“Get to Know Your Customers with a Customer Profile”

OVERVIEW [top]

Whether you provide a product or service, everything you do is based on what you know about your customers. If you don’t know enough about your customers’ wants and needs, chances are you’re missing sales opportunities.

If you know a lot about your customers, you can grow your company quickly by providing exactly what your customers want.

A good way to understand your customer is to create a customer profile. You can do this by personally interviewing your customers, or by analyzing your sales information with data mining techniques.

In this Quick Read, you will find:

• Two ways of creating customer profiles.
• How to put these profiles to work.

SOLUTION [top]

Say you run a shoe store: when a woman comes in, you show her the women’s shoes, and when a man comes in, you show him the men’s shoes. But how do you know who wants to shop for children’s shoes? You’ll never know the answer to that question unless you interview your customers or analyze sales data.

Interview your customers

Let them know that you are trying to understand your customers better and seek their permission to ask a few questions. If they say yes, then go ahead. Otherwise, respect their desire to keep personal information private.

Interviewing does not have to be verbal. For example: give customers who buy children’s shoes a sweepstakes form to fill out so they can win a free gift in exchange for their personal information. Ask why they bought the shoes and what brought them to your store. With a brief written survey, you can note things such as age and sex of your customers. Other telling descriptors might be hobbies, preferred entertainment (so you know where to place your advertising), and related purchases (so you know how to bundle products).

If you sell expensive products with registration forms, such as computers, it will be easy to find your customers after the sale. You may even want to turn these interviews into “case studies” that show how customers use your products and what they find valuable about them.

Analyze sales data

Every time your cash register rings and a credit card or check is used, note the customer’s sex and zip code. How many times has a customer in that category purchased shoes, and what kind of shoes, in the past? Do the dates of children’s shoe purchases coincide with special sales or the start of school? This process of extracting sales data that can be used for decision making is often called data mining.

Every company that sells something has data on its purchasers. In fact, David Cody, senior marketing manager for SPSS, Inc., a customer-relationship-management company, says most companies have more information than they ever use. Building a customer profile through data mining takes four steps:

1. Gather the data. Take information about your customers from sales records and load it into a database.

2. Develop a way to look at the data. Sort it by age, sex, geographic location or any other category you can think of. Companies were doing this long before computers. “Even if you just have a lemonade stand, you can divide your customers into piles,” Cody says. But computers do make this faster and easier. It can be as simple as using a spreadsheet program or as complex as buying specialized data-mining software, costing anywhere from $1,000 to $100,000.

3. Classify, or analyze, the data. You can use graphical models to help you understand your categories of customers. Plot the ages of your customers along a graph to see where they cluster. Plot repeat buying habits against sex to see if men or women are more likely to purchase your product on a repetitive basis.

4. Create a profile of your typical customer. For example, our customers are primarily 35-45-year-old married men who own Palm Pilots, drive BMWs and like to eat Thai food (for a company selling Internet golf paraphernalia). Or we target the young family with 2-3 kids living in suburban environments with one SUV in the family (for a pizza chain with video games and birthday parties).

Putting your knowledge to use

As you learn more about your customers, you will want to put what you learn to use. You may find that your customers value something about your product that didn’t seem that important to you. It may spawn an entirely new advertising campaign or a product redesign.

You may also discover that your customers aren’t who you thought they were. If a large corporation buys your product, the end user within the company may be of a very different education level than you thought. You might need to rewrite your user manual to satisfy that customer.

Look for the connections in the data you analyze. If many customers who bought product A and B bought product C six months later, you might consider bundling A and B with C, or calling every customer who bought A or B and offering them C.

The real goal is understanding who exactly is making the decision to buy your product and then targeting your advertising and your product to that person.

REAL-LIFE EXAMPLE [top]

Rejuvenation Lamp and Fixtures sells $20 million in reproduction light fixtures every year. The company sells 30% of its products at one retail store and 70% through catalogs and at its Web site.

In every box of lights that is shipped, the company includes a questionnaire with a return stamp. The questionnaire is humorous, and fun to fill out. It not only collects information about the purchasers, it asks them what products they might want that Rejuvenation doesn’t carry. The "how can we help you?" message, combined with the prepaid return and humorous presentation earns Rejuvenation thousands of responses each month.

