Friday, August 13, 2010

Marketing Strategy : How to Profile Your Customers

How to Profile Your Customers

Originally published here in

Knowing one’s customer is a prerequisite for successful marketing practice. Customer profiling is the collection valuable information about customers which will help in better targeting and marketing strategies. Although every marketer knows about the importance of customer profiling, it is surprising to see how little effort has been taken in this regard.

The main reason cited by marketers, especially those dealing with FMCG and consumer durable products, for this lack of customer profiling is the sheer size of the customer base. For a mass marketer, profiling the large segment of consumers is not viable economic proposition. The problem starts when marketers see their customers as a large segment and not seeing them as a collection of individuals. It is true that a mass marketer cannot profile individuals but treating the entire segment as one without understanding individual profiles can make decision making less effective.

Profiling helps the marketer in better targeting, better communication and also provides a thorough understanding about his/her buying behaviour. The more information a marketer has about the customer, more efficient will be his marketing activities. Customer profiling can be done at an individual level or at segment level. In practice, most of the mass marketers and B2C marketers tend to profile customers at the segment level and the B2B marketers focus on individual profiling. B2C marketers find it difficult to profile individual customers because of the large number of customers.

Customer profiling starts with the identification of target customers. Before profiling, marketers should have clarity about their prospective customer. This is a critical step for start-ups and those businesses that are entering new markets. The critical question that a marketer should address at this stage is “Who is our customer? “. Many businesses tend to view this question narrowly. It is important for marketers to understand the different customer- roles in a buying situation. For example, in the case of a Television purchase, every member of the family will have a role to play in the whole purchase process.

According to Professor Philip Kotler, there are five customer roles in a purchase process

Initiator – The person who first suggest the idea of buying a product.

Influencer- One who influences the purchase decision through his suggestion or advice.

Decider- Who decides on the purchase and also any purchase decisions like where, what and how to buy.

Buyer – Who makes the actual purchase?

User- The person who consumers or uses the product.

While profiling the customer, it is important to profile those members of the purchasing unit who takes up these roles.

The next step in the profiling process is to decide on the information that is to be collected. Marketers can collect general date like demographic data which are often available in the public domain. These data help in proper segmentation and also in determining the market potential. Along with these data, it is important for marketers to collect personal data about their target customers. These data are difficult to capture and requires investment of people and financial resources. These data involves the media habits, hobbies, psychographics, purchase patterns, attitudes etc. In the book “Customer Equity “ , Robert C Blattberg, Gary Getz & Jacquelyn S Thomas , identifies six major categories of customer profile data. They are

Customer Sales Potential: Refer to the potential sales volume from the customers.

Customer Characteristics: Refers to the data related to customers like demography, income etc

Summary Customer Equity Measures: The value that the customer brings into the company

Organisational charts and Key persons: Applicable to business customers.

Influencers and specifies: The key roles customers play in the buying process.

Customer Attitudes: The qualitative data about the customers.

Once the information requirements are finalized, marketers should decide on the collection of the data. It is very difficult to collect the personal data of the consumers. Hence marketers should adopt data collection techniques which are more qualitative in nature. It is important for marketers to take a long term view about collecting such data because of the cost involved. The data pertaining to the attitudes and purchase patterns should be collected on a continuous basis in order to make it relevant.

Data once collected should be effectively utilized in the decision making process. Technology has enabled companies to collect all sorts of data. Many managers feel overwhelmed by the quantum of information collected. It is important for firms doing customer profiling to have a mechanism to make relevant data available to the decision makers.

In this era of high competition, customer profiling can prove to be the winning edge for marketers. One factor that determines whether a company is customer oriented or not is how the firm effectively uses customer profiling in their decision making process.