What Your Customers Really Want

You have to let some customers go.

This was the most difficult thing for Dann Cady to learn. Owner of abode, a self-pronounced retailer of “affordable, cool” furniture, Cady found that, try as he may, he couldn’t sell to every person’s wants and desires. He’d jump through all kinds of time-consuming hoops trying to find just the right piece and accessory for a customer. Then he discovered that by letting some customers go, even directing them to competitors, his business has grown.

How can this strategy be profitable, especially at a time when most retailers are casting the widest net possible? Isn’t the goal to generate as much traffic through your door as possible? You’ve got to have something for everyone, right?

The Rise of Nanomarkets
Well, not so fast. More and more, retailers are finding out that this kind of marketing is decidedly Old School. Once upon a time, demographic statistics were carefully mined, methodically scrutinized, and used for marketing decisions top to bottom. A retailer’s target customer group was derived according to tried-and-true demographics: age, gender, income, education level, and marital status. Then a broad net was cast, trying to catch the attention and buying power of large consumer groups such as empty nesters or first-time homebuyers.

But across the retail spectrum, traditional demographic criteria are becoming less and less predictive of consumer behavior. In fact, many studies of consumer behavior in today’s marketplace indicate that the picture may be much more complex than in previous economies. “The value of demographics has begun to wear out a little bit. They’re increasingly becoming less important,” claims J. Walker Smith, president of Yankelovich Partners of Chapel Hill, North Carolina.

When retailers attempt to target a demographic group as large as customers, finding and hitting the bull’s eye is difficult because demographic groups aren’t a single homogeneous population of clones. These large groups are actually comprised of smaller, more specific groups with unique needs and desires. Lines between demographic groups are actually quite blurred and composed of smaller segments that Smith calls “nanomarkets.”

A Futon Life & Living Spaces demographic survey also found traditional demographic groups fragmented, customized and individualized. Rather than a group of like-minded clones, our survey of twenty 35-54 year old married, home owning, college-educated women found a wide range of consumer attitudes and behaviors. Women in this survey group refused to fit in a single tidy consumer category that would respond to a single marketing approach. Instead, they varied widely in their motivations for furniture shopping, their comfort with online and catalog furniture shopping, and their emotional connection to their homes. Our survey also found they had widely divergent lifestyle interests and attitudes.

Psychographics: the new demographics
In response to this market fragmentation, retailers are turning away from rigid demographic boxes and turning more and more toward psychographic criteria to identify their target customers. Psychographics, like demographics, is a system for generalizing about consumers based on meaningful categories. But unlike demographics, psychographics uses consumers’ personality traits – their beliefs, opinions and interests – to predict who will buy what.

Psychographic profiling is about finding subtle differences between consumers and then sorting them into little lifestyle cubbies. This sorting is vital because while there are numerous ways to increase visibility and reach customers, very few methods work with everybody. The more retailers know their current and potential customers, the easier it is for them to design effective marketing. When the important motivations and aspirations of a particular customer group are discovered, finding out what your customers will buy becomes easier. Without this knowledge, purchasing, marketing, and merchandising endeavors are hit-or-miss.

Industry experts cite Best Buy as the most focused example of marketing to psychographic micro-segments. Though a big box consumer electronic store, its newly implemented “consumer centric” program is undeniably niche and specialty marketing in that it is focused on very specific consumer segments. Best Buy has identified five prototypical consumers and is spending over $50 million this year alone to shape its retail experience to these consumers’ liking.

Best Buy has painted a detailed portrait of these five consumers, even to the point of naming them. For example, prototype “Barry” has money to burn, shops for expensive items like fancy home theaters, and uses technology to show his economic achievement. “Jill” is a suburban mom who uses technology to bond her family but doesn’t typically like the Best Buy shopping experience.

By identifying their target customers so precisely, Best Buy aims to “know our customers better than anybody else,” says Barry Judge, Best Buy’s senior VP-consumer and brand marketing. And by focusing on these five prototypical customers, they are choosing to let go of other customers, going so far as to purposefully discourage them.

