customer profiling - Demographic Marketing

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Q. What is Customer Profiling?

A. Customer profiling is identifying the characteristics of your key customers. Whilst your business will serve many different types of people, research will generally show that one or more groups of people with selected specific characteristics will be more valuable customers than others.

Q. What is a Customer Profile, What Does the Profile Include?

A. A customer profile describe the main characteristics of the customer. These will include demographic factors such as: age band, stage of family life cycle, household family size, income, type of employment, home owner/ renter, education, gender, transport/ mobility. It may be found that the best customers are aged 35 to 45, female and are mothers living in suburban areas. The customer profile needs to be developed as far as possible even to the point where it is possible to draw and name a character! By identifying and listing as many characteristics as possible, how the business can serve them better will become clearer.

Q. What does a Consumer Profile Include?

A. The profile includes the demographic UK data shown above. It will also include analysis of the product or services that appeal to that customer. It is unusual for a business to have just one type of customer. For example a café at a farm shop may attract one type of customer for morning coffee and a different type for lunch. Afternoon tea could draw a third group whilst a very different type of customer is attracted late afternoon or early evening. In this case there could be four or more profiles. Whilst this sounds like hard work, it is only be segmenting customers in this way that a business can fully understand the markets it serves.

Q. What is Psychographic Customer Profiling?

A. Psychographic profiling is based on the understanding that what people do (their activities, buying behaviour and interests) and how they feel about their life (attitudes, behaviours and opinions) play an important role in determining which products and services they demand. Research shows that each generation grows up in a different environment from the previous one and this different situation creates the constantly varying types of need. Psychographics is one of several behavioural methods of profiling consumers and audiences.

Q. Can Demographic and Psychographic Profiling Be Combined?

A. Yes the two are being brought together as demographic profiling systems use ever increasing amounts of data from surveys and become less dependent upon census data, which is pure demographic information. The benefits of this is that we are beginning to see increasing levels of customer information linked to post code analysis. One of the weaknesses of psychographic and behavioural profiling in the past was that whilst selected types of profiles could be developed, there was no way of targeting the profile members. By combining psychographic and demographic profiling data, post codes are being linked to psychographics for the first time.

Q. What Is Audience Profiling?

A. Audience profiling is an extension of customer profiling in that it describes the characteristics of a group of product or service users. Many of the characteristics will be the same as those described for customer profiling.

Q. Why Is Audience Profiling Used?

A. Audience profiling is used extensively by companies for many different reasons. Media companies will identify the target audience for new shows and TV productions both to market the production itself and select the best time slot for it to show but also to understand which advertisers will be most interested in the target customer group. Organisations seeking funding either from financial institutions or grant bodies such as the Heritage Lottery Fund will need to specify the target audience for their project.These estimates will be used as the base for the business plan to be presented to the Heritage Lottery Fund (HLF) or other grant aiding authority.

Q. Why Is Customer and Audience Profiling Important?

A. Once a target audience has been defined or profiled, it is possible to use market demand research data to generate estimates of visitation or use. The resulting estimates will then be used to identifying potential visitor numbers and revenue for the proposed venture. Projections of profit and loss will be created from these projections. The audience profile and resulting estimates will then sit at the heart of the resulting business or market development plan. Such data will give more comfort to funders and grant aid bodies.

The benefits of business planning are not confined to occasions when additional funding is required. The benefits of customer and audience profiling should flow throughout the business at all times. By profiling, the business should learn which products are the most important now and what may be added in the future. It should also show how customer service can be improved. Would home deliveries be beneficial, are the current opening times appropriate, should some products be emphasised at different times of the day? Businesses with multiple outlets will discover why some products and services popular in one area are less so in another.

Q. How Can I Develop An Audience Profile?

A. There are many ways to create an audience profile. The best way for your organisation will depend on the starting point. If the audience is already known, then surveys can be developed to identify the key characteristics of the audience members. Alternatively a post code analysis of members can be profiled against a demographic profiling system. This lies at the heart of demographic marketing. If the profile is required for a new project, and there is no existing audience to profile, then a known audience at a similar venue or business could be profiled. The results of this profile analysis can then be overlaid onthe residential profile for the proposed catchment area and likely levels of participation can be assessed. Otherwise it may be a question of determining the key demographic characteristics required for the audience before identifying who and how many such people live in the market area.

