Editor's Note: Bruno Delahaye is the CEO of Reach Analytics, where a version of this article first appeared. Today he joins us to review popular strategies for building a customer profile, and a new approach made possible by cloud technology.
Having a strong understanding of who your customers are (customer profiling) is a central element in any marketing effort. Marketers may choose to focus on strategic activities like company positioning, and defining target markets. They may also look at more tactical approaches like marketing campaign design and execution; however in all of these cases, the first thing any marketer needs to understand is who their customers are and what they are like.
To obtain a customer profile which provides them with this information, marketers have three traditional options:
- Create a segmentation of their existing customer base using internal data
- Conduct a market research survey
- Append 3rd party data to their customer file as a base for profiling
In what follows, we will briefly survey these strategies and spell out an effective approach to customer profiling.
Segmentation allows companies to sift through company clients and sort them into categories. These categories allow for strategic marketing decisions when it comes to new products and services. Of the traditional choices, segmentation has been the fastest and least expensive customer profiling option until recent times. Large companies generally have had the resources to run analysis internally, relying on their data infrastructure and the availability of a data science team. This team would typically take between 1 and 6 weeks to report their findings.
The main drawback of this customer profiling method is that the entire analysis is centered on your existing customer base. Although it may seem intuitive that customer profiling should center on your customers, this strategy utterly neglects context: the only way to build a comprehensive understanding of who your customers are is to compare them with non-customers. In other words, you should be asking what differentiates your customers from the general population, and what makes their profile special. For this very reason, market research surveys and use of 3rd party data for customer profiling have become more widely adopted strategies.
Market research analysis is the most expensive and time consuming technique to build a customer profile. A key advantage is that it focuses on a comprehensive review of customer expectations and personalities outside of your company, allowing you to develop strategies that work broadly and effectively.
...or at least, that's the theory. While hotly debated, market research analysis remains a qualitative technique. Rather than using hard data on customer behavior, it is based on surveys which report customer opinions. While there is probably some value in this, actions tend to speak louder than words, and even moderately skewed survey questions can skew the answers received.
Using third party data
The third approach tends to address the major drawbacks of both segmentation and market research surveys. 3rd party data allows your company to synthesize analysis of both customers and non-customers to build a thorough and balanced customer profile. Yet, an obvious drawback of this approach is that it can be a relatively long process and therefore limits applicability:
- Small and medium sized companies cannot manage such processes if they do not have the necessary internal resources, and outsourcing might be cost prohibitive.
- Companies typically have more than one product/service on offer, and would like to generate more than a single customer profile analysis.
The Cloud Approach
And now there’s good news that will help marketers to resolve downsides of all the traditional approaches. By leveraging a predictive marketing cloud, we are able to quickly generate a complete customer profile with the following characteristics:
- A basic profile for marketers to gain an initial high level understanding of their customers’ demographics: age, marital status, income, and education level.
- An advanced version of the same profile which enables marketers to identify characteristics that set their customers apart from the rest of the population.
By removing the largest hurdles in the development of customer profiles using 3rd party data (time & data science expertise), small and medium-sized business as well as large companies are in a position to access a more analytic approach and leverage their customer profile to make more informed marketing decisions.
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