Customer Profiling Defined
The definition of Customer profiling is ” a description or analysis of a typical or ideal customer for one’s business” Harper Collins Publishers. Customer profiling is a marketing tool that businesses use to understand their customers and helps to make better business decisions. Profiling results in customer profiles which provide a description of your customers based on a set of attributes. You can group similar profiles by shared characteristics such as demographic, geographic, psychographic and behavioural characteristics.
Why profile your customers?
Customer profiling will help you to understand your customers, highlighting who they are, what they look like, their interests and wants. This insight will help you to recognise your customer’s characteristics, behaviour and traits. Having a better understanding of your customers, you will understand what they are interested in and will be able to communicate with them more effectively.
Common Customer Profiling Models
Profiling usually groups customers into similar characteristics providing ‘types’ or groups of customer. Demographic and social grade definitions enable the classification and measurement of people by different social grade, income, life stage, age, affluence and location. These factors can then be used to group similar customers, you may be familiar with well known social grade classifications like ABC1 & C2DE developed originally by National Readership Survey.
Behavioural classifications can also be used to group people based on their shared behaviour, likes and interests. This then provides a more in-depth and robust look at your customer base and what drives and motivates them when making purchasing decisions. MOSAIC, ACORN and Personicx are all well-known examples of classifications that take into account behaviour and hobbies as well as demographic variables such as age, location, affluence and life stage.
Understanding similar traits amongst your customer base enables you to segment them into similar groups by shared characteristics and traits. The benefit of customer segmentation is that you can target each customer segment with a bespoke approach rather than a one size fits all technique. Targeting by specific segment makes it easier to communicate with your customers with message relevant to them, providing a more personalised approach with appropriate marketing communications
Customer Profiling and Transaction Analysis
Once you have developed a profile of your customers you can then analyse transactional data to identify patterns and trends amongst your customers by segment. As a result, your customer profile is not only based on demographic information but also takes into account past behaviour. You can analyse your customer profile by product type, value, frequency and patterns of spend. Analysing the different patterns of behaviour or spend by customer profile, provides a clear picture of your most profitable customers. Once you understand who your best customers are, you can develop a strategy allocating the resource you would like to allocate for each segment group. Optimising your marketing budget and improving return on investment.
Using Customer Profiling for Prospect Acquisition
After you have identified the profile of your best and most profitable customers, you can then find look alike prospects and target them in an effective manner. These prospects should have a higher propensity to take up your offer and therefore provide a more cost-effective means of targeting new customers.
In conclusion, customer profiling and segmentation provide the tools to fully understand your customer base, improve customer engagement and target look alike prospects.
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Profiling Case Study – World of Wedgwood