Data HQ’s complete guide to customer and prospect profiling

Do you really know your customer base?

Successful marketing relies on a clear understanding of your customer base.

To deliver the right messages in the right places at the right times, you need to know exactly who you’re selling to and how likely they are to respond.

Creating buyer personas is one of the first steps in getting initial insight into who your customers are and what will motivate them to convert, but that’s not where the customer profiling process begins or ends. In fact, customer profiling is a separate process to persona-building, but both are essential.

You have to continuously analyse the performance of your marketing communications and then heed what the data is telling you, so that you can tailor your approaches for your audiences. This is how you’ll make your future campaigns more successful.

Our full guide to customer and prospect profiling will give you the insight you need to make sure you’re…

1. Taking a scientific approach to your marketing
2. Mining value from the information you already hold about your customer base
3. Maximising the ROI on your data
4. Improving your conversion rates among new prospects and existing customers

Why customer profiling is essential

Customer profiling is about identifying which of your customers are most likely to take specific actions – such as purchasing a certain product, renewing a subscription or making any other sort of valuable conversion.

The process involves analysing how your customer base is really behaving versus what you expected, as well as evaluating your current market penetration. You can then use any findings you make to refine your approaches.

Profiling tends to confirm what you already know (or suspect) about your customers, but sometimes it will highlight a misconception or two.

For example, you might start out by thinking you’ll have easy success targeting a specific job role within a specific industry – only to discover over time, through profiling, that this audience is not as viable as you expected.

On the flipside, you might experience some unexpected success targeting other job roles, or turning towards out-of-focus industries that you had previously overlooked or outright dismissed as irrelevant. It’s human nature to get stuck in certain mindsets and opinions about who your customers are; what profiling does is challenge those assumptions scientifically and objectively – giving you cold, hard figures that you can’t argue with.

And that’s where the beauty lies: you’ll uncover lucrative nuggets of information that lead to better marketing decisions and higher conversion rates.

Propensity modelling and how it adds value

Propensity modelling – a key part of customer profiling – identifies the best prospects to go after, by ranking each one of your contacts on their likelihood to respond or behave in a specific way.

It works both ways, because you’ll not only discover which prospects are very close to purchasing and just need an extra nudge, but you’ll also identify which existing customers are unengaged and likely to churn.

As such, propensity modelling helps you send the right messages at key stages of each customer’s journey. Not only does this keep your communications relevant and thereby help to ensure better engagement, but it also helps you save budget and time, because you’ll have a much clearer idea of when not to promote certain products to certain contacts.

For b2b purposes, you can also score each individual company on its propensity to buy, as opposed to just giving each individual contact within that company a score (because you may have several people from the same company in your database).

How to build and use your initial buyer personas

Buyer personas give you the foundations for a strategic, targeted approach to your marketing, so they should precede any future campaigns you run.

If you don’t already have your personas, create them as soon as possible – certainly before you launch any new campaigns. This will provide immediate value by giving you a clear picture of who you’re trying to engage.

What exactly are buyer personas?

They’re detailed stereotypes that you create based on what you already know (or think you know) about your ideal customers. The information you build them with comes from...

1. Contacts you’ve collected or acquired (through forms on your website and other such organic methods, or by sourcing a mailing list ethically from a reputable data provider)
2. Market research you’ve carried out (such as focus groups and surveys)

A combination of an existing database and some market research is best, because that gives you more context to work from, but it might be that you only have one or the other. A brand-new business, for instance, might have carried out some market research but have a completely blank slate when it comes to the prospect database. And then an established business might have a well-populated database but no additional market research to complement it (or none that’s recent enough to be truly relevant).

If your database is currently sparse or you believe it misrepresents your target audience (or if you’ve bought cheap data in the past), you should definitely commission some fresh market research, because it’ll give you a truer idea of where you stand in your market.

Using your existing segments

In an ideal world, the creation of your buyer personas comes before the segmentation of your database, but if you have already segmented the contacts in your database – whether broadly or finely, recently or long ago – you can use these segments to help you formulate your personas.

Here are some of the common ways businesses segment their contacts:

• General demographics (relevant mainly to b2c)
  • Age
  • Gender
  • Hobbies and interests
  • Geography – cities, counties, regions, countries, continents
• Professional demographics (relevant only to b2b)
  • Job title or department
  • Industry
  • Seniority level
  • Company size
  • Company turnover
  • Geography – if relevant
• Behaviours and habits
  • Order history
  • Purchase frequency
  • Purchase value
  • Source of conversion
  • Loyalty
  • Level of engagement with marketing communications

Keeping on top of your segmentation is one of the essential tasks in database management. You can go as granular as you like, but be sure not to apply the same degree of granularity when constructing your buyer personas – you’ll want to keep those more general, so that each persona is applicable to a wide enough range of people.

