What is customer profiling?
Customer profiling is the process of using customer data to create representations of your most common and valuable customer types — the archetypical customers for your business.
The value of profiling customers is predicated upon the idea that those most likely to value your products or services have other traits in common and can therefore be grouped accordingly. By tailoring your messaging to speak directly to those audience groups, and narrowing your segmentation to those most likely to convert, you create more effective sales and marketing campaigns, convert more, and improve return on investment (ROI).
Customer profiling makes use of many types of data, including:
- Demographic data: information like education, age range, gender, employment status or industry or income range
- Psychographic data: this type of data includes factors like goals and values, interests, causes about which the profile is passionate, and deterrents to engagement
- Geographic data: information related to the physical location of this audience, which includes data points like post codes, but also whether their area is urban or rural and perhaps even information about the average climate
- Preferred communications channels: data about what channels of communication get the best response rate from this segment
- Technographic data: data relating to the technology stack to which this customer group has access
- Behavioural data: information taken from customer behaviour in the past, which might include website stats, advertising information or previous transactions with the company.
Taken together, this information forms a holistic, three hundred and sixty-degree view of your customers, what they need from you, and what matters to them. You must decide which data is relevant to you — perhaps, to a company selling cookware, profiling with technographic data may prove less useful than to a software company; likewise a fashion retailer may value geographic data, but that same software company may not.
What’s the difference between a customer profile and a persona?
Customer profiling is the process of collecting the right data and analysing it for insights to better understand your customers and group them into useful segments.
A ‘persona’ refers to the fictionalised representation of a customer who represents one of these segments.
You might end up with several such personas, depending on what your profiling tells you about your customers. Personas can be easier to use in some circumstances because they stand out more in peoples memories, but they are still built from the process of customer profiling!
How does the business benefit from customer profiles?
Seasoned sales and marketing professionals do notice trends and usually have a good grasp on your customer base based on their experiences. These hunches are usually correct in the general sense, and they are much better than operating in the dark.
But your team’s best guess will always pale in comparison to the accuracy and certainty of creating insights by using empirical data that accurately reflects the state of your customer base.
There are several benefits to a more refined and accurate understanding of your customers:
- Better customer experience improves retention and loyalty, making repeat purchasing more likely.
- Better targeting and segmentation helps lower costs associated with distributing messaging more widely. It also helps businesses attain more conversions from a narrower audience, thus improving ROI.
- Centralising customer data means that a holistic view of customer trends and behaviours is possible. This permits businesses to make data driven choices to streamline activities and boost efficiency while growing their bottom line.
So, how do you create customer profiles?
Customer profiling requires that you accrue customer information, group it by common elements, and make a thoughtful assessment as to which of those factors are relevant to your business relationship.
On this journey, you should consider certain questions:
1. What does your organisation do best?
What problems do you solve?
In answering this question, be as specific as possible. Having a detailed answer to this question will help you determine which among your existing customers are the closest to your ideal.
For example, have you performed best when working with small and medium businesses? Are there areas in which your margins are much more comfortable?
2. Who are your best customers right now?
Draw from your current customer data to find your highest-performing accounts. These are very likely to mirror the traits and values of your ideal customer profile.
These customers will be the most valuable for determining what data points are most relevant to your profiling. Not all factors will be equally important to every business, and it is not useful to muddy your profiling with information that is irrelevant.
3. Source your data. Where are you going to get your customer data?
Draw from marketing, sales and customer service systems to make sure you get a holistic view of customer activity. Among your data sources you might include:
- Email and e-news information, like opens, sign ups, clicks
- Social media data
- Website behavioural data
- Lead capture forms for gated content
- Customer service records and notes
- Loyalty program records
The task of profiling means determining what information is most relevant and bringing it together into an abbreviated document that contains the most pertinent insights into your customer. For the purposes of targeting, it can be useful to ensure that there are fields in your customer profiles that provide a space for you to turn your data into insights. For example, keeping a section that interprets the data you already have with questions like ‘given the context of all this information, what promotions would this kind of customer most want to hear about?’ can be a useful shortcut for your sales and marketing team.
4. How should you maintain your profiles?
Once you have developed your customer profiles, they won’t remain unchanged forever. Changes in your industry, or across the economy as a whole, can hasten the obsolescence of customer profiles. For example, the current cost of living crisis is creating new psychographic pressures for a wide range of customers, which is altering the psychographic landscape of motive and deterrent.