Q. How Are audience Profiles Used?

A. Audience profiles are used in the media to identify which types of people will be attracted to a programme and which types of advertisers may be interested in promoting their programmes to them. Customer and audience profiling is also used by organisations to test market demand and market need. Once the number of potential customers is identified, a retail store operator or manufacturer will be able to use market research data to estimate the likely demand for selected products in their area. These estimates will then be used to generate estimates of revenue and costs for the operation. The use of audience profiles is not limited to commercial organisations. Visitor attraction operators such as trusts and local authorities can also use them when researching demand for visitor attractions such as museums. The audience profile can be used as a base for estimating museum visitor numbers. Then the profile can be used to ensure that the right services are provided, these will include displays and interpretation, information provision and catering services. The visitor estimates will also be used to scale car parks and other service provision.

Q. What is Market Segmentation?

A. Market Segmentation is the process of splitting customers or prospective customers, into separate groups or segments. Customers in each segment will have similar requirements. A market segment is a group of people who can be expected to respond in a similar way to a given offer. This understanding flows from customer and audience profiling.

Q. Is Demographics the Only Way to Segment a Market?

A. No. Demographics is one of the better methods to use but is not the only one. A second way is to segment a market is by the benefits that a product or service provide. In this approach the main question to ask is ‘what benefits does the customer or consumer receive as a result of using this product or service?’ Tourism is a good example of how benefit segmentation is used. Many different types of people will visit an area. Their reasons may include: the quality of coast and countryside, excellent beach and sea swimming, exceptional watersport activity, good quality diving, excellent golf courses etc. In this case the markets can be segmented by activities or, more to the point the excellent benefits that they provide. A further method of segmentation is psychographics, which enables users to be segmented according to users’ attitudes, values and opinions.

Q. How Do You Profile B2B or Business to Business Customers?

A. Several different methods of profiling are available for businesses. The first involves the use of the Standard Industry Classification Code, or SICC for short. Every business is given a code to describe its main purpose. This enables businesses to be clustered according to their code, industry or sub industry group. The benefits of this system are that similar businesses can have similar needs. However the SICC also has weaknesses, namely that one code may not indicate all of the services offered by the business leading to missed opportunities. Based on past experience we believe that in addition to the SICC, size of company in terms of its number of employees helps to determine a business’s needs. In some cases size may be more important than business type.Other factors can include the number of outlets that the business operates, geographic locations, ownership – private or publicly owned businesses, owned buildings or leased, mainly male or female employees, type of business activity – warehouse, retail, professional etc. As the list shows there are many ways to segment companies and businesses too.

Q. What Are the Advantages of Customer Profiling

A. There are many advantages of customer profiling. The first is that once a business learns who its main customers are, the owners can ensure that their needs are more fully met, both in terms of the products sold and the way the customers are served. In addition the profiles can be used to identify where other similar people live. This presents the business with the means to target more, similar people. As a result the success rate of the promotional activity should be higher, meaning that the cost per acquisition will be less. A further advantage is that once you know more about your customers, you will be able to identify which other businesses they use, enabling you to form marketing alliances. This may even mean that you can market to someone else’s list.

Q. How Do You Do a Customer Profile for a Retail Store?

A. The easiest way to profile shoppers is to run a demographic profile on the members of a loyalty programme. The added benefit of this is that if customers’ purchases are also logged then you can identify different types of customer for different types of product. Add in the time of day and day of week and the customer profiling becomes even more interesting and detailed. It will then be possible to see who buy what, where and when. If the store does not run a loyalty programme, then collect the post code of shoppers over a standard week, together with the time of day and day of week of their visit, and profile that list.

Q. Can an Online Business Develop Customer Profiles?

A. Online businesses often have the advantage of having customer address details. This enables their customers to be profiled. Whilst this is a great advantage, many online retailers never see their customers and so do not understand their characteristics. Facebook profiling helps to solve this problem. However it does not always enable a complete profile to be developed. By running a customer database through a demographic profiling system, the e-commerce business will get a much better understanding of its customer base. This in turn will enable it to consider how the product range can be developed. It may also assist in the development of a more appropriate tone of voice.

Q. Can You Use The Customer Profiles of Other Businesses to Your Advantage?

A. If you are considering developing a new business close to the outlet of a well known brand, thenget a general market profile of the types of people that are drawn to that brand. This will help you to understand the types of people who will probably be passing your door. Similarly if you are trying to replicate the services offered by a more famous brand, consumer profiling may show you the type of people they attract and you could search your market area for similar types.

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