How Understanding Customer Mindset Can Help Your Business Model
Have you ever thought about what business model you should pursue? Something adjacent or completely different that your current model trajectory? The answer can be found via psychology. Mindset is a set of attitudes, values, and beliefs that can be typical of a particular group’s social or cultural values. When you connect customer mindset to what they buy, you find out why they buy.
By examining your CRM data and connecting it to mindset, you can see a clearer and causal connection between the two. Understanding customer mindset can help you identify degradation in economic performance because you’ve organized people according to mindset as opposed to media definitions. What your product is accomplishing for different groups of people can be discovered by understanding not just why people buy but who they are. For example, one group of people may love your product while another group might require a discount to be interested. The level of discounting and ultimate acquisition cost is most likely connected to just how different these groups are psychologically. It’s not just a blanket statement but it can be quantified.
When you take the same product and same message, you end up with broad averages and confusion about what to do next. The finer you understand people, the more you realize acquisition cost, conversion, and ultimately scale are highly connected to their purpose. Understanding customer mindset can help you understand how your product needs to change and how your marketing needs to change in order to satisfy new groups of people.
Great companies get this right either by selling something so generic that it must be bought every day or by understanding high degrees of segmentation and how to satisfy those different groups properly. One example of a company that does this well is Netflix, which started as a DVD rental company but shifted its business model to streaming as technology advanced and customer preferences changed. But that’s just half of it. A few years back one of their executive said they take demographic data and throw it in the trash. It was the psychology of the customer that defined consumption and return and ultimately subscription.
In contrast, companies like Groupon struggled when they failed to properly understand and segment their customer base. In the early days, they did well but as they crossed the chasm into the mass middle of their customer base, their acquisition cost skyrocketed and caused problems for many businesses that used their service. Groupon never truly understood the psychology of their customers. I don’t know if they are today but it’s not a brand I think about often.
By understanding customer mindset and segmentation, businesses can identify areas of strength and weakness in their business model, make strategic decisions, and ultimately achieve financial success.