At the retail store, clerks are trained to ask customers the same questions, even as they browse the merchandise. How can we help you with your project? What do you need that you don’t see?

The management team at Rejuvenation also uses its own products. CEO Mary Roberts has used the company’s lights in six different homes.

"We constantly ask ourselves, what can’t we find that we wish we could in our own catalog? What about our lights do we like, and don’t like?"

Because this information is gathered and analyzed, managers can describe in detail who their customers are and what they value about Rejuvenation products.

Example 2

Mac McConnell conducted a survey using a one-page questionnaire for his walk-in customers of the Artful Framer Gallery in Plantation, Fla. The survey polled customers on who they were, where they’d heard about Artful Framer, and how they rated the store’s custom framing. More than three-quarters of the shoppers gave the framing an excellent rating, but McConnell was surprised by their list of priorities. Quality was top priority, uniqueness came second, and price was dead last.

McConnell reworked his business to satisfy customers’ desires. Because quality was what customers wanted, quality is what he gave them. To that end he decided to abandon the low end and make museum framing his standard.

Additional findings:

• Word-of-mouth brought in 30% of his customers, so he gave his customers more reasons to tell their friends about Artful Framer.

• Customers wanted to b
  e satisfied with the framing. He, therefore, added a lifetime guarantee on all work and started calling customers a month after purchase to see if they were satisfied.

• About 80% of the customers surveyed checked off a household income of $40,000 or more. So, McConnell taught his salespeople to take a consultative approach to selling to the affluent crowd: First, talk about where the customer plans to hang the art, and then talk price.

A year after introducing the changes, the store’s average invoice rose from $67 to $167. Over four years, overall sales tripled, to about $600,000, and net profits were up 26%.

(Source: 301 Do-It-Yourself Marketing Ideas, Inc Products, January, 1997)

DO IT [top]

1. Review your company’s approach to knowing your customers. Do you have mechanisms that everyone uses to gather information about your customers?
2. Develop a basic database of information taken from your accounts receivable. Enter receivables for at least the last year. Be sure to include pertinent data from credit-rating reports.
3. If you capture purchase information when customers use loyalty cards (affinity cards), integrate it into your profile. If you don’t, consider starting a loyalty-card program.
4. If you aren’t already interviewing customers, ask your marketing department to help you create a questionnaire that can be mailed or conducted in person or on the phone with your customers.
5. Provide incentives to your sales staff to get customers’ comments back to the management team.
6. Take action based on the things you learn about your customers. Review the information you have available about your customers today, and decide if it should change the way you do business.
7. Ask your public relations staff or counsel to develop case studies based on interviews with customers. Each one should be no more than two pages in length. Share them with all your employees.
8. Get a system in place to communicate customer profiles to staff members — especially to those who develop or select new products to market and to those who do the marketing — so they will be applied.

RESOURCES [top]

Books

Guide to Customer Surveys: Sample Questionnaires and Detailed Guidelines for Creating Effective Surveys by Trevor M. Spunt (Customer Service Group, 1999).

New Direct Marketing: How to Implement a Profit-Driven Database Marketing Strategy, 3rd edition, by David Shepard Associates (McGraw-Hill, 1999). Three chapters on managing marketing databases are followed by a textbook on statistical analysis to take advantage of the data.

Loyalty.com: Customer Relationship Management in the New Era of Internet Marketing by Frederick Newell (McGraw-Hill, 2000).

Articles

How to Create a Customer Survey (Edward Lowe Foundation Business Builder, 2000).

Pumping Your (Web-site) Visitors for Information by Jeff Cannon (January 26, 2000).

Making the Transition to One-to-One Marketing by Don Peppers and Martha Rogers, Inc. (January 1, 1997).

"The Sales Autopsy (sm): How to Build Future Sales Successes on Current Successes" by Jeffrey P. Geibel (1998).

How to Identify a Target Market and Prepare a Customer Profile (Edward Lowe Foundation Business Builder, 1996). How to profile potential customers in a potential market.

---

Article Contributors

Writer: Kathy Watson