What “Know Your Customer” Means To Entrepreneurs
The idea that entrepreneurs should “know their customer” is not a new one. From the very earliest days of enterprise, business owners have sought to understand their customers; to try to anticipate their needs, and to engage in behaviours that will encourage customers to return to their company again and again.
However, while most entrepreneurs are aware – in an abstract sense – that they should “know their customer”, it’s well worth investigating this phrase a little deeper, and especially how the concept has developed in the modern world.
Why should business owners seek to “know their customer”?
There are two primary reasons a business should seek to know their customers:
- The theoretical: The first is a simple matter of efficacy; to be able to sell to someone, you have to know what they want. Much of the psychology of selling is based on the identification of needs and understanding what customers expect.
- The practical: The second is a legal necessity; many businesses are required to undertake measures that comply with anti-money laundering legislation. When used in this way, the ability to know a customer is more about a company’s ability to act within the law rather than drive towards sales.
How can business owners get to know their customers?
- Knowing your customer in a theoretical sense tends to involve market research, user surveys, and focus groups. All of these tactics can provide insight into what customers want, which in turn is used to formulate plans that allow for effective selling to that customer.
- Knowing your customer in a practical sense is far simpler, and is usually best outsourced to a specialist company who can perform an ID check on your behalf. While this is simpler than more abstract concepts like focus groups and surveys, it is still important if you wish to comply with legislation that is relevant to your business.
How does “know your customer” work in an ever-more privacy-focused world?
This problem is most often encountered when trying to get to know your customers theoretically, using surveys and focus groups. In a world that is hyperfocused on security, many customers don’t want to provide data to a company – and realistically, there’s very little you can do about that.
The best option for overcoming this barrier is to offer incentives for those who choose to engage with your company via surveys, focus groups, and market research initiatives. This could be a literal financial incentive, in that you pay them for their involvement, or could mean providing a discount code on their next purchase. Provided that customers feel they are getting something for providing information, you should be able to collect the information you need to increase your knowledge of your customer base.
The concept of knowing your customer still has a place in modern business, albeit expanded and tweaked beyond its initial purpose. Hopefully, the above considerations will benefit your own approach to knowing your customer in your own business.