Customer Analysis - Terminology Confusion?

10 Min. Read

For Shopify merchants, the purpose of customer analysis is to understand how their audience spends their time using their Shopify store. This can be done by analyzing customer data, it might be Google analytics data or customer surveys results for example, or any data that can provide an insight into customers behavior.  The goal is always to use insights gained from data to personalize marketing, – making it more relevant to the customer.  

However the terminology surrounding customer analysis can be confusing, this is simply because it is constantly changing as new tools emerge and compete for market positioning space, in addition SaaS vendors often rebrand themselves in an attempt to differentiate themselves from their competition.

Ultimately customer analysis is about segmenting your audience, using the data available and then targeting each distinct group distinctly, with marketing campaigns to re-engage and sell more.

There are many types of customer analysis, and terms of analysis.  While some can be used interchangeably, others are used to define greater detail, and provide precision in analysis, below I have tried to clarify common terms and how they relate to one another.

No matter the terminology used, customer analysis is based on the maxim that it is far cheaper to sell to existing customers than it is to get new ones.  That being said, customer analysis can also help you to define new markets.

Table of Contents

What is Customer Analysis?

Customer analysis is a method used by retail analysts to understand how customers interact with business. It can help identify where there may be opportunities to improve sales and operational efficiency through focus groups, customer interviews, market research, and more. 

There are many ways that you can use customer analysis to improve your operation, nearly all of them rely on getting to know the customer (KYC) and  improving the product and product marketing, (personalization of content), to meet customer needs.

Branding can also be personalized based on customer analysis insights.  It can be designed to make it easy easy for your chosen audience to identify your branding, by creating a brand personality, mirroring interests, expectations of the customer.

Understanding eCommerce Data

Dive into your data and carry out market segmentation to find out which marketing campaigns are working or not, keeping the bits which keep customers happy while changing the rest.  Understanding your customer’s journey is key, from the moment of opening an account to canceling it, or see what changed their minds.   Take the guess work out of decision making and replace it with data driven insights, and by doing so, plan your marketing campaigns more effectively.  There’s a lot of value in data, and analyzing it in the right way greatly assists you make more informed decisions.

Customer Analysis Terms

The terms below are among the most commonly used in relation to customer analysis, and the most commonly searched for on Google Search, however there are many more out there.

Customer profitability Analysis (CPA)

If you were wondering what customer profitability analysis is, simply put, it’s the percentage return a merchant will get on a product or service, sold through a Shopify store, – for example. It’s an important number to know because it shows us how much profit a seller can make from each sale.  Sometimes it can surprise – revealing hidden profit opportunities or even profit losses! 

6 ways to use your customer profitability analysis:-

  1. Use your acquisition spend figure to prioritize the targeting of big spenders.
  2. Learn from the distribution of profitability across your customer base. Focus on product category’s and products that perform well.
  3. Increase perceived value of your products by crafting offers, specifically for big spenders.
  4. Generate a discount policy that benefits your most important customers.
  5. Rework your channel strategy based on your profitability analysis to focus on customers with upward potential.
  6. Terms of business review.  Revise minimum order figures to keep costs of doing business down.

Understanding your ideal customers will help you select the right products for them, calculate the right prices, and nurture them with the right information and calls to action (CTA). Besides having a better understanding of your own business and your customers, this approach also helps other businesses grow by providing valuable insight into what types of products and services they might be missing out on due to ineffective marketing practices or haphazard approach to customer acquisition.

What is Customer Behavior Analysis (CBA)

The goal of customer behavior analysis (CBA) is to use insights gained from both qualitative and quantitative data to test personas (validate or reject proposed behaviors/behavior patterns when compiling personas from a larger audience).  This investigative process is carried out at every stage of the customer journey in order to segment (see Conversific) and narrow down persona groups to enable greater personalization in targeting.

The hypotheses proposed should be designed to discover what factors influence the behavior of a customer, including from both positive and negative interactions. This information can then be used to communicate with the customer in a manner that promotes a more positive experience. It has become increasingly important for e-commerce businesses to understand their customers and their decisions at every touchpoint – whether it’s through product purchases, returns, customer service or other behaviors that may affect overall sales.

Customer’s behavior analysis can help you develop new products and services that better meet customers needs. It can also help identify trends in how customers use your business. For example, if your customers consistently use your website for purchases that weren’t previously made, then you may be able to develop a product or service that matches their needs better than any available on the market.

What is Customer Experience Analysis (CX Analysis)

How can we improve Shopify customer experience? The best way to start improving your customer experience is by asking the right questions. Customer experience helps you understand the context around customer purchases and makes sure that customers have a great experience every time they visit your store. This includes understanding what actions people took after visiting your site and learning what each step involved. Customer experience analysis is a crucial step in defining your conversion funnel and most effective if you combine your conversion funnel steps with storytelling in your communication.  This should also be taking into consideration stages of awareness.

Your (customer’s) story is an essential part of the customer journey. When reflected back to the customer it can provide the context for your highly personalized offer and should relate to other your brand personality.

At Conversific, we have developed a powerful set of tools to help you analyse customer experience in an actionable way. Building an emotional connection with your customers starts with knowing how to interpret your data.

The final word on CX analysis, the importance of cx analysis becomes all too clear when you consider that a good experience is shared on the customers social channels.  It is the no.1 way to create customer advocates.

