By CommenceCRM

What Are the 3 Methods of Customer Profiling?

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When creating a strategy for your business, it’s important to engage in customer profiling first. Customer profiling paints a picture of who your customers are and what they need. By utilizing these customer profiles, you can make better informed decisions for your business.

So what are the three basic methods of customer profiling? There is the psychographic approach, the consumer typology approach, and the consumer characteristics approach. These customer profiling methods will help you design your business around who your customers are, and help you make better, customer centered decisions.

Understanding Business Profiling

Customer profiling is a way of creating portraits 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. Business 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 customer types 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 Customer Profiling Is Done

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 smartphone 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 smartphone 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 romance books while customer B prefers fantasy novels – both of them are readers, 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 buying power.

2) The Consumer Typology Approach

The customer typology approach segregates consumers based on their motivations, their mindsets, and how to engage them. There are usually four types of consumers: loyal consumers, discount consumers, impulsive consumers, and need-based consumers.

  • Loyal consumers are rare, but valuable. They tend to remain loyal to a brand and promote these brands through word-of-mouth.
  • Discount consumers, 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 consumers do not shop with anything specific in mind. Unlike either loyal or discount consumers, they aren’t looking for a product, service, or brand, and spend their money capriciously. They are more emotionally driven rather than logically driven when making decisions.
  • Need-based consumers 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 Consumer Characteristics Approach

The consumer characteristics approach asks what traits influence buying decisions. There are a variety of consumer characteristics, but there are three common ones that define modern consumers.

  • Convenience-driven is one trait that characterizes a modern consumer. These are the customers who may not have much time on their hands, so they order products or services online so these arrive faster. For them, everything should be fast, simple, and easy to use.
  • Connectivity-driven consumers want to feel part of a community; they feel connected to someone else if both purchase the same product. Connectivity-driven consumers 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 consumers would be more inclined to make the same purchase.
  • Personalization-driven consumers would prefer a customer experience that is customized for them specifically. These consumers value making the choice of how a product will look, or how a service will be attuned to their needs exactly.

Creating Your Customer Profiles

Creating a customer profile begins by gathering information on existing, satisfied customers, then trying to target new prospects with matching profiles of your target group. You can begin customer profiling by:

  • Collecting feedback from your customers: Survey your existing customers to get their feedback on what you are offering and how they perceive your business. It’s important to do this especially when your business launches something new. You would know what works, what doesn’t work, and what can be improved. Include incentives that will induce them to complete your survey, such as discounts on the next purchase.
  • Keeping your customer profiles consistent and up to date: Documentation is naturally a part of consumer profiling. Keep your findings in a database that is easy for you to read and familiarize yourself with. The template of the profiles should be the same for every customer type and should include information, such as their name, email address, demographics, behaviors, habits, psychographics and societal surroundings.
  • Surveying your customers on their interests and preferences: A customer profile will change based on customer experiences and trends, which is why it is recommended to conduct surveys quarterly. Identify their gender, job role, location, habits, interests, and preferences and include these in the profile.

Using Customer Profiles to Find the Best Customers

Among the many case studies conducted by McKinsey, a quick-service restaurant chain used people analytics to create a profile for their frontline employees to understand how they can play a part in growing the business.

They created a profile for each employee and categorized them into four different archetypes. Using each profile they gathered, the business tried to find out which variables corresponded most closely to store success and found that certain employee archetypes achieved more due to their personalities.

The reverse can be done to find an ideal customer for your business as well. In creating a customer profile of your ideal customer, your sales team will be able to better identify similar customers who are a better fit for your business. You can match the customer profile of each successful sale to understand who your business should be looking for.

Invest In a Customer Profiling System

Customer profiling systems have greatly evolved over time, so there is no longer any need to conduct manual research to create and manage profiles. From digital notepads to artificial intelligence, you can use tools to combine customer information from across the internet and outline who your customers are, their buying preferences, and how they want to be treated.

Commence Cloud CRM has a customer profiling software that provides an in-depth view of your customer’s account, sales, and service history. Our software can show you a simple customer profile at a glance, so you can make every interaction count. Build and nurture meaningful relationships with your target audience, rather than using a generic message for each customer. Try Commence CRM with your business today.