What is customer profiling and how do you create one?
By Indeed Editorial Team
Published 25 April 2022
The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.
Customer profiling is a process that helps businesses understand which demographics and types of customers have an interest in the goods or services the company offers. The process creates profiles of typical customers, based on sales data and customer feedback. It can help shape business decisions by tailoring the product to meet the needs of that subset of customers. In this article, we explain what customer profiling is, with examples of how it works, different strategies and how to create a customer profile.
What is customer profiling?
Customer profiling creates a portrait of a typical customer, with accompanying details of their characteristics, spending habits, likes and dislikes. These personas help a company understand what its target audience thinks and feels, helping guide decisions about the direction the company could take with its products or services. Real customer data and market research help design these consumer profiles. They represent a typical customer in a particular target audience. A customer profile might include the following details:
number of children
level of disposable income
When creating a customer profile, it's a good idea to have a team comprising members from different areas of the organisation to get a holistic view of consumers and their behaviour.
4 strategies for customer profiling
To develop a customer profile, a company first understands the shared traits and characteristics of its target audience. They may gain this knowledge through market research or customer surveys. There are several strategies used to gather and collate the data and transform it into useful customer profiles:
1. The psychographic strategy
This profiling method considers a customer's lifestyle, characteristics and personality. The analysis of data might include:
Demographics: This is data about a customer's age, gender, place of birth, ethnicity, occupation, marital status and profession. For example, feminine people aged between 20 and 30 might be more likely to purchase a bridesmaid's dress than other demographic profiles.
Interests: Based on feedback and buying habits, this part of a psychographic profile attempts to predict the hobbies and interests of target audiences. For example, people who routinely buy books on history may enjoy visiting historical sites thus making them an interesting target audience for National Trust membership advertisements.
Values: This provides detail about the beliefs and values of a customer. This can determine what drives them to purchase certain items and their purchasing preferences, for example, people who care about the environment and animal welfare might choose to purchase plant-based foods, rather than meat-based products.
Income: The amount of money someone has, specifically their disposable income, dictates what kind of consumer they are. Understanding the amount of money their target audience has available to spend can help a company set price points and decide how and when to publicise discounts and sales.
2. Consumer characteristics split
This method of customer segmentation and profiling focuses on which aspects of someone's personality drives their decision-making and purchase choices. Three key factors thought to be the most powerful motivators and form the basis for consumer profiles in this model are:
Convenience: Consumers want their needs met and prioritise time and ease above any other factor when making purchasing decisions.
Customisation: This type of customer cares about how products and services meet their specific needs. They value the ability to tailor a product, for example, choosing colours and designs based on their personal choices.
Community: A consumer who values personal recommendations and other word-of-mouth style advertising, who wants to shop locally and places importance on supporting businesses in the local area.
Which of these customer trends greatly depends on what product you're providing and what industry the company's in.
3. Consumer typology
This organises customers based on their key interests and the motivation they have in making purchases. They split this into four distinct types. Understanding which of these types of consumers like and buy specific products can help a company define key audience groups and develop their products to appeal to these groups:
Impulse-driven consumers: They may make unplanned purchasing decisions based on spur-of-the-moment desires. Consumers satisfy these desires using products that are immediately available rather than price or brand loyalty.
Discount-focused consumers: These customers want to find good deals and place value on low-cost goods and services above being loyal to a particular brand.
Needs-based consumers: A classification given to consumers who limit their purchases to necessities. They're hard to sell luxury products to and may not have great brand loyalty.
Loyalty-focused consumers: These customers strongly favour particular brands and may stick to what they know. This means that a brand that can attract these types of consumers can develop a powerful brand following.
It may be the case that a company wants to attract a certain type of customer. Determining what types of consumers the company's already attracting through the creation of a customer profile can provide a company with the insight to change where necessary.
4. Mechanisms to gather data
Influencing customers to share their thoughts about products and services can help companies build the foundations of customer profiles. There are several ways to do this:
focus group testing
auditing online reviews left by consumers
collating data from customer feedback helplines and email addresses
direct customer interviews
How to create a customer profile
The following steps can help a company develop and refine its customer profiles:
1. Identify the unique selling point (USP)
Understanding the need that a product or service meets is a useful way for a company to establish which kinds of consumer values and uses the product. Companies often do this by collecting data about purchasing habits and asking for customer feedback. The following customer feedback questions can pinpoint the need your product or service meets:
Why did a customer choose this product?
What does consumer feedback say about how the product did or didn't meet their expectations?
What sets your product apart from competitors?
What negative feedback do customers have about your product?
You can also identify selling points by asking people in the company what their perception of the product is and how it could be more unique.
2. Collect demographic information
Demographics refer to the statistical data about your audience. The following questions can help a company understand the demographics of the consumers using their product:
Where are your customers based?
What shops do they frequent?
What occupations do your customers have?
What are the average annual salaries of the consumers?
What is the marital and family status of customers buying the product?
At this stage, you can also determine if people commonly buy your product as a gift or for themselves.
3. Track customer habits
Your data can then help a company develop new products, advertise sales and build customer loyalty. Here are some ways you can gather data and track your customers' spending habits:
set up a loyalty programme that collects customer purchase data in exchange for discounts and vouchers
provide discounts in exchange for completing customer surveys
track inventory carefully and track seasonable or time-specific fluctuations in product popularity
direct sales to specific customer groups to test the consumer profiles
For the methods that involve directly gathering information from customers, you may want to inform them that their answers could assist with future product development and marketing campaigns.
4. Evolve customer profiles
Customer profiles are not a static concept. As a company evolves, the type of consumer they appeal to changes. Similarly, consumer groups change and there may be many environmental factors that influence consumer values and beliefs. This means that the consumer profiles need changing and evolving too, otherwise they quickly become stale and irrelevant. As with many marketing concepts, refreshing them is essential.
What are the advantages of customer profiling?
Customer profiles provide a subjective way for a company to sense-test new ideas for novel concepts. It means that product developers and members of a marketing team, who may not be the target audience, have a simple means to guide their decision-making process. Using customer profiling can therefore help clarify uncertainty and avoid personality clashes when product developers have different ideas about what works best.
This methodology of profiling and reviewing customer feedback can also help a company identify gaps in the market. For example, if consumers explain that a product is only partly meeting their needs and expectations, it may highlight how a company could change or develop the product to fully meet this demand. It can also be a sensible way for a company to prove how customer-focused they are and build brand loyalty by listening to consumer feedback.
What are the disadvantages of customer profiling?
Some marketers may dismiss customer profiling in favour of traditional demographic considerations. Customer profiles do not aim to replace established marketing strategies, rather they strive to inform and complement these traditional marketing concepts. They can help product design and service refinement to support companies in creating better-tailored products and help businesses make better decisions.
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