Customer profiling is as easy as answering two simple questions: Why are customers buying this product or service and why are they buying it from you? Throw in a few demographics and you have got yourself a profile.
Okay, it may not be that easy, but customer profiling, formally known as market segmentation, can be an important component to your marketing plans. Market segmentation is the process of dividing the entire market into smaller groups of potential customers that have similar demographic, psychographic and/or product usage characteristics.
Market demographics are facts. Age, income, gender, education and marital status are all demographics and help characterize markets. Psychographics are subjective, human behavior traits that are identified as being shared by the segment. Market segments can be conservatives, liberals, leaders, followers, or any other group characteristic that is shared by the group and influences their purchasing decisions.
By identifying key trends and commonalities of your customers, you can fairly accurately predict customer reaction to your overall marketing strategies. Profiling gives you the all-important “why” factor. Why do customers buy certain products or services? Why do they choose to buy from you rather than your competition? Knowing these answers allows you to add dimension to your customer profile.
You may sell one product, but different market segments will buy it for different reasons. Simply put, different benefits appeal to different customers. For example, a TV dinner is a TV dinner is a TV dinner. But, convenience is not saving money, weight-loss or better nutrition. Yet, Hungry Man, Budget Gourmet, Lean Cuisine and Healthy Choice have segmented a market of frozen meal buyers into specific benefits that appeal to a specific customer.
Profiling your customers allows you to link the segment with the benefit. Getting the information is as easy as watching who comes through your doors and asking them. As you ring up sales or assist them in their purchases, you should be noting what they are buying and asking them why. Most customers will attribute it to friendly customer service.
This type of market research can become more sophisticated. Surveys, focus groups, purchased demographics summaries and more are available for a fee. These tools can assist market segmentation efforts, especially if you have neither the time nor the inclination to take on this project on your own.
Additionally, once you know your customers and their salient characteristics, you can look for similar segments that you are currently not reaching. For example, if a certain segment is buying your product or service for the benefit of convenience, are there other groups who would appreciate the same benefit? Usually there are and once you have found that link, you have also found a brand new customer base.
With a little work and time, you can get to know your customers and their buying habits and characteristics. This knowledge should guide every marketing decision you make.
The bottom line is this. Knowing who your customers are makes for better business. Your marketing dollars will yield a larger return on investment if you can better predict customer reactions to your marketing efforts. With successful customer profiling, you can.