The Tools Early-Stage Startups Actually Need to Understand Their Customers

Segment Co-founder and CEO Peter Reinhardt has personally test-driven a tool a week for the last three years. Here he shares the toolkit you need to get the most out of your customer data.

Where to Start When Selecting Tools

When most people want to make use of customer data, they think of analytics, but advertising tools, help desks, CRMs, attribution and a dozen other categories of tools are also powered by customer data. “What all these tools have in common is that they use customer information and behavioral data to help business teams improve the customer’s journey,” says Reinhardt.

First decide to build or to buy.

It’s impossible to operate a business without interacting with customers and capturing their profiles, especially in the early, formative years of a company. Reinhardt discusses the critical consideration of whether to purchase off-the-shelf or in-house tools, emphasizing that startups should only build their own tool if necessary.

Compile a comprehensive checklist of tool categories.

If you decide to test and buy tools, it can be challenging to untangle what to select, let alone the universe of tool types out there. Reinhardt has identified eight categories of tools, which should serve as a sufficient starting checklist for most startups. Here are his categories and top recommendations:

Basic top of the funnel analytics: Google Analytics.
Mid- to deep-funnel analytics: Mixpanel, Amplitude and Kissmetrics.
Business-wide analytics: Looker, Mode and Periscope.
Diagnosis tools: Olark, Livechat and Intercom.
Drip email: Customer.io and Autopilot.
Sales and support tools: Zendesk and Salesforce.
Paid acquisition: Facebook and Twitter.
Attribution: Convertro (web) and Kochava.

Timing makes good tools great.

A big task in selecting the right tools is integrating them at the right moment, which can help keep you from buying expensive tools too early or continuing to use basic tools if you’ve outgrown them. Reinhardt emphasizes the importance of timing in integrating tools.

Switch between qualitative and quantitative tools with logic.

Reinhardt sees a common pattern among startups as they expand tools to understand the far corners of their business, oscillating between quantitative and qualitative tools.

Use quantitative tools to discover symptoms or opportunities and qualitative tools to diagnose them.

Pitfalls to Avoid When Choosing Tools

Reinhardt shares three basic mistakes he frequently sees companies make when selecting tools:

Test-drive the off-the-shelf tool — don’t drown in research.
Calculate the full cost of the tool.
Don’t overdose on quantitative data.

How to Gauge the Success of Your Tools

Reinhardt believes that there is a general benchmark of success for each type of tool, highlighting that the ultimate goal is to enable informed decision-making based on data insights:

Basic top of the funnel analytics: Knowing traffic.
Mid- to deep-funnel analytics: Successful event tracking.
Business-wide analytics: Building quality dashboards.
Diagnosis tools: Project managers learning context.
Drip email: Capturing a list in a funnel.
Sales and support tools: Providing an exceptional level of service.
Paid acquisition and attribution tools: Measuring customer acquisition costs.

In conclusion, Reinhardt’s insights guide startups in navigating the landscape of tools necessary for understanding their customers, emphasizing a balance between experimenting with and effectively utilizing these tools.