Use your understanding of your customers to influence them

Understanding customer behaviour is important, but influencing customer behaviour is the key to profitability. One company that has perfected the art of influencing customers is Amazon.com.

In a recent survey to find out what people were doing on its Web site, Amazon.com found that of those who had purchased during their online visit, only half had logged on with the intention of purchasing.

Getting that influence right is what makes Amazon.com so successful, and it does so in a wide variety of ways. These include knowing a customer's past history with the company - including not only what he or she purchases, but also what he or she looked at but did not purchase. This enables Amazon.com to offer appropriate choices, as well as substitutes and complementary products.

Before being able to influence what customers do, however, businesses really need to understand them.

"Most businesses have rich sets of data that can be measured for marketing purposes. They should not rely on market research companies to tell them what to do but rather get close to the information they have and understand what is there," says Dr Andreas Weigend, former chief scientist at Amazon.com, now at Weigend Associates LLC.

The days of relying on gut feel are over. Organisations need to experiment and measure to ensure they really know how to proceed. Weigend gives an example:

A supermarket in the California Bay area did some customer experimentation with jams. On the first day, it displayed six different types of jam for customers to taste.

"40% of customers stopped to taste the jams, and the conversion rate, or people that actually bought jams, was 30%," says Weigend.

On another day, 24 jams were put out for tasting, and 60% of customers stopped.

"The conversion rate, however, was only 3%. So the more the choice, the less they bought, and choice was shown to be demotivating. Organisations need to test constantly, to learn about their customers' behaviour," he says.

This experiment was simple as it only involved a few variables but most organisations deal with far more. The best way to successfully understand customer behaviour is by using business intelligence solutions with analytical ability. The solutions should be able to source data from a myriad of sources, and analyse it in ways that both show what happened in the past and predict what is likely to happen in the future.