Hotjar is an effective data analysis tool that offers advanced insights into the customer experience of your website. With intelligent tracking to gauge how far users journey onto your page, the links they click most, and other relevant information about their interactions on your site, you’ll be able to better optimize your online presence to reflect how users surf. 
• Customer Relationship Management (CRM) software – CRMs house important customer information—such as phone numbers, locations, and customer preferences—to facilitate fast, accurate marketing personalization efforts. 91% of companies with 11 or more employees use CRMs as it's simply quicker, easier, and more accurate than tracking relevant customer data by hand. 
• Social media listening tools – These marketing and data collection solutions collate information from across social media pages (both your own and the general public’s) to glean insights into the current state of the consumer market. They provide information about ongoing trends, the performance of competitive brands, customer sentiments, and more to help you better steer your marketing efforts. 

Steps to conduct customer behavior analysis

With the numerous benefits it can offer your local business, you’re likely more than ready to start conducting your own customer behavior analysis. But how do you get started?

Follow these steps:

• Define your goals – Every successful plan starts with an endgame in mind. To that end, identify achievable objectives and outline how your strategies will help you reach them. Increased conversions, higher customer lifetime values, and similar profit and productivity-based goals are common, reasonably achievable benchmarks to aim for when starting behavioral analysis. 
• Collect relevant data – Determine what kind of data you’ll need to support your goals, where it’s hiding, and how you’ll get it. If you want to increase personalization efforts to improve your customer relationships, for instance, try leveraging the information you have about your audience to tailor your ads.
• Analyze and interpret the data – What does the information you’ve collected tell you about your target audience? Do they, for instance, only spend a few minutes on your pages? Are they interested in your digital presence but hesitant to actually purchase your products? Assessing your collected data helps identify the issues and strengths of your current marketing campaign strategies and informs future improvement efforts. 
• Segment your audience – Segmenting your audience involves organizing them into similar groups based on demographics, purchasing history, or other, similar factors. Segmentation allows you to personalize ads and marketing campaigns to resonate more closely with specific parts of your customer base. 70% of marketers are already utilizing customer segmentation techniques while 80% of brands that try it report increased sales. 
• Implement insights into your marketing strategy – After determining how to best utilize your customer’s behavioral data, implement your strategy into your marketing efforts. Start customizing more interactions, reworking your online presence, or doing whatever else your initial research suggests will help you achieve your end goals.
• Monitor and refine your approach – After implementing your new marketing techniques, monitor their efficacy and determine their impact on your bottom line, customer acquisition, and other key metrics. If you see they’re not rising as expected, rework your marketing strategy until you achieve your desired results. 

Real world examples and case studies

Hoover vacuums have been sucking up debris and keeping floors clean worldwide for over 100 years. Despite their popularity, however, an issue arose: most households only ever need to purchase one—minimizing their repeat clientele and overall Customer Lifetime Value (CLV).

Given this situation, Hoover had to get a bit crafty to bolster their sales and bottom line. In turn, they targeted customers on Nextdoor based on a recent, specific behavior: moving. The logic was that people moving to new homes often get new fixtures and equipment—including vacuums—to match their space. Their reasoning was beyond sound, and Hoover ended up with an admirable Return on Advertising Spending (ROAS) of 2:1.

Arroyo Grande, California-based realtor Kim Renshaw also targeted customers on Nextdoor based on their behavioral patterns. Instead of singling out new movers, however, she advertised to neighbors in specific ZIP codes where she also mailed out personalized postcards. The double-whammy of online and real-life ads did the trick for Kim, and she was able to develop a plethora of quality local leads that ultimately ended in sales. 

Actionable tips for implementing customer behavior analysis

To make the most of your customer behavior analysis and reap the rewards of more personalized, informed marketing, consider these tips:

• Start small with specific, achievable goals – Start slow and implement new marketing strategies carefully to get a sense of how your base will react. Then, when it’s working as expected and you’ve achieved some of your smaller goals, you can ramp up implementation across your organization. 
• Use the right data collection and analysis tools – Customer behavior analysis solutions should collate the exact data you need to inform your marketing techniques and better understand your customers. Platforms such as Nextdoor Ads Manager that segment based on age, location, and similar factors are the best bet for local, small businesses hoping to interact with their immediate community. 
• Regularly update your strategies based on new insights – If the demographics, preferences, or other important characteristics of your neighborhood and target market change, so too should your strategies. Keep close tabs on what’s hot and adjust your marketing techniques to better target important segments of your audience. 

Leverage Nextdoor Ads Manager for effective, actionable customer behavior analysis

Customer behavior analysis tracks your existing customers’ preferences, desires, and sensibilities. From monitoring customer actions on your website to hosting focus groups, there are a number of effective ways to collect customer behavior data. And, once you have it, you can begin personalizing interactions, improving your marketing campaigns, and resonating more closely with your target audience.

Nextdoor Ads Manager simplifies customer behavior analysis by offering key demographic information from the moment you sign up. By focusing on factors like home ownership status, income, and other important consumer statistics, you’ll uncover which audience segments to target and how to best cater your messaging to appeal to them.

Begin using Nextdoor Ads Manager today and gain the insight you need to better market to the neighbors in your community. 

Sources: 

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