Understanding who your ideal customers… what’s important to them… how to locate them– is a critical part of any business success.
The first commandment of business: thou shalt know thine customers, well. Customer profiling is the process of using relevant and available information to describe the characteristics of a group of customers, and the drivers they use for making purchasing decisions.
There are really only two questions that every business needs to answer: 1) Who are my ideal customers? 2) What’s important to them? Once you’ve answered the questions, then growing your business becomes much easier…
Building business success is about getting the right message to right person at right time. In other words, it’s all about relevance; and to be relevant you must have a clearly defined customers’ target strategy: Who are the customers? How to engage them? Many companies fall into the assumption trap and take the one-size-fits all approach to their business programs.
But in order to achieve growth it’s crucial for companies to look at individual markets, target groups, and tailor their messaging strategy to be relevant to each group. By comparing the ‘ideal’ customer profile with what is available across the business universe, you can identify the specific customers that will provide highest growth and profit potential for your business.
According Johan Lindqvist; you can profile your best customers in your existing markets and find more of the same in new markets; then, devise business programs that hit the right customers, the first time, and truly deliver results. By comparing current customers, within the context of your target markets, you get a clear view of how you’re positioned and what steps must be taken to engage the customers and take advantage of their business opportunities.
Understanding the customers’ Who, What, How– is the way you deliver real value to your customers, and create a win-win situation for everyone…
In the article Customer Profiling by Sean Crain writes: Customer profiling can mean many things and be associated with several activities. It’s not mentioned often, but all good businesses do it all the time without thinking about it. As with anything, actions without thought and planning; will not yield the desired results.
Customer profiling falls into this category; engaging customers and potential customers requires a planned approach in order to maximize the chances for success. Customers are people with unique needs, personalities, interests… profiling is the art of assessing customers on an individual level and developing an approach that provides them with the appropriate support. Also, it allows corporate strategy to be effective when dealing with multiple customers from different business entities or within the same organization.
The profile process begins even before meeting customers… each organization has to assess its target markets, and this leads to the first step in a process; while recognizing that not all customers are ideal for a particular organization. Customer profiling provides the methodology for deciding what types of people should be approached and who should be avoided.
For example; corporate resources, financial limitations, enterprise strategy and goals… are all factors in specifying target groups and are used in developing and matching group customer profiles. Once this framework is established, corporations can focus on assessing potential customers that fit into one or more of their categories of interest…
In the article Know Your Customers: Customer Profiles by BBVA writes: A customer profile is simple a tool that can help you better understand customers, so that you can develop and grow your business. Let’s start with an overview: A profile is a collection of information that defines your customers and determines; why they buy, or don’t buy your products.
Profiles are fundamental in targeting sales and marketing plans to meet the needs of your intended audience. There are two basic profiles: demographic profiles and behavior profiles. To make it easy, a demographic profile tends to answer the question– Who? A behavior profile answers the questions– How? and What? A typical developing methodology, for example: Start by evaluating the frequency of purchases by customers.
Rank your customers from highest to lowest in terms of purchase frequency. Then, evaluate total spending (within a specific period of time) by customers. Rank from highest to lowest in terms of dollars spent. Now compare the two lists. In many cases the results will be similar, but not in all cases. Certain customers make infrequent but large purchases; others will make frequent but small purchases. (Both are good customers.)
Now, look at your demographic profile: Where do the best customers fit in terms of demographics? What characteristics do your best customers share? Then take a look at your current marketing strategies. Do you target your best customers? Are you spending significant resources in sales and marketing programs at the demographics that do not purchase frequently or in high-dollar amounts? If so, you have two basic options:
- Change your strategy to better attract demographics you currently fail to attract, or
- Change your strategy to better focus on the demographics you currently attract so you can grow your business, faster.
In reality you have several options; you can modify you sales and marketing programs that doesn’t work, enhance your sales and marketing programs that do work; or use profiles to identify your best customers, identify your worst customers, and know how better to serve them.
In the article Importance of Target Customer Profiling by Cindy Kennaugh writes: A target audience profile or customer profile is a very detailed appraisal of your customers’– characteristics, attitudes, and behaviors. Sharing high-quality customer profiles across your organization pays off in several important ways:
- Help the company make better, more consistent decisions about how to best market and sell, including; which products and services to offer and how to most effectively communicate their features, benefits, and availability.
- Reduce confusion among functional areas through a common business foundation for decision-making.
- Make it possible for your staff to treat customers more consistently because everyone is working from the same comprehensive information.
- Save time and money by minimizing missteps and rework stemming from inconsistent knowledge about customers.
- Improve overall business focus and communication effectiveness.
There is no one comprehensive profile that contains all your customer’s information and insights, and you may need to produce multiple versions, as needs arise. For example, profiles can be prepared for an entire company, product line, or a particular product. On the one hand, the greater the breadth of the customers segment (i.e., company-wide…), the more general the information needs to be.
Whereas, profile for a particular product or service needs to be quite specific. Information should come from multiple sources, and the process of building a profile has a lot in common with market research. Typical data sources include; existing profiles, marketing and sales staff customers knowledge, third-party research reports and articles, conversations with customers…
Regardless of how much information you gather, it’s usually not enough, and you almost always have to make some assumptions and estimates based on your experience: It’s just part of the process. Doing so acknowledges uncertainties while giving decision-makers something specific with which to work. Some parting advice:
- Use, share, and update your profiles often. This should be a living document. As your understanding of your customers changes, you should consider adapting your strategies and policies in response.
- Don’t rush the process. The information you gather will be the foundation for many significant decisions. It’s worth doing them well the first time.
- Don’t assume your organization already has a thorough understanding of its customers, thus making target audience profiling unnecessary. Few companies actually know their customers that well.
- Talk to selected customers. Under the right circumstances, they are often willing to share their perceptions and experiences.
The importance of developing a customer profile cannot be over-emphasized or ignored. Your customers are your most valuable asset. They are costly to acquire, and easy to lose. A profile is a compilation of information about the internal workings of your customers, including; everything from the company’s history and ownership to its day-to-day buying process.
By improving your understanding of their business situation, major motivations, pains keeping them awake at night… it helps you develop a better relationship… that’s the key to becoming their supplier of choice. Although the data itself is useful, the main value of the customer profile is in the process of learning about the customers. In other words, the profile questions are intended to stimulate your thought process.
Remember, the essential value of this exercise is not the answers themselves, but rather clues they provide for developing intimacy. Be creative! A customer profile is about understanding your customers… There’s a lot of hype around its importance. That’s because profiling really is one of the big differences between companies that are successful and the ones that are not. You must know your customers, well, before you can develop a strategic plan to engage and retain their business. In order to visualize your ideal customers, you must create a profile or detailed description of your target customers as part of your strategic planning process:
Think about the– behaviors, motivations, and potential benefits they seek. In order to create a detailed profile, you need to know your customers’ characteristics. Be interested in their– likes, dislikes, needs, wants,… If you have consumer products, the major types of characteristics are; demographic, geographic, lifestyle, usage…
If you have business-to-business products, the major types of characteristics are; demographic, environmental, operating variables, purchasing approaches, situational factors, personal characteristics…
Create a profile that requires you to visualize your customers with clarity. By understanding trends and preferences– customer profiles brings relevance to business process; relevance of product, relevance of value, relevance of channel, relevance of message…