Customer profiling is when a business conducts research to build a portrait of their customer base. As a business, this lets you find what products and services your customers really need.
Creating A Customer Profile
Customer profiling is similar to market research, except that profiling is usually conducted on your business’ existing customers while market research considers all consumers in the particular market. There are many factors that build up a customer’s profile. These are some questions to ask, and factors to take into account:
Location
- Where are your customers located?
- How far are they located from your business?
- Do your customers frequent certain business locations over others (if your business operates from multiple locations)?
- What type of place do they reside in (apartment, house etc.)?
Customer characteristics
- What are their spending behaviours (eg. seasonal, frequent)?
- What motivates them to buy (necessity, pleasure, lifestyle etc.)?
- Do they have a budget?
Personal life
- What is their age and gender?
- What is their family like (eg. traditional, modern, single)?
- Where do they work/ what industry do they work in?
- What are their interests and hobbies?
- What is their cultural background/ethnicity?
Interaction with your business
- How do they access and use your products and services?
- What products or services from your business have they used before?
- Have they ever been unsatisfied with your business’ products or services?
- Are they likely to recommend your business to others?
You can find a profile builder here.
How Can You Use Your Customer Profiles?
The most successful businesses use their customer profiles to generate profits by understanding their customers, and identifying their needs. Grouping customers by their profiles allows you to see where there are gaps in your company’s product or services availability. You can use this in order to develop new products, introduce new services or make changes to your current offerings. Profiles can also be used for tailored marketing, or development or amendments of sales tactics.
Privacy
Customer profiling can be tricky to navigate when there are privacy principles that all Australian Privacy Principle (APP) entities must follow. For example, the first privacy principle restricts entities from holding personal customer information for direct marketing purposes. However, the second and third principles are exceptions to this principle. According to these principles, an entity may collect personal information for direct marketing purposes only if customers consent to it, or customers have pseudonyms that protect their identity. Collection of personal information is regulated by your business’ privacy policy. Therefore, customer profiles can be curated if the customer has specifically consented to personal information collection in your business’ privacy policy. However there are a few restrictions:
- you cannot use unfair means to collect information (APP 3.5)
- you cannot collect sensitive information (such as racial origin, political opinions, religion, philosophical beliefs, sexual preferences, criminal record, or health information) without specific consent to obtain that information.
We recommend speaking to a privacy lawyer to review your privacy obligations, before collecting personal customer information to build your customer profiles.
Conclusion
To conclude, business’ can use customer profiles to grow and develop. They can help build the success of your business by understanding where the gaps in your business products or services are. But information to build a profile should only be collected where there is consent for your business to collect and retain that information, for the specific purposes that you collect the information for.