Choosing the criteria to build your personas on

Take time to establish which data points are contextually vital to what you’re selling, and weed out those which are surplus.

If your offering is luxury b2c products, the persona’s annual-income bracket is a relevant and insightful data point to include, because it can help you estimate how much disposable income they have. The job role through which they earn that income, however, is immaterial.

Conversely, if you’re selling b2b, the persona’s job role is a far more relevant data point than their income bracket – because the amount of money they make won’t necessarily correspond to the decision-making power they wield within their organisation.

You don’t have to apply the same criteria across all of your personas. With each one, focusing on choosing the data points that help you build a clear portrait of the ideal or typical customer. As long as you answer the following questions, you should have the information you need.

1. What are their pain points? I.e. what problems are they trying to solve?
2. Who are they influenced by?
   • Celebrities and role models (b2c)
   • Managers, decision-makers and professional role models (b2b)
3. Which communication channels are they most active on and most comfortable with?
4. What are their purchasing obstacles? Or what could be an obstacle?

Hypothetical b2c criteria

• Age bracket: 25-35
• Gender (although it’s not always relevant): Female
• Hobbies and interests: Reading, cycling, yoga, music gigs
• Media taste: Netflix series, electronic music, bestselling fiction
• Role models: Victoria Beckham and Michelle Obama
• Preferred social platforms: Instagram and Twitter, but 90% Instagram
• Level of disposable income: £500-£700 per month

Hypothetical b2b criteria

• Job function or job title: Marketing Director or Head of Marketing
• Industry: Leisure & Tourism (mostly visitor attractions and events)
• Company size: 50-200 employees
• Main objectives in job role: Driving more ticket sales or more bookings while maximising marketing budget, and raising brand awareness among new audiences
• Long-term career goals: Promotion to CEO or moving to a bigger, better-known company to run the marketing team there
• Pain points: A slow, outdated booking system and insufficient web budget
• Purchasing obstacles: A boss who isn’t bought in
• Preferred communication channels: LinkedIn and email

Those lists of criteria are by no means exhaustive – they just give you an idea of the level of detail you’re looking for. Some criteria are indispensable, whereas others are nice-to-haves.

Knowing how many personas to create

There’s no hard-and-fast rule about how many personas you should have. It depends entirely on what you sell and who you’re trying to sell it to.

If your offering is wide and complex, you might require as many as 12 personas or even more. If your offering is narrow and simple, two personas might more than suffice.

Establish how many different personalities might buy from you. If you’re b2b, a good place to start is by dedicating a persona to each distinctive job role – not necessarily job title, because synonyms and company-specific job names may lead you to create far too many personas. For example, you can group marketing directors and heads of marketing together in the same persona, and likewise for finance directors and CFOs. Bear in mind that personas are supposed to be generalised depictions that put you on the right lines, rather than dossiers about real-life individuals.

Also remember that your personas are by no means set in stone. Some may become obsolete over time, and you may discover new ‘types’ of customers who are unrepresented in your current persona mix. Take time to review your personas every so often – based on facts and figures wherever possible, rather than opinion or intuition – and make any changes that are necessary.

The two main purposes of customer profiling

Profiling and analysing customer data helps us to execute better marketing campaigns, but, if we dig deeper into the reasoning, it’s about ensuring two things:

1. Acquiring new customers who are like our ‘best’ existing customers
2. Retaining our existing customers – particularly those at risk of churning

Profiling for acquisition purposes

Once you’ve identified your most loyal and profitable existing customers, you can compare their profiles against the wider universe of data to acquire more customers just like them. This is where profiling really pays dividends, because you start to uncover ‘lookalike’ prospects to target.

There are many data points that you can examine here. Unlike the creation of generalised buyer personas, this profiling process relies on granularity – looking at many different variables, from age, gender and location to far more specific and behaviour-based criteria (such as purchase history, customer value, brand loyalties and more). Each of these chosen variables is ranked according to its importance in the grand scheme of the customer profile, resulting in a sophisticated scoring system that ensures accuracy.

As these lookalike prospects meet the same crucial demographics as your best customers, they will automatically have a high propensity to buy or be interested in hearing from you. This should make your customer acquisition campaigns much more cost-effective and time-efficient.

This means that it’s no longer a case of “throwing enough mud at the wall and hoping some of it will stick” – it becomes a case of taking aim and being far more confident that you’ll hit the target.

