Today, consumers know exactly what they want. They’re demanding, discerning, and they produce more data than ever before. They expect more from brands – looking for a personalized experience at every touchpoint.
This demand for brands to tailor their marketing has spurred the need for in-depth data that goes beyond simple demographics. Before customer profiling, marketing was impersonal. Advertisements were churned out to consumers without targeting. Today, this doesn’t work. Modern marketing requires consumer profiles based on perceptions, interests, attitudes, and behaviors.
Profiling customers has transformed the modern marketing world. It has eliminated the need for guesswork, paving the way for data-driven and informed decision-making.
Let’s explore what customer profiling is, the benefits to a business, and how you can look to implement it.
What is Customer Profiling?
The concept of customer profiling is not new. However, the volume and complexity of data now generated means that profiles can be more in-depth than ever before.
Technological advances mean we now have an entire new wealth of means to gather information on consumers. Transaction data and traffic remain the most frequently used sources of customer information, but other methods are becoming more common.
Source: 2019 Unified Commerce Report
Social media listening, conversation intelligence, behavior analysis, and sentiment tracking are changing the game. By utilizing this new data, customer profiling can produce actionable results.
Customer Profiling vs. Segmentation
Customer profiling and segmentation are often confused. Both are used to create a more detailed picture of a consumer, but in different ways. The key difference between segmentation and profiling is personality. Think of segmentation as an empty shell, while profiling gives it a soul you can speak to.
Customer segmentation divides an audience into groups by demographics, interests, and other characteristics.
Customer profiling approaches customers from another angle, focusing on behavior and identifying patterns. This method turns data into an actionable picture of a real person. This can evoke empathy and provide insight into the customer experience.
Where customer segmentation would provide a picture of a middle-class man, aged 18-34, who lives in Berlin, a customer profile would give you Ben. Ben earns €45k per year as a freelance marketing manager. He works from home and is looking for a way to make communicating with his clients as easy as possible. He would benefit from software that makes it simple to conduct a secure conference call.
If you are the marketing manager for said product, would it be easier to market to the segment, or to Ben? Short answer, both. By combining a customer segment and consumer profile, you leverage the largest amount of data to create the fullest picture.
Source: Charlotte Clergy Coalition
What Are the Benefits of Customer Profiling?
Knowing your customer is vital if you want to not only grow your business but to sustain the growth. Its benefits are impactful across the entire business.
Customer profiling helps you do the following:
1. Identify Better-fit Prospects
By knowing who benefits from your products the most, your organization can find consumers that are most likely to convert.
Let’s use a mobile phone business as an example. You’re looking to sell a phone contract with free international calling for 12 months. You have three individuals in front of you –a college student, a recently graduated expat, and a stay-at-home mother. With just a tiny snippet of information, you are significantly better prepared to know who to sell to (and how to do it).
You’ll no longer have to waste time or resources on prospective customers that do not fit your target market. These prospects will be less likely to complain further down the line.
2. Reduce the Cost of Customer Acquisition
For a business to grow, it needs to also grow its customer base. Unfortunately, new customer acquisition can be expensive. Customer acquisition cost (CAC) is the amount spent on marketing and sales campaigns to attract a single customer. CAC can vary from industry to industry, but can reach up to €2,000 per customer in the B2B higher education space.
By having a clear picture of your customer, you can better target your campaigns and increase your conversion rates. This will reduce the overall cost of acquiring a new customer and subsequently growing your business.
Source: First Page Sage
The better you understand your customer, the better you can target your messaging. In short, the more developed your customer profile, the less you’ll spend.
3. Better Serve Customers
Knowing your customers is key to providing a better service.
By understanding pain points and characteristics, you can easily deliver excellent customer service. This can happen before a customer has to request it.
You can predict issues before they arise, provide preventative self-help resources, and better align with their needs if they do reach out to your customer service team.
4. Reduce Customer Churn
Understanding how to prevent customer churn can be pivotal to business success.
Customer churn refers to the rate at which you lose customers over a period of time. This happens – people change, people find new products, but there are ways to reduce this from the offset and throughout.
By creating strong customer profiles from the start, you can attract and serve customers who actually want to use your product. This increases the likelihood of them continuing to do so.
