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Home » Why Knowing Your Customer Drives Smarter Growth (and Higher Profits)
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Why Knowing Your Customer Drives Smarter Growth (and Higher Profits)

News RoomBy News RoomJune 13, 20250 Views0
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Entrepreneur

It’s one thing to have an idea of who your customers are. But it’s quite another to actually know them. The more companies learn about their target audience — whether through purchase data, reviews, focus groups or other methods — the better they’ll be positioned to unlock growth.

Thanks to AI adoption in marketing and the availability of more industry and consumer-level data than ever before, companies have never been in a better position to know their customers in a way that drives smarter growth and higher profits.

Related: How Understanding Your Customers Can Help You Create Copy That Sells

Provide more personalized customer experiences

The main purpose of knowing your customer is to better understand their needs and why they would make use of your products or services. One of the most obvious examples of this comes from Amazon’s personalized product recommendations, which suggest goods related to an item that a customer is considering. These suggestions are drawn directly from the company’s own data based on what other customers have purchased, as well as the individual’s history.

Amazon’s data-driven model has become a powerful element in driving growth and additional sales among its existing customers. As far back as 2013, “also bought” recommendations accounted for 35% of Amazon’s sales. The success of this model has played a major role in positioning Amazon as the go-to online retailer for so many customers, causing other retailers to attempt to replicate this design.

Understanding your customers can also be applicable in less retail-oriented settings. For example, a report from BuzzRx found that women aged 30-39 filled the most mental health and ADHD prescriptions in the United States out of any demographic.

For healthcare providers, understanding the higher prevalence of these conditions in this age group (as well as which prescriptions are most commonly filled) can lead to higher-quality care. While not necessarily profit-related, this personalized support can help healthcare providers retain patients and provide better care.

Tailor your messaging appropriately

Knowing your customer also enables smarter marketing that is likely to result in higher sales. By understanding customer needs and preferences, marketers can ensure that their campaigns will reach the right people, on the right platforms, with the right type of messaging. If any one of those three factors is off, your marketing budget could go to waste.

Furthermore, by gaining a deep understanding of your target audience, you can adjust your messaging and tactics as needed as circumstances change. For example, during the height of the pandemic, Lowe’s released a commercial highlighting various ways that suburban parents could turn their backyard into a fun place to spend quality time, even as pandemic-related closures limited traditional summer plans like going to the movies or visiting the beach.

By understanding how customers might be feeling when they were spending more time at home, Lowe’s and its rival Home Depot saw significant sales growth during the early days of the pandemic.

Targeted marketing that understands audience pain points can result in a massive lift on your advertising return on investment. In fact, 74% of customers report being more likely to stick with brands that they feel understand them and provide relevant communications. This only happens when you learn more about your customers.

Guide your product development

Finally, businesses that understand customer preferences can use that information to improve their products and services. Savvy businesses take customer feedback very seriously, whether in the form of complaints or even recommendations for a product, service or new features that could meet additional needs.

This can also be true when a product or service doesn’t resonate with your customer base. In an interview with CNN, former Nintendo of America President, Reggie Fils-Aimé, was quick to note that the failure of the company’s Wii U console was a direct contributor to the success of its follow-up — the Nintendo Switch.

Aside from making improvements to the design of the system itself, Fils-Aimé also referenced how the company learned the importance of providing a “crystal clear” value proposition to differentiate the console, as well as a steady flow of games. The lessons learned from what previously did not resonate with customers have led to the Nintendo Switch selling over 150 million units to date.

Whether you are refining an existing product or developing new offerings that will better meet market demands, knowing your customer can drive more innovative and customer-oriented product development. This will, in turn, make your products more desirable to your target audience, creating higher sales potential.

Related: Customers Are Changing – Is Your Business Ready?

Knowing your customers is a competitive advantage

Truly knowing your customers can provide a powerful competitive advantage in any industry. By using your knowledge of your customers to offer more personalized, higher-quality experiences, adjust your marketing and even guide product development, you can build an ecosystem that increases customer satisfaction and loyalty.

Remember, acquiring a new customer can be five to 25 times more expensive than keeping your existing customers. With greater knowledge of your customers, you’ll be able to keep your current base and drive more purchases, while also being able to acquire new customers in a more cost-effective way.

It’s one thing to have an idea of who your customers are. But it’s quite another to actually know them. The more companies learn about their target audience — whether through purchase data, reviews, focus groups or other methods — the better they’ll be positioned to unlock growth.

Thanks to AI adoption in marketing and the availability of more industry and consumer-level data than ever before, companies have never been in a better position to know their customers in a way that drives smarter growth and higher profits.

Related: How Understanding Your Customers Can Help You Create Copy That Sells

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