Profiling for retention purposes

As well as finding new customers to pursue with confidence that you'll hit the mark, profiling can help you take better care of the customers you already have – especially those who are at risk of churning in the near future. Your aim should be to retain these customers, rather than try to win them back once they’re lost – because the latter tends to be much more difficult.

You can use the data you have on your already-lost customers to create profiles of likely churners among your active customer base. With this insight, you can dedicate time to create campaigns that are targeted specifically towards the at-risk portions of your database – aiming to retain them while there’s still time.

Analysing your customer data and learning from it

Marketing is a continuous process, so you have to regularly re-evaluate your strategy and make tweaks in order to optimise your performance. There’s unfortunately no secret formula that will always work no matter what.

Uncovering your best-converting industries (b2b) or demographics (b2c)

If you can see where you’re achieving the highest conversion rates, you can capitalise further by…

• Putting even more effort into communicating with those audiences
  • But only do this if you can realistically expect to increase conversions further – otherwise you risk over-communicating and bombarding your contacts, which can irritate them and end up lowering conversion rates (not to mention cause unsubscribes as well)
• Homing in on similar audiences and using the same tactics (where applicable)
  • A b2b example would be starting to target solicitors if you’ve achieved success with accountants, or turning towards coffee shops if your offering could also apply to restaurants

This is all about seeing where you’re excelling, and trying to replicate that elsewhere, as well as ensuring that there are no viable audiences flying under the radar, to prevent revenue opportunities from passing you by.

Identifying underperformance and remedying it

As profiling is partly about testing your own assumptions about who your customers are and what will motivate them to buy, you have to objectively assess how well your campaigns are really performing.

Perhaps conversion rates are steady but surprisingly low within a specific industry, or one of your assumed core audiences is just not engaging with your communications, or a certain geographic area is proving less viable than you expected. In any case, you have to try to diagnose why.

Here are just some of the questions you should be asking yourself:

• Are our send-times causing low open rates?
• Do our email subject lines lack intrigue?
• Is b2b contact churn causing hard bounces and skewing our figures?
• Have we neglected data hygiene for too long?
• Is our direct mail just falling flat?

It’s a never-ending process of trial and error, and the goalposts are always moving. What works today might not work tomorrow, so always be open to changes in approach – both small and big.

Augmenting your database with additional data

Refreshing and expanding your database is just as important as tweaking your communications, because you need a steady stream of new prospects to contact if you’re going to increase sales in the long term.

Business data decays, and there’s no getting around that, but that’s not the only benefit of purchasing more contacts. The larger your database gets, provided that the data is clean, the more valuable information you’ll learn about your prospects, which will make your customer profiles even more detailed and allow you to further define your lookalike audiences.

The result? Even quicker wins.

Best practice and key steps for customer profiling

Start with clean data, and keep cleaning it

Low-quality data breeds low-quality outputs, so make sure you clean your database before you start to analyse your contacts. The purer your database, the sharper your insights will be.

If you’re b2b, have a third-party data specialist compare your contacts against the Business Suppression File (BSF), so that obsolete corporate contacts (of which there may be many) are highlighted and removed from your database.

Data hygiene is just as important in b2c. Emailing uninterested contacts just because they’re in your database might seem harmless, but if they’ve never engaged with you, what’s the value in persisting? If you’re running any direct mail campaigns, you’ll want to maximise the ROI on your postage costs – so save costs by only sending to relevant contacts, but also remember that people move address, so some older contacts might be out of date.

Repeat the cleansing process regularly. Businesses come and go, and people change jobs. Consumers will move house, and they’ll remain fickle.

Keep an open mind

You know your business inside-out, but always be willing to be challenged. Data doesn’t lie (not if it’s clean, anyway!).

Even if profiling doesn’t disprove any of your theories about your customer base, it will at least add some extra granularity, and that can be incredibly valuable.

A large-scale building-supplies company might be spot-on in its belief that all of its customers are in the construction trade, but not have realised a sweet spot of contractors that have between five and 10 employees.

Understand what you want to get out of your customer profiling. Is it to identify frequent customers to cross-sell to? Or unengaged contacts at risk of churning? Or do you have the broader aim of gaining a deeper level of understanding about your whole customer base?

Use the insights to take action

Analysis is only worthwhile if it leads to actionable insights, because the point of profiling is to make tactical and operational changes, not just observations.

You’ll avoid analysis paralysis by determining what the required action is for each of the insights you glean.

That’s how you’ll make a noticeable difference to your business and ensure that you’re optimising your marketing performance on an ongoing basis.