Leverage Purchase Behavior Insights for Better Customer Understanding
The practice of studying customer purchasing behaviors has been around since the dawn of commerce. In earlier times, it was apparent to local shop owners that the more they knew and understood their customers, the better equipped they were to market and sell to them. The concept that was recognized then is essentially still the same, but has evolved from small "mom and pop" shops having a level of customer intimacy to big-box retailers and corporations today. Using purchase behavior to understand what customers are buying has evolved over the years, and can now be adapted on a much larger scale and applied not only to consumers, but within the B2B world as well.
Be an Early Adopter
The fundamental concept behind purchase behavior insights is tracking and understanding what customers and prospects buy and then interpreting that information to predict future purchases. Prediction is the crucial element. Think about how consumer marketing has used purchase behavior to better target customers, because life events dictate financial purchases. If a family is expecting a baby, they will more than likely be looking for more space in a home or maybe a shiny new minivan. And that minivan purchase is a loud signal for future diaper purchases. If an individual receives a promotion that requires relocation, there could be a new home purchase, a change in insurance carriers, and the start of a lot of new relationships with phone companies, dry cleaners, and other businesses. Knowing about these scenarios before the competition does enables a company to provide the products or services needed or take necessary actions to retain—or gain—the customer's business.
This powerful tool can also be applied to understanding business customers. It's all about having the right insights at the right time. A company is more likely to sell a product or service if it knows a particular business is in need, rather than trying to sell once a competitor's solution has already been found. A business's purchasing decisions provide a picture of its future needs, and companies that are able to capture and interpret information regarding these decisions can develop a clearer picture of how to enhance customer loyalty and sales effectiveness toward the business. It is essential to start helping them make the decision at the earliest moment, before the competition increases or a purchase decision has already been made with another company. Everybody is looking to get information before it happens, just as an individual wants to know the weather before stepping outside and then realizing it is raining. Anticipating the targeted business's next move before it makes it is key.
From B2C to B2B
People have been looking at purchase clues and life event–predicting data for years, and the sources of information have varied greatly. For example, product warranty cards and time-sensitive "trigger" data, such as lists of new movers, were important elements of the early stages of database marketing. Technology advances led to the capture and utilization of basket-level purchase behavior data—a database marketer's dream come true. This is the real reason receipts are so detailed—retailers want to be able to personalize marketing messages and offers to the individual consumer. Organizations also want to be able to understand their inventory to determine pricing models, what days a certain product sells higher volumes, and what products are typically bought together. An ocean of valuable insights can be derived from transaction-level data, especially when the information can be linked to an individual. The increasing appetite for these insights continues to fuel new ways to capture and deliver data that is even more timely and actionable. Have you noticed how many retailers are moving to hand-held point-of-sale devices that email you receipts? It's a portable data capture and delivery platform centered around the purchase behavior.
The same principles apply when a company targets businesses. B2B marketing is currently underdeveloped, and customers and prospects are viewed through a primitive lens because the data about them is limited. The primary focus is still on demographic data regarding the size of a business and what it does—if it happens to fit snugly into an SIC code, which is not nearly accurate enough and produces generic and unfocused marketing efforts. What you are and what you do are two totally different things, and two companies may have the exact same SIC code, with the same revenue, but behave very differently and be on two very different growth paths.
Increasingly, many companies are realizing the same B2C marketing tactics are now applicable in the B2B space. If companies leverage their own internal purchase detail data, sprinkle in purchase clues from the outside world, and learn from the purchase behavior strategies used to reach consumers, much deeper insights about their prospects and existing customers are possible. Companies can look at invoice-level detail the same way retailers study receipts to determine what customers are buying, and use the information to help predict their customers' needs and future behavior and build stronger relationships with them. Whether the goal is more sales, improved retention, or creating deliriously happy customers, understanding purchasing behavior is at the core of improving performance.
Purchase-behavior insights are about one-to-one marketing, relevancy, and timeliness of marketing and sales. Customer relationship management has evolved during the past 20 years, and with companies now having more data and new thinking at their disposal, we can become more sophisticated in how we initiate and cultivate these customer relationships. It is truly a simple notion: Understand the customer's spending patterns, anticipate his needs, and act.
Jim Swift is CEO of Cortera, a provider of comprehensive business-to-business payment and purchase behavior insights on public and private companies.
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