Know Your Customers: Customer Profiles & Personas

Who are your best customers? The more you understand about them, the more you can target others and win their business too. A customer profile is a simple tool that can help you better understand current clientele and target demographics so you can grow sales. The term buyer persona – defined as semi-fictional depiction of your ideal customer based on market research and actual data – often is used interchangeably with customer persona.

Both customer profiles and buyer personas are a collection of information to ascertain why people buy or don't buy your products and services. Customer profiles also help you develop targeted marketing plans and ensure your products and services meet the needs of your intended audience. Here are the three basic types:

• Demographic profiles. These are based on characteristics like age, gender, income levels, marital status, place of residence, etc. In marketing terms, demographic profiles tend to break down customers into age, social class, and gender. For example, younger buyers may make buying decisions based on how they feel the purchase enhances their image. Older buyers may focus on quality or safety. Wealthy customers may be willing to pay a premium for service or perceived value, while lower income customers may be more likely to focus on price.
• Psychographic profiles. These profiles answer the questions: why, how and what. Why do your customers buy this category of products and services? Why do they buy from you? How else do they spend their money? What drives or motivates these customers at their core? What groups do they belong to? How do they want to be known? When they use your product or service, what do they want to achieve?
• Buying Behavior profiles. This model focuses on actions: which items were purchased, purchase frequency rate, average transaction value or which items were purchased in conjunction with other products.

Demographic Profiles

Demographic profiles are fairly easy to create. If you service a specific geographic area, use online tools to gather population and economic data. A good place to start is the U.S. Census Bureau website, which provides a broad range of demographic information.

You also can easily evaluate your current customers: Check out your previous six months' sales, identify your largest customers and create their profile. If you run a retail business or a restaurant, this could be difficult. Still, since you likely serve a fairly broad demographic, using the averages for your area may yield decent data for analysis.

Finally, go one step further and add subjectivity. For example, if you provide financial services, your best customers are likely to be professionals or business owners with a high net worth. In all likelihood, you already know your customers better than you think you do. You simply haven't actively thought about the specific demographics.

Psychographic Profiles

While demographic information is fairly easy to acquire through research and third parties, psychographic information requires that you know your customers well. One method of getting closer involves debriefing your sales staff about their observations regarding customers.

Ask them: what groups do they belong to? What personality types do they represent? How do they like to communicate? Why do they buy from you instead of your competitors? Who do they regard as leaders? Why do they value these leaders?

Holding focus groups with your customers likewise can provide insight into these questions. Lastly, annual reviews by executives can incorporate some of the questions to draw out this valuable information.

The bottom line is that the more you learn about customer base psychographics, the more likely you’ll retain them as customers – psychographics are all about understanding motivation.

Here’s an example: Young upwardly mobile professionals, popularly known as yuppies are a good example of a market segment based on psychographics. Known for their high-end buying habits and preoccupation with status, product categories, such as specialty wines, designer clothing and even housing developments, were created to satisfy this profile.

Buying Behavior Profiles

Behavior profile development can be more subjective, but you can apply some objective measures to the process. One simple method is to evaluate the frequency of purchases and the value of those purchases.

This protocol works well because:

• Customers who purchase frequently are more likely to buy again.
• Customers who purchase multiple items are more likely to purchase again and to purchase multiple items on their next visit.
• Customers who spend higher relative amounts per transaction tend to purchase more frequently in the future.

Start by evaluating the rate of customer purchases. Rank your customers from highest to lowest in terms of purchase frequency.

Then, evaluate the customers’ total spending per a specific time period. Rank from highest to lowest in terms of dollars spent.

Now compare the two lists. In many, but not all, cases the results will be similar. Certain customers will make infrequent large purchases; others will make frequent small purchases. Both are good customers.

Evaluate the Results

Now look at your demographic profile. Where do your best customers fit in terms of demographics? What characteristics do they share? What age or gender characteristics do they share?

How do the demographics tie to the psychographics? When you put the two together, can you predict who makes the best customers for your firm?

Then take a look at your current marketing strategies. Do you target your best customers? Are you spending significant sums advertising to demographics that do not purchase frequently or in high-dollar amounts?

If so, you have two basic options:

• Change your marketing strategies to better attract the demographics and psychographics you currently fail to attract
• Change your marketing strategies to better focus on the demographics and psychographics you currently attract so you can grow your business

You also can modify advertising that doesn't work and enhance advertising that does work. All these measures dovetail to help you better serve – and cultivate – your market.