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How to understand your Amazon customers - tips for Amazon sellers

Amazon sellers are only as good as their ability to understand and cater to their customers. The more you know about what your customers want, the better you can serve them. This article will introduce you to strategies for gaining a deep understanding of your audience and then show you how to use data from your own sales and marketing efforts to improve those strategies over time.

Why should Amazon sellers care about understanding their customers?

As an Amazon seller, you might not know that customer data is the foundation of your business. Customer data helps you understand how your customers interact with your products, what they like about them, the order in which they purchase, how often they purchase, and many other important insights.

Customer data also allows you to optimize your business by figuring out ways to improve sales and generate more revenue and profit. The problem is that it's not always easy for Amazon sellers to access their customer data and, even when they can, it can be really difficult to know what to do with the information.

Here are some ways in which Amazon sellers take action when armed with customer data:

  • Using customer data to optimize advertising strategies
  • Personalize marketing to specific cohorts (groups) of customer
  • Optimizing product offerings and cross-selling strategies
  • Improve pricing strategies by capitalizing on 'gateway' products.

Customer lifetime value and retention

In order to really understand your Amazon customers, you'll need to know how to measure two key metrics: customer lifetime value (CLV) and customer retention rate.

CLV is the average amount of profit that a customer generates over the entire life of the relationship with your business. It's calculated by dividing total profit by a total number of customers. The higher this number is, the better for your business!

Retention rate is simply defined as "the percentage of customers who return to a business in a given period." A high retention rate means that more people are coming back and buying from you again - and importantly, in the vast majority of cases you don’t have to pay anything for them to purchase again! Conversely, if your CLV is low compared with other companies selling similar products on Amazon, it could mean that they’re getting more repeat customers than you are—and thus stealing away some of your sales potential.

Sellers that want to build a successful brand are focusing on customer retention

Amazon sellers that want to build a successful brand are focusing on customer retention.

Customer retention is the key to success. It's the difference between a good business and a great business, and it's all about customer loyalty, customer satisfaction, and customer delight—the holy trinity of what every company wants from its customers.

But what does this mean for you? You need to understand precisely how your customers are behaving so that you are able to scale up what's working and dial back what isn't.

 

Understanding customer retention is how you can best understand your customers.

Understanding the purchase journey and experimenting

Once you've started to understand what an individual customer's value is, it's time to start looking into how you can improve the purchase experience.

You'll want to start by understanding the purchase journey of your own products and brand. Are there specific products that are bought together? Do your customers generally follow particular buying patterns for specific products (i.e. do they always buy at 30-day intervals?). Would adding or removing something from your listing or ad make a difference? This is where being able to measure the impact of any changes you've made really comes into its own.

Why not look at other similar products on Amazon and see if they're doing anything differently? What are they doing well that you think you could do better? This will help inform where improvements should be made in order for you to stand out against the competition on Amazon. Once you've made your changes, you can use a cohort analysis to understand whether customers purchasing during the time you made changes are coming back more often, or if your customer lifetime value increases during that period.

Before you can understand a customer, you must understand their value.

Amazon sellers should understand the importance of knowing their customers

You should understand your customers because it will help you improve your product, marketing, customer service, sales and brand.

  • Understand your customers to improve your product. You should always be looking for ways to better serve them and give them what they want in order to make more money on Amazon.
  • Understand your customers in order to improve your marketing campaign or advertising efforts so that you can reach out even more effectively than before!
  • If you don't know enough about who buys from you then it'll be hard for other people (like investors or stakeholders who may have a financial interest in learning more about how well things are going right now) to understand your potential for growth.

Conclusion

As you can see, there are many ways to understand your customers. While it might be tempting to go all out and do everything at once, try starting with one approach first and seeing how that works for you. You’ll get a better idea of what works best and will have more data on which to base future decisions.

And as always, don’t forget that the most important thing is gathering data! Without customer behavioral data, your marketing strategy will be purely based on guesswork. Make sure you get hold of a tool that can show you exactly what your customers are doing - and when - so you can create winning marketing strategies and get ahead of the Amazon competition!

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