There’s no perfect schedule on which to update your profiles. But it’s valuable to remember that the process is designed to be iterative, and therefore to have some kind of schedule in mind. Consumer habits, values and desires change, and so too must your organisation’s understanding of its customers be regularly maintained and updated.
What do you do if you don’t have existing customer records to use for your customer profiles?
While all businesses have customers, some businesses may not have access to data relating to those customers.
Asking why you don’t have access to those records is a useful first step — for example, is this a case of not capturing valuable first-party customer data, or is it a case of not yet having access to the data? In the scenario where a business may not have captured or kept sufficient records historically, data capture processes can be improved by operational changes, sometimes even quite minor ones, and data that is inaccurate or invalid can be fixed. Alternatively, a business may not yet have access to a specific market into which they hope to extend their reach. In this case, that paucity of first-party customer data falls outside of the organisation’s immediate control.
In circumstances where no first-party customer data is available, the common wisdom is to instead examine the kinds of customers engaged by market competitors who are most similar in profile to your business.
This will never be quite as comprehensive or useful to your efforts as data drawn from your own customers. But if no other recourse is available, it can offer an alternative that supports your growth.
How can businesses use customer profiles?
Tailor customer experiences
To ‘tailor’ something means to craft it to your customer’s measurements and specifications. In the context of using customer profiles, it means that the information contained in those profiles is used to alter the customer experience.
For example, if you know your customers will have a particular problem or experience in common, making reference to it in your marketing copy will create a more personal and relevant experience for your customer. You could also take steps to alter the buying process in your favour, like bundling the products your most valuable customers purchase together to reduce friction in buying them.
Know your customers’ motives and deterrents
Understanding your customers’ motives tells you why they want to buy your products or services. This information allows you to focus on those motives when you talk to them, so you can better emphasise the particular value of your offering.
Many factors can deter people from buying a product or service. Some of these are factors that are outside of your control — for example, pricing is often influenced by your supply chain and overheads, and cannot fall below a minimum number.
But others are within your power to change, like providing certain information about your offerings up-front, or widening your available payment options.
Profiling your customers makes it clearer what might be turning them off purchases, and then you can address those deterrents, either in your messaging or by altering operations.
Improve lead scoring and qualification
Profiling your customers will offer you insight into the details of your pipeline, which helps you to accurately identify which part of the pipeline your customer has arrived at.
Knowing exactly where your leads are in the process can help you score them more accurately. This in turn can inform your sales and marketing practices, which allows you to distribute those resources more efficiently.
Retain buyers
Profiling customers can show you where in your processes customers are most “at risk” of attrition, which empowers you to make alterations to reduce that friction.
It also allows you to offer more relevant loyalty rewards, and to ensure your messaging touches on points that show your customers that you understand what they value. For example, if your psychographic data shows that your buyers are motivated environmentalists, you can offer them insights into what your organisation does to offset any environmental impact.
Target more likely customers
Customer profiling tells you where best to focus your efforts — and, therefore, your resources. This ensures you target customers who are a better fit for your product or service, which means that you are selecting customers who are more likely to convert, and who you’re more likely to retain afterwards, from the very outset.
Acquiring new customers is always more costly than engaging customers who have already purchased from your organisation. A more targeted acquisition process and higher retention rate can significantly boost your return on investment.
Centralise customer data to make more informed decisions
Creating customer profiles requires that you bring together your customer data from separate sources into one coherent repository. Getting this holistic view over your customer information can help you make more informed decisions more broadly.
How do you measure success?
Any initiative within a business requires metrics by which performance can be measured. This lets us know if the initiative is worthy of continuation, or if it should be changed or scrapped altogether.
The outcomes of customer profiling can be assessed through a range of metrics, like:
- Conversion
- Qualified leads
- Customer acquisition cost
- Customer satisfaction
- NPS (net promotor score)
- Engagement with touch points
- Customer retention
Quality data supports customer profiling
Many different data points can be used to profile customers. As businesses are unique, the kinds of data used to profile customers can also change quite a lot. For example, a fashion retailer finds value in the geographic locations — and therefore average climate — of its customers, but has little interest in their technographics.
But no matter what data points are required for profiling, the exercise will always be most effective when undertaken with clean and accurate data. If your customer information is wrong, outdated or invalid, the profiles you output will be less valuable than they would be otherwise. Conscientious data management and regular deduplication and data hygiene processes will ensure the most efficacious customer profiles.
Not sure where to start? The DCA Data Services team has created a customer profile template to assist you.
