Why it pays to profile your customers

profile your customersEstablishing a customer profile can give you the information you need to generate business from new and existing punters. Tom Whitney finds out how to go about it

Understanding your customers is the secret of successful selling. Existing customers are important sources of information. The more you know about them, the easier it can be to increase their spending. And you can also use the information you gather to help you find new customers.

Create a customer profile

The information you need to collect depends on your type of business. For example, if you sell to individual consumers, you will want to know their age, gender, location, spending habits and income. If you sell to other businesses, find out what sector they are in, how big they are, how much they spend and what other suppliers they use.

"Find out as much as you can about existing customers," says Chartered Institute of Marketing (CIM) adviser Ray Jones. "Analyse your sales records, talk to your customers and, if you need more information, consider carrying out a survey."

Build up a database of information about your customers. Include as much feedback as possible about how highly they rate your products or services. Use your own records to add details of purchasing behaviour, such as products each customer buys, when and how. (Bear in mind that once you have created the database, you must comply with the Data Protection Act.)

"Keep up-to-date records about who your customers are, what they are buying and how much effort you're spending on them in return for the profit this generates," advises Jones. "Accurate profiles allow you to focus your marketing resources where they are likely to be most effective."

Key benefits of profiling customers

"The information you gather makes it easier to distinguish why customers buy from you," adds Jones. "The more information you have about your customers, the easier it is to spot opportunities to sell them new products."

Use your new database to group individual customer profiles into different "market segments". This will enable you to target each group with specific offers tailored to their needs.

Targeting by segment also makes it easier to ensure that each customer gets the relevant marketing messages at the appropriate time. For example, you might be able to "up-sell", by explaining why a higher-priced product would better suit a particular group. You could also consider boosting sales by producing customised products or services for each group.

"By analysing your records, you can identify important information about key customers," says Jones. "Look for those who make the largest orders or those accounts which are most profitable. In some businesses, just a few customers are responsible for almost all orders, while some of your largest-size customers might be among your least profitable.

"Profiling existing customers also makes it easier to find new ones. You can look for similar prospects and sell to them in a similar way," he concludes.

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