Customer Profiling: Different Types, Advantages, and Steps to Follow
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Customer Profiling: Different Types, Advantages, and Steps to Follow

Based on data and insights from your business, you know that you have some customers who show high loyalty to your brand and spend significantly more money than others. You also know that some customers are less loyal to your brand and spend a lower percentage of money with you than others. Given these insights, how do you identify customers who will increase the spending of all your loyal customers? And those who might be less inclined to spend money with you? Customer profiling effectively targets only the right customers so they become the greatest advocates for your product or service.

Customer profiling, also known as customer asset management (CAM), is the process of understanding your customers and their needs to drive business growth. It is one of the most useful tools in a company’s marketing plan because it helps you know whom you should target with marketing campaigns, advertising messages, or other customer-facing strategies.

Customer profiling is a method of dividing your customers into groups that have similar characteristics and offering them different products or services. These groups can then be targeted with highly specific messages to increase your chances of converting them.

Customer profiling lets you create a story for each customer that makes them feel special and ultimately increases your chances of converting them into paying or loyal customers.

In this article, we will explore different types of customer profiling, the advantages of doing it, and the steps you need to take to implement it into your business.

How Does Customer Profiling Help in Business?

With customer profiling, you can dig deeper into the process of analyzing and understanding customer behavior, needs, and interests to create more effective marketing strategies. Companies can then use this information to target their advertising campaigns and sales efforts toward specific demographics or population segments who are most likely to benefit from their products or services.

Identify Better-Fit Prospects

Identify Better-Fit Prospects

Better-fit prospects are those individuals whose characteristics match those of current customers in terms of demographic data (e.g., age, sex, income level), buying habits, or other factors.

By identifying these potential customers early in the buying process, companies can reduce the time and effort required to pursue sales leads from other sources. Targeting the right customers helps achieve better repeat customer rates, fewer returns, and happy customers.

Bring down CAC_

Bring down CAC

There are a few different ways that customer profiling can help lower Customer Acquisition Costs (CAC):

Targeting offers based on customer interest enhances the likelihood that these prospects will convert on the first contact and refer your product or services to others. Because you know what they want and how to best appeal to them, you can reduce the amount of ad spend required to acquire these customers.

By understanding customer needs and wants, businesses can develop products or services that address those needs or desires. It allows them to focus their marketing efforts on reaching more potential buyers who will likely be evangelists for your product.

Builds trust and reduces churn rate

Builds trust and reduces churn rate

Customer profiling helps in assessing how likely a customer is to switch providers based on factors such as age, sex, income, location, and relationship status. You can use behavioral analysis tools to identify why customers are leaving your business, improve your offerings, and/or change your marketing or sales activities to prevent them from switching.

To keep your customers from churning, provide them with a compelling reason to stick around. Profiling helps to offer lower prices or better service than competitors. It also helps to encourage loyalty by providing exclusive rewards or discounts for longer-term customers. Building trust and regularly communicating will attract specific customers.

Improves customer service

Improves customer service

It allows profiling customers who are more likely to have a problem or issue with a product or service. By understanding these customers’ unique needs and wants, companies can tailor services and products specifically for these customers.

Improves product decision making

Improves product decision making

The data enables managers to develop data-driven products, which in turn helps customers enjoy using the company’s product and increases customer loyalty. Managers can better forecast future demand for a particular product or service by understanding past purchasing behavior.

Types of Customer Profiling

Geographic Profiling

It is a technique used to identify individuals or groups with a particular interest in a certain geographic area. Companies can then use this information to create targeted marketing campaigns or sales pitches more likely to appeal to those people.

Demographic

Identifying the age group, gender, marital status, ethnicity, education, company size/type, and industry type of your customers is a great way to get a better sense of who they are and what they might be looking for. Knowing where and what type of people are buying can also help curate a list of more relevant products.

Psychographic

It entails knowing why people shop, with a focus on why they shop online, and what makes them return to your brand. It comprises psychological methods to identify customer needs and motivations. Businesses can use it to improve the design and delivery of products or services by identifying customers likely to respond positively to a particular offer or experience.

Behavioral Profiling

It is similar to psychographic profiling but focuses more on the individual’s behavior rather than their identity. This type of profiling can help businesses identify risky tendencies that customers may exhibit and take appropriate precautions accordingly.

Steps to Follow in Profiling Customers

Customer profiling determines what features and offers will impact your customers’ experience and make the most sales.

But what data can you use to create customer profiles?

The answer here is simple: “All of it.”

You can use data from social media, email communication, data from your website, and data from your sales records to create customer profiles. You can also speak to potential customers and get an idea of their needs and interest to build a persona.

Infograhic-Customer Profiling

Step 1: Create a database of your ideal customers

Knowing your ideal customers and their needs is the prime motivation behind creating a customer database. The customer database will include information such as name, address, email address, products purchased, and purchase history. It will also include information such as the age group of your customers and which gender they fall under.

A database of ideal customers can be compiled based on a variety of factors, such as age, location, interests, etc. You can then develop specific customer profiles for different types of businesses to better understand who is likely to buy your products or services.

The database could include customers in major metropolitan areas, rural locations, and suburban areas. However, it is also possible to focus on specific industries or businesses within those locations.

For example, a pet grooming business may do well in urban settings. At the same time, a home improvement store may have a greater customer base that resides outside cities but is close to them.