What is Voice of Customer Analysis - Customer Purchase History

Actions speak louder than words, which is why the analysis of a customers purchase history is often referred to as “Voice of Customer Analysis”, but it is also based on feedback elicited about their experience. The goal is to learn about the pain points customers encountered on the road to becoming a customer. Factors to investigate include:

  • Upselling
  • Cross-selling
  • Downselling
  • Cart abandonment
  • Customer loyalty (advocate potential?)
  • Touchpoint analysis
  • Customer service interactions.

What were their actions and why?

What is Customer Churn Analysis

The goal of customer churn analysis is to figure out how many customers your business loses each year. Since a lot of factors go into customer retention, this is a valuable metric to be monitoring. Whether you’re looking at large companies or tiny niche businesses, knowing how many customers leave your shop each year is an important indicator of success or failure. Knowing how to increase your customer retention is crucial to growing your business, and we’ve got tips for you on how to do just that.

Customer churn analysis is a metric closely associated with customer expereince analysis (above).

What is Customer Needs Analysis (CNA)

It is important to identify your customers’ specific needs so you can properly meet their needs and create a fulfilling shopping experience. This analysis can help identify strategies and tactics that will help increase sales and profits while driving below market prices to your customers. Let’s dive into some insights into how to properly conduct a customer needs analysis so you can optimize your Shopify store to drive more sales, more profit and better customer satisfaction. 

CNA is important, not only with regards to store features and user experience but with regards to understanding customers motivation.  This can be achieved by learning about customers paint points to determine why they might need your products.  Your customer needs analysis includes listening to the voice of the customer (see above).

What is Customer Journey Analysis

How can you connect with your customers and get them to buy from you again? This is a question we get asked all the time. Customer journey analysis is a term that’s been popularized by Shopify and can be used to understand your customer’s current purchase journey through to the product sale. It helps you figure out where they are in their buying journey — whether it’s starting out with just a product or progressing through more advanced purchases like contests or subscriptions.

Customer journey analysis is about optimizing those touchpoints, and is an essential task in today’s mobile first, multiple device customer journey.  Content fit for desktop is usually not fit for mobile and so AB testing your messages is an essential step across all devices.

By learning what channels each customer uses enables more focused targeting and assists with determining where to spend your advertising budget.

What is Customer Lifecycle Analysis

Customer lifecycle analysis is an important part of a successful customer experience strategy. It helps to paint a detailed picture of your customer’s experience with you, from initial activation through to the day they leave your store. This enables merchants to identify key factors that can help them improve their customer experience as well as identify the top reasons why customers leave. It also gives them the power to make changes that directly affect these outcomes.

Understanding when and how the customer consumes/utilizes your product is an essential part of customer lifecycle analysis as part of a wider customer needs analysis (above).

Customer Retention Analysis

The purpose of Customer Retention Analysis (CRA) is to identify and address repeat customers who have certain characteristics or take certain actions like those who make repeat purchases. The goal of this analysis for a Shopify store is  to improve its products and offer products at higher profit margins to retain and grow repeat customers. It helps to identify key factors to help enhance the customer experience across multiple channels, such as website, email and social media channels. These factors include brand awareness, feedback from previous customers, purchase history, location-based behavior and many others.

There are three main components to retention analysis: customer disposition, performance and product, service and point of sales (POS) quality. Each will be an important factor in your overall Store Positioning, but not all elements can be addressed in every retention attempt. A successful retailer needs to continually assess their retention opportunities to remain competitive in the marketplace. The key elements of successful retention are engagement, affordability, and relevance.

Usually a combination of data collection, utilizing proprietary technology, behavioral analytics and social listening to know what actions keep customers coming back and improve. Most importantly, retention provides the ability to measure the impact of every step we take in improving customer retention, including how we communicate with active customers, measure interest and behavior after activation, and provide services that inspire repeat purchases.

Customer Loyalty Analysis

The goal of any Shopify merchant is to sell more by turning returning customers into repeat customers. This is not a one time thing but a continual task, a process of building relationships with your customers, so that you can learn how better you can serve them.

You can use customer loyalty analysis to help you make decisions about your Shopify store. More specifically, learn how to engage with, and what to offer to them. This can help you set up a win-win scenario where both you and your customers are happy. The trick is to find the right balance. For example a discount for a large value purchase.

Customer Value Analysis

Customer value should be classified as the perceived value each client attributes to the product and service offered or purchased. This is determined by analysis of information such as response time, past purchases, frequency of return visits, etc., as well as information on past performance and customer feedback.

Your customer value analysis should enable you to determine what the customer goals are and how they’ll achieve them. You can do this by asking straightforward questions like: How frequently do I expect to use this product/service? Who are your ideal customers? What are the most important things to them? Takeaway: make sure your customers are actually going to use your product or service

Customer value analysis helps you make better decisions for your Shopify store. It helps you figure out which products and offers are actually helping customers and which costs are being passed along to other parties. It helps you make informed decisions about pricing, promotions, and shipping.

Conclusion

Marketing and eCommerce platforms, and their use of data define the terminology used in business.  Marketing teams have to adapt to systems and terminology used to describe tool use, consequently there is wide spread confusion in terminology meaning.

There are many overlaps in definitions and meaning, and in terms of interpretation of data.

Whatever terminology you choose to adopt for your business the core KPI’s remain the same. You can choose to group them however you please. The terminology we use has been carefully selected to reflect our experience with 1000,s of eCommerce stores, which is reflected in our KPI reports, based on real world experience, helping store owners improve their sales. Our product, Conversific, is constantly evolving, however if you find that you feel a useful report is missing, or could be improved, please report it, and will endeavour to supply it in a timely manner.

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