Shell Haffner, Xerox Corporation

In my previous post I discussed the ways in which small businesses can gain and preserve customer loyalty by letting their human qualities play a major role in their everyday business interactions.

In the following I expand on that notion with a discussion about how small businesses must learn as many details about their customers’ human qualities (and, therefore, their buying preferences and habits) to compete in today’s marketplace.Getting to know your customers

Product availability used to be a differentiating attribute for a business. Commerce sites have changed this by offering anytime availability. The ease of the transaction is now the most desired attribute. By that, I mean the customer is looking to buy a product, but the choice of where to buy that product hinges more on non-product-specific attributes—they are looking for the best experience. Check out “The Experience Economy” by Pine & Gilmore to read more about this phenomenon. The experience of the buying process earns loyal customers.

This experience notion prevails in businesses today. It’s the greeter that welcomes you at Wal-Mart, the “Recommendations for You” on Amazon’s website; and the free coffee as you wait for your car to be serviced. Every business wants to make you feel more comfortable while you spend your money. These methods certainly work for some of us (like me and my sub-shop example from last time). To make these experiences work, you need to know your customer. The Amazon “recommends” list would not be as influential if Amazon simply guessed at the new books offered to me. Instead, Amazon uses data mining to serve up similar content that others like me have purchased.

How do your customers react to different offers and approaches? And why? Enter the field of behavioral economics; which studies the social, cognitive and emotional factors influencing the purchase decisions of individuals.  We believe we are individuals and that our decisions are made logically. Studies show the opposite—we often react similarly. Dan Ariely is a behavioral economist with passion for his field; he’s the author of many books, TED talks and has his own blog.

Just last week, I sat through a presentation by a fellow marketing companion from a large consumer technology company. They have a behavioral economist (Dan Ariely) on a consulting arrangement to help with the phrasing of offers, the colors used in design, and other aspects of marketing materials; all to optimize viewing and effectiveness. The lesson here: know as much as possible about your customer and this will help drive your business. Read Dan’s blog or start with his first book, “Predictably Irrational.” You’ll definitely use some of the material in your small business and learn a little about yourself in the process.

Figuring out what drives your customers will help you give your customers a great experience with your business. Obviously, this is a critical advantage for small businesses with little margin for error. How to accomplish that task is the topic for my next article. In the meantime, please leave comments and share with me and other readers what steps you take to learn about your customers.