Marketers use customer profiling to identify the best customers, their common interests and demographic information. This concept will help you to make informed targeting decisions based on customer profiling analysis by providing an overview of key characteristics and tools.
What is customer profiling?
Customer profiling is a way to gather the insights needed to identify, segment and define your target audience.
Going far beyond basic demographics, it means getting as close to your customer as possible, so you can reach them the right way.
But the answer doesn’t lie in extensive research. It lies in good quality insight. And yes, there’s a difference.
Customer profiling is about creating value from data to understand everything there is to know about your target customers and the market that surrounds them.
Leading brands are putting insight in the driving seat to put customers at the heart of their messaging, guiding everything from campaign planning to brand positioning.
This process starts with focusing on your current customers, followed by your desired target audience and target market, getting the validation you need that you’re looking at the right people.
Once you have this, it’s about understanding and defining these customers to get your messaging right, focusing on the ideal customer insights that can drive meaningful creativity.
So what are the three basic methods of customer profiling? There is the psychographic approach, the customer typology approach, and the customer characteristics approach. These customer profiling methods will help you design your business around who your customers are, and help you acquire and retain the ideal customer.
Understanding Customer Profiling
Customer profiling is a way of creating id cards of your customers that are based on factual information, such as their buying behaviors or customer service interactions. These aren’t meant to replace traditional demographics, but are used to complement them as you work with customer touchpoints.
In many businesses, the people behind the products or services offered are rarely the end users. Customer profiling is a tool which allows you to visualize the customer types who will actually interact with what you provide. Instead of deferring to team members when making a decision, you can refer to these personas to meet the customer’s pain points and expectations.
Customer profiling can tailor products or services for more specific groups of people, rather than drawing broadly and hoping to capture more of the market. In recognizing your customer, you can develop an edge over competitors since you can tailor your products to have more impactful features and attract more people who are likely to buy it.
How to master Customer Profiling
Customer profiling is done by breaking customers down into groups that share similar characteristics and goals. For example, if the goal is to purchase a pair of headphones online, there might not be too much of a difference in the habits of a single professional and a married business executive.
Both would know how to use an online shopping platform, but won’t have much time to spend in choosing a headphone model. They would also have more purchasing power compared to someone like a high school student.
There are three methods of profiling customers based on their decision-making styles:
1) The Psychographic Approach
The psychographic approach takes a look at customers’ lifestyles to define market segments. Many components play a role in using the psychographic approach, such as activities, interests, values, and social class.
- Lifestyle and demographics are factors that include age, location, and gender. For example, a customer’s lifestyle determines how your product will fit into the needs of school-going, college-going, and office-going customers’ buying habits respectively.
- Activities, interests, and opinions are a subset of lifestyle, focusing on your customers’ activities, interests, and opinions. It’s not a problem if customer A enjoys hip hop while customer B prefers rock – both of them are music enthusiasts, and that is how you profile them.
- Values, attitudes, and social class pertain to how people were brought up. These affect how they spend their money and what they choose to spend their money on. Social class is especially important, as their income determines their purchasing power.
Companies need to go further to understand who their consumers are and the reasons behind their actions (why). This combination of the WHO and WHY generates a deeper understanding of the customer base and the best way to target them. Companies need to include psychological modules on the already available data that they possess (emails, survey data, social media data, all CRM data and so on), but most of the time it's a blocker to integrate this information into a single source of truth.
For instance, psycholinguistic customer profiling analyzes the way people write, what words they use and how they express themselves to reveal their mindsets and personality traits.
By combining this with emotional and motivational modules and using it on all available text data, the company can detect the underlying mindsets, emotions as well as motivations behind the customers transactional search intent. Basically, getting to know one’s own customer and having a deeper understanding of them.
2) The customer Typology Approach
The customer typology approach segregates customers based on their motivations, their mindsets, and how to engage them. There are usually four types of customers: loyal customers, discount customers, impulsive customers, and need-based customers.
- Loyal customers are rare, but valuable. They tend to remain loyal to a brand and promote these brands through word-of-mouth.
- Discount customers, on the other hand, don’t prefer one brand over another. They will only make a purchase if there is a discount or a sale.
- Impulsive customers do not shop with anything specific in mind. Unlike either loyal or discount customers, they aren’t looking for a product, service, or brand, and spend their money impulsive. They are more emotionally driven rather than logically driven when making decisions.
- Need-based customers are the opposite of impulsive ones, as they will only purchase a product or service to fulfill a need. They are the type who would enter a store quickly, make a purchase, then leave.
3) The customer Characteristics Approach
The customer characteristics approach asks what traits influence buying decisions. There are a variety of customer characteristics, but there are three common ones that define modern customers.
- Convenience-driven is one trait that characterizes a modern customer. These are the customers who may not have much time on their hands, so they order products or services online so they arrive faster. For them, everything should be fast, simple, and easy to use.
- Connectivity-driven customers want to feel part of a community; they feel connected to someone else if both purchase the same product. Connectivity-driven customers also tend to listen to other people for their opinion on products, services, and brands. If one person says the product is good, then these customers would be more inclined to make the same purchase.
- Personalization-driven customers would prefer a customer experience that is customized for them specifically. These customers value making the choice of how a product will look, or how a service will be tailored to their needs.
Customer Profiling goes hand in hand with enriching your existing customer database. It is a part of keeping your database clean and consistent in order to maximize the value of your gathered customer information. Read more about it in our latest Guide: Customer Profiling and Database Enrichment.