Step 2: Identify and verify your target audience

Now that you have a database of your ideal customers, you need to know who exactly is living inside it. You can do this by conducting customer surveys, surveys with potential customers, or interviewing them. You can also use social media data to identify your target audience and verify their information.

Once you know the pet grooming business works well in cities and working professionals who have a hectic lifestyle. A pet grooming solution can take care of their loved ones.

Once identified the market, ask the right questions. Understand the needs of the current customer base.

Carry out market research to check the market depth and industry trends.

Create a definition of who is not your target audience. Keep running ad campaigns for different age demographics to get closer.

Continuous testing and iteration to optimize and create the right persona for your target audience.

Use analytics to see customer buying patterns and frequency based on time and other conditions. It can help you determine new types of products that you can offer to these customers.

Step 3: Identify Problems during user research

  • Identifying how customers react during the entire customer journey,
  • Discovering what motivates or drives customers’ behavior when using the product or service
  • Investigating whether there are any problems users experience while using the product or service
  • Determining whether there are any areas of the product or service where users would like more information or functionality
  • Investigating what the click-through rate is.
  • Evaluating the effectiveness of different marketing or sales approaches targeted at target customers

Step 4: Iterating the effectiveness of customer profiles in a campaign

Assessing campaign effectiveness includes researching various fronts:

  • How many new customers were created as a result of the campaign?
  • How much revenue was generated from new customers?
  • What percentage of total online traffic was derived from the campaign?
  • What were the most common reasons people abandoned the campaign?
  • How many returning customers were achieved as a result of the campaign?
  • What were the most common reasons people returned to the campaign?

The issue with most online analytics is that they typically track devices (or cookies) rather than individuals, like when marketers use them to monitor the success of marketing campaigns and consumer interactions.

It has become increasingly difficult to assess and comprehend online behaviors using only passive techniques. It is because consumers become more dispersed and use a multi-channel and multi-platform strategy during the online purchase experience.

Step 5: Mapping the consumer journey in Customer profiling

A customer’s journey begins with the need for a product or service. After evaluating possible solutions, customers arrive at a purchase decision. The products or services are then used and assessed until the customer becomes satisfied or dissatisfied with them. There can be a repetition of this process as customers use different products and services on an ongoing basis.

There are four steps in the customer journey: need, evaluation, purchase, and use.

The need phase begins with an individual or company having a problem they want to fix or a new product or service they want to explore. Next, they research potential solutions and decide which best meets their needs. Customers may evaluate different products and services during this process to see what is best for them.

The evaluation phase of the customer mapping journey is where you take all of the collected data from your surveys and interviews, as well as any insights gleaned during ideation and prototyping, and use that information to build a more granular understanding of who your target customers are.

During this phase, you can develop hypotheses about which solutions or services might be most effective for reaching these customers. You can use them to refine the assumptions based on what you learn through market research and user feedback throughout the rest of the customer mapping process.

The purchase phase is when customers pay for the product or service and receive it. A purchase can be made by an organization, the same as an individual making a purchase. With differentiating factors being the type of product, the quantity being purchased, and the problem it aims to solve.

Customers may use various channels to buy products or services. They may visit stores or websites directly, search for specific items online using keywords or filters, or contact companies by phone, email, or social media to inquire about products and/or services.

The use phase begins after customers have used the product or service and determined whether they are satisfied with it. They may continue to use it or decide to replace it with a different product or service.

Step 6: Automation

Customer profiling can be automated, making customer profiling quick and efficient, allowing for flexible customization, and helping scale production up or down as needed. It helps enterprises profile large numbers of customers with little effort and minimal time.

Moreover, it can help you identify problems that might otherwise remain undetected for years or even decades because no one has ever looked at them before. And it gives you access to new insights about your customers that would not have been possible with traditional methods of profiling like manual entry, individually handling customer records, etc.

Having examined the workings and advantages of customer profiling, let’s look at a real-world application of the analytics process, and how actionable insights into customer segments can influence business decisions.

A Course5 Case Study on Customer Profiling

One of our clients, a leading player in the CPG industry, was looking to redevelop its marketing strategies to enhance its brand equity, as well as develop a new range of innovative products to cater to the needs of different customer segments.

As a significant seller of oral care (OC) and personal care (PC) products, they wanted to include people with physical disabilities such as arthritis, cerebral palsy, and those with loss of limbs, who comprise 13% of the total US population.

To address this, the client carried out in-depth qualitative interviews. However, due to a shortage of time and resources, the client was struggling to form a holistic view to understand the segment and have actionable insights to base product development on. They reached out to Course5, and we are always happy to help.

We audited the existing research and interview videos, along with in-depth desk research into the industry and how existing products affect differently-abled people. Through active research and efficient customer profiling, we crafted a report that not only covered the challenges faced by the differently-abled; but it also featured recommendations on how to connect with them, and what type of products could help them in their daily lives.

The report enabled the client to connect better with their clients from a particular segment. It also provided them with specific directions for future campaigns, in order to enhance brand equity among their audience. The report is also being used by the Research and Development team to develop innovative Oral and Personal Care products for the differently abled.

Customer profiling is a great way to gain insight into the minds of your customers and help you understand their buying patterns better.

Get in touch with us to know how a data analytics and insights company can help revolutionize customer acquisition/profiling.