How to Effectively Undertake Customer Profiling
We know what customer profiling is and why we do it. But some businesses are still unable to do so in an effective way. 68% of retailers need to improve their ability to utilize insight to meet customer expectations. In a world where customers are looking for a personalized experience at every touchpoint, it’s vital to deliver it. But how do we do it?
The process of profiling customers can be broken down into five straightforward steps:
1. Start with Your Data
Data should be the first port of call with any customer profiling exercise.
What do you already know about your consumers? Look to consolidate the information available to you. This could be as simple as demographic information and records concerning purchase history or channels. It could also factor in email responsiveness, product mixes, or engagement with the business over time.
If you find it difficult to differentiate bounce rate vs. exit rate or the data available to you is limited, you can enhance and enrich your own data with third-party data.
This is optional but can help ensure your data is sufficient, thorough, and strong enough before moving forward.
2. Segment Your Customer Groups
Understanding similar traits amongst your consumer base enables you to segment them into similar groups by shared characteristics.
This allows you to target each customer segment with a bespoke approach. Personalization is key. This will also allow you to easily target your best customers or the customers you feel represent the greatest opportunity.
3. Create a Rich Picture of These Customers
Once segmented into groups, you can then create rich and descriptive pictures of these consumers. But utilizing data, you can understand your potential customers both on and offline.
This allows you to better target them in terms of relevant messaging, channels, locations, and times of the day.
It’s imperative that the data collected can create a clear and distinct picture of the consumer.
Data has the potential to provide meaningful information about potential customers, but only if that data is readily available and accessible. Only 31% of leading brands say they are data-driven, leaving a clear opportunity for others to change their approach. This may be due to technical challenges such as data organization, limited storage, or slow processes.
With a rich picture of a consumer, you can have a clear voice of a customer guiding every decision you make around ads.
4. Deploy Your Cross-channel Campaigns to the Customer Segments
Customers do not operate on one channel, nor are modern customer journeys linear. They are less predictable than ever, with touchpoints across multiple different channels. It takes multiple touchpoints to generate a conversion. Does your campaign speak to customers at every touchpoint?
A cohesive and convenient customer experience across each and every preferred platform is now a basic need for businesses. Campaigns should be targeted and personalized with customer segments in mind.
5. Measure the Effectiveness
Customer profiling is not a one-and-done exercise. It will be a continual cycle of action, learning, and refinement.
This can be done by monitoring campaigns over time. This should be complemented with changes in your competitors’ customers, spatial trends, and changes in platform behavior.
Gathering feedback from consumers after a campaign or a change in company direction is a great way to garner sentiment. It’s a technique often utilized by major brands such as Nike, especially after controversial campaigns. This can better inform future campaigns for certain segments.
Customer Profiling Best Practice
First and foremost, customer profiling should be factored into a business across its lifespan.
Market research does not belong independently at the start of a lifecycle of a business. Customer profiling should hold a place in your schedule baseline for any project. Whether launching a new product, approaching a rebrand, or looking to revitalize sales, an up to date customer profile can be pivotal to success.
Customer profiling should also be kept up to date. It’s important that you are able to gain insight into changing habits, preferences, and interests. These will inevitably change over time. This may be due to the customer’s experience or market trends.
It’s important to consider other stakeholders within the business when developing profiles. Customer profiling does not assist only with sales and marketing. From customer service to product development or design, almost every entity of a business can benefit from knowing more about the end consumer.
By breaking down communication silos and including stakeholders from various departments, the business will be better positioned to get the most out of profiling.
Should I Invest in Customer Profiling?
Short answer, yes. In 2022, you should be placing emphasis on knowing your customers.
As the economy changes, we see more companies drilling down on operational efficiencies. FIFO vs LIFO for inventory – a shift to cloud-based solutions, remote working. You name the process, businesses are actively looking to refine it. Too often, they overlook refining their understanding of their customers.
Consumer profiling is about defining, segmenting, and profiling target consumers to guide every element of their strategy. Time and time again, we see the value that lies in data.
As consumers move further away from responding to blanket messaging, investing in data that tells you more about your audience is not only worth it, it’s essential.