Casting a selective net
What Best Buy has spent million of dollars to do, Dann Cady does intuitively all day long at abode. But both have come to the same conclusion: you can’t be all things to all people. At abode, Cady knows his target customer is an ’urbanite professional’: an art-loving, socially conscious young man or woman, in his or her last year at a Brown University or Rhode Island School of Design who will continue to live in a densely populated area after graduation and who knows abode’s furniture costs more in other cities. A second target customer is the more established professional man or woman, single or married, who loves to shop and buys pieces “here and there. They express their creativity through this hunting and gathering.”

Cady’s experience proves that while Best Buy may be able to target five customer types effectively, even smaller retailers can compete for one or maybe two target customers with profitable results. In fact, casting this selective net works for all retailers. “Even Wal-Mart isn’t speaking to all of America,” reminds James Chung, founder of Reach Advisors, a Belmont, Massachusetts, strategy and research firm. Smaller retailers “need to ask themselves, ‘what are the segments where I can compete?’ and ‘where are the segments where I can win?’” recommends Chung.

Journey into your target customer’s brain
Retailers must “know their customers’ mindsets, know what motivates her, (so they can) tap into her other passions,” recommends Jennifer Ganshirt, co-founder of Frank About Women, a marketing-to-women communications company that has helped businesses like Thomasville build stronger brand relationships with women. She advises furniture retailers to paint a richer profile of their target customer. “Don’t look at them with only demographics in mind. Don’t rely on stereotypes.”

Retailers need to ask themselves questions like: What do my customers do for leisure? What kind of pressures and stresses do they have in their lives? To what charities do they devote their time and money? What is their emotional connection to their home – is their home to be a statement to those around announcing ‘I’ve arrived,’ a means of self-expression, or merely a family hub? What motivates them to shop for furniture? By tuning into these types of drives, retailers can focus on meeting their target customer’s unique needs.

By journeying into a target customer’s brain and drawing a detailed portrait of his attitudes, beliefs and motivations, a retailer is able to customize the products and services accordingly. A detailed target leads a retailer to the images, buzzwords and hot buttons that will connect with consumers. “If you don’t speak with lifestyle relevance to your customers, they’ll tune you out,” Smith warns.

At abode, for example, Cady gets the attention of his art-loving customers by using his retail space to host a gallery night every six weeks, showcasing the work of local artists. These shows have some associated costs for things such as a 2000-piece mailing and luminaries on the street, but proceeds from any sale of art are split fifty-fifty. Cady figures that while he breaks even on these exhibits, the real benefit comes from the development of a return customer base which reaches across demographic groups without regard for age, income and even geography.

When it comes to identifying your target customers and crafting marketing to draw them in, Chung cautions against a mistake that smaller retailers can make. “The customers that retailers may know best are their super-high maintenance customers, the ones that they aren’t making any money off of.” Beware of focusing on these squeaky wheels. Instead, “their moneymakers may be the ones retailers don’t know very well. Those are the ones you want to encourage and reach out to.” Good advice.

Overall, it’s the ongoing relationships with customers that serve as the best source of information for small retailers. And it’s these relationships that Dann Cady enjoys most about retail. He had considered expanding his store’s website to include an online furniture business, but feels that the filtered interaction with people online can’t compare with interacting with customers over the threshold of his store. And that’s the key to finding out what they really want.

10 Great Questions to Ask About Your Customers

Knowing your customers is key to finding out what they really want

1. How do my customers view the furniture shopping experience: as recreation or work?

2. What motivates them to purchase new furniture: fashion or function? Want or need?

3. How much and what kind of handholding are my customers looking for in the furniture buying process?

4. Where do my customers get their information about home fashions and design?

5. Do my customers use their homes merely as a “hive” or as a statement to others?

6. How confident are my customers in their decorating sense/style?

7. What do my customers do with their leisure time? What cross-marketing opportunities could this present?

8. To what degree do spouses, neighbors, colleagues and the media influence my customers' purchases?

9. Are my customers multi-taskers? What timesaving services would be valuable to my customers?

10. What community activities are my customers involved in?

FLLS