This blog was written by David Edelman and Francesco Banfi from McKinsey & Company

Nearly three quarters of companies believe their budget for customer insights is too low, according to a recent survey of almost 700 senior executives we completed. Even more disturbing, only 6% of companies surveyed understand customer needs extremely well while 45% of companies admit they have limited to no understanding on how their customers interact with them digitally.

Without the ability to understand their customers, companies will find it difficult to be where their customers are. Part of the reason that companies are having trouble understanding their customers is that customer behavior itself is complex. For example, our research shows that 44 % of shoppers use their mobile phone while shopping to check websites, compare prices, and learn more about products.  In France, around a third of shoppers buy online, but pick up their product in a store.

However, the more fundamental reason is that shoppers are shopping in a different way that requires companies to change how they think about and interact with their customers. It used to be that marketing and sales leaders thought in terms of the classic funnel, which represents the buying process as an ever-narrowing array of decisions and choices until purchase, with little regard for the post-purchase experience. In reality, the channel-surfing customer of today is often expanding the set of choices and decisions after consideration. Customers now are also often actively engaged with the brand – and their friends and peers – after they’ve bought the product or service using social media and the Web.  

This Customer Decision Journey (CDJ) is a pretty simple concept but it helps to highlight and isolate the most important aspects of the journey. Here is how the CDJ works:

■ Consider an initial set of brands.

■ Evaluate information to expand and then narrow choices.

■ Buy a product based on a final decision.

■ Experience the product and create expectations that will inform a subsequent purchase.

■ Advocate for (or militate against) the product or service based on the experience

■ Bond with the brand, which that leads to repeat purchases.

This visualization of the journey helps focus conversations on where to spend money, where the opportunities are, what sorts of people and processes are needed, and where you’re weak and your competitors strong. The insights can be revealing.

For example, one home appliances company had been spending a large portion of its marketing budget on print, television, and display advertising to get into the consideration set of its target consumers. Analysis of the CDJ, however, showed that most people looking for home appliances jump quickly from consideration to evaluation using retailer websites. Less than 9 percent ever went to the manufacturer's own site. So the company moved away from general advertising to content development for retail sites, a shift that led to a 21 percent lift in e-commerce sales.

This is not just about having a friendly and informed sales person, an efficient call center, or a great site. It’s about having ALL of those things working together like a relay team handing off the customer from one touch point to the next in a smooth way. If you are not thinking about that complete journey, it is hard to understand your customer.

The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views of The Economist Intelligence Unit Limited (EIU) or any other member of The Economist Group. The Economist Group (including the EIU) cannot accept any responsibility or liability for reliance by any person on this article or any of the information, opinions or conclusions set out in the article.