Customer Profiling

For a developing business it is very important to understand who are the best customers, how to find more customers like these and where to find. Customer profiling is the best strategy to accomplish this. It helps to find valuable new customers, enhance the profitability by retaining existing customers and also identify low valued customers so as to minimize the cost to reach them. Customer profiling is a behavioral relationship marketing technique which includes a variety of marketing strategies ranging from simple one’s to most complex one’s.

Customer profiling starts with identification of relevant information regarding all the satisfied existing customers and then try to target new prospects with matching profiles. The profiles of customers can be categorized differently according to some influential variables present in their profile.

For example, let’s examine the following two customer profiles:

  1. This profile shows, the customer is married and has two children. He lives in a high society area and continuously read Economic Times newspaper.
  2. This profile shows, the customer visited the supplier’s site regularly for 3 months, but has never visited in last 2 weeks.

The first profile clearly indicates that the customer characteristics are demographic. The demographic profiles always help the suppliers to attract the customers and generate good revenue in the amateur stages of projects; these projects are basically online projects. The first profile will be interesting for someone inside the organization who is in advertisement department or who is involved in deciding the content and matter of websites.

The second profile can be depicted as a behavioral profile. The basic questions arise regarding to this profile should be, will they buy again? Will they visit again? A behavioral profile indicates the prominence of the relationship with customer in near future hence these profiles are crucial for organizations that focus on retaining more customers to increase their business value. Although behavioral profiles are more prominent than demographic but a combination of both provides a powerful and strong database to decide the customer characteristics in efficient way. The following steps depicts an ideal profiling technique:

  • Gathering demographic related and influential information from existing customers.
  • Encapsulate this information in profiling database to each customer record.
  • Attach more relevant information like behavioral characteristics (recent purchases, sales historical view etc) and some other related information to each of the profiles.
  • Implement the variables and strategies that determine the best and worst customers.
  • Applying these effective variables to non-customers’ profiles to identify valuable prospects.

The above process is involved ideally for simple profiling which can become complex for complex strategies. After profiling is completed the customers are then segmented according to segmentation variables. Every customer has individual preferences, needs and behavior associated with products which are different from other customers. Substantially it becomes impossible for suppliers to manage customers separately on individual characteristics; hence they pool customers into separate segments according to the type and variables they have in common.

Invalid or wrong information passed while profiling process will result in suboptimal decisions and unworthy consequences and could fetch customer dissatisfaction and could even lead to customer defect. Hence all the information and data should be validated and corrected before profiling is done. Customer profiling is the basis of market research techniques and is proved to be the most useful strategy under any circumstances in customer acquisition approach.

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Customer Relationship Management