Are you missing out on business goals? Whether it is revenue, growth, or creating a loyal customer base, many businesses may miss out on an essential but often hidden insight into their customers. Why is that?
Many brick-and-mortar stores anticipate that they fully understand their customers. Whether these stores have opened recently or have been operating for years, a business should always follow new and shifting developments.
This article will give retailers insights into customer profiling for retail. Given the fundamentals, we’ll specifically focus on retail businesses operating in defined markets by providing a data-driven approach and an example of customer profiling for retail.
What is Customer Profiling?
Customer profiling for retail uses data from various sources to create a detailed view of surrounding customer bases. These comprehensive views on customers and the target market assist businesses in defining strategies and measures to enhance business operations and drive revenue.
Why is Customer Profiling for Retail essential?
Many local retail stores might already have their point of view on customers. Often, these views are based on a more general perception than facts. However, without reliable data, these profiles may be individually biased. A biased view of customers will cause a retail business to miss out on market potential and may even harm revenue and growth.
Types of Customer Profiling
Customer profiling is an extensive topic. Businesses have multiple angles worth analyzing in detail when analyzing a customer. These angles are often called types and focus on distinct aspects of customers. Depending on the intent, many retail businesses use multiple profile types for a data-based decision-making process.
Demographic
Demographic profiling focuses on customer characteristics such as age, gender, marital status, education, and other personal information. Creating a demographic customer profile built on the findings of a demographic data analysis. Demographic data is essential for many retail businesses to define appealing product portfolios. However, this analysis involves multiple vast data sources to get essential insights for a specific target market.
Psychographic
While demographic data describes the customer base using general characteristics, psychographic customer profiling typically segments customers based on interests, traits, habits, and personal values. Psychographics are essential since these factors often correlate with individual lifestyles. These insights are crucial to aligning the retail business with the potential consumer base. For retail, psychographics are of fundamental importance due to various reasons. Psychographic information gives retail businesses reliable indications to match customer interests, preferences, and pricing decisions.
Geographic
Geographic segmentation tries to describe the customer base using their district, region, state, or even country. While it yields limited insights for a single retail store, a geographic grouping might have valuable information for retail businesses operating multiple subsidiaries. Using geography in retail customer profiling can help identify distinct preferences by directly comparing two or more subsidiaries.
Behavior
Another way of profiling is by looking at customer behavior. Unlike psychographic segmentation, behavior means reviewing previous interactions and finding patterns in this data. Examples of behavioral data are current customer lifetime value, number of transactions, and dates and times of visits. These details will help create behavioral customer profiling for retail businesses that retailers can use to track marketing potential and efforts. A behavioral customer profile can outline low-hanging fruits and cost-effective marketing efforts for particular groups.
Characteristics of Customer Profiles for Retail
After learning the fundamentals and types of retail customer profiling, valid questions might be: What is an ideal customer profile for retail? How can customer profiles be used?
There are different types of customer profiles. These various types all involve analyzing available data for distinct patterns. Revealing these patterns is the first step towards ideal customer profiling for retail. An ideal customer profile combines multiple types that validate a specific business hypothesis. But how to do that? With a data-driven analysis.
From our point of view, an ideal customer profile should only be built on reliable data. With this data, retail owners can create comprehensive profiles that include demographics and psychographics for an initial segmentation or customer grouping. Using these groupings, it is possible to derive and enrich these base profiles with valid and proven data about particular customer groups’ buying behavior and distinct preferences.
From Characteristics to Insights
Defining comprehensive customer groups and profiles is an ideal starting point for understanding the customer’s behavior, needs, and preferences. However, how should customer profiling be used in retail? Here are two example uses for profiles in practice:
- Customer Profiles for Comparison
Using a data-driven approach, retail businesses can use profiles and conduct comparisons on their present customer base to identify business opportunities. In this context, opportunities refer to underperforming customer groups.
- Customer Profiles for Target setting
A more common approach is using customer profiling to set retail target groups. Given the customer profiles, retail businesses can start marketing efforts corresponding to particular customer groups.
Having distinct groups and in-depth insights into customer profiling for retail is essential to aligning retail offerings and services and ultimately reaching the entire customer base. However, where do retail owners get this data?
Importance of Data for Customer Profiling
Today’s business is all about having the correct data at the right time. Trustworthy and up-to-date data is more important than ever before. The most successful retail businesses master the collection and analysis of customer data to continuously refine their business strategy and marketing efforts. However, most smaller businesses lack these possibilities since they operate on tight marketing and research budgets.
However, how can smaller established or starting retail businesses get the information for a comprehensive customer profiling for retail? While collecting and gathering necessary information about business metrics is feasible, many companies may face significant roadblocks regarding demographic and psychographic data:
- Data Sources: There are plenty of data providers. Some are free, but most are proprietary research that charges a fee.
- Format: Every data provider uses its own format. While CSV files are today’s standard, each file may follow a different terminology and information density.
- Target: Data sources may differ in their initial research direction. Demographic data, for example, is mainly used for governmental and statistical purposes.
Acquiring this data is still possible, but at what price? Identifying, collecting, and synthesizing these vast data sources requires a substantial upfront investment—a solution: specialized data platforms.
A reliable platform that provides data is essential for businesses to thrive. Mapchise, a location intelligence and competitor analysis tool, can give retail owners the necessary data. Mapchise sources demographic and psychographic data from various proprietary providers to cater to individual business needs. Businesses using Mapchise can display demographic and psychographic information specifically for their target market.
A Data-Driven Approach: Example Customer Profiling for Retail
So, how can businesses conduct customer profiling for retail? What essential role does Mapchise have in this process? At this point, it is necessary to differentiate between omnichannel and stationary retail businesses. Both business types can benefit from Mapchise’s diverse features. The following example will focus on a local plant shop as a traditional stationary retail business.
Customer Profiling for Retail: Fancy Plants Shop
The plant shop owner, Sarah, researched and examined the target market using Mapchise. Sarah already knows that the plant shop is in a high-density area. With Mapchise’s radius exclusion feature, a local market can be defined using a distance or approximate travel time to the store’s location.
The concise visualization and reference data display the neighborhood’s potential customer count and average demographics. Additionally, Mapchise shows a forecast for this trending and developing area. Sarah uses this information and blends it with general psychographic knowledge.
This might be a reference profile:
| Age | 29 |
| Income | $80000 |
| Housing | High-density area with apartment complexes, often single-tenant |
| Occupation | Primarily office workers, academic degrees |
| Habits | Values quality and aesthetics, sees home as a haven; Recurring Investments |
| Low-maintenance, limited space, but rich/unusual foliage |
Sarah can now refine her product palette using these findings as a reference. She may optimize her business, focusing on exotic plants for smaller apartments. Since most potential customers are single, she figures a section for fancy but low-maintenance plants and complementary care instructions makes sense. Furthermore, a repotting service might lower the barrier for singles in small apartments investing in their in-house greenery. The foot traffic feature also enables her to set realistic targets for storefront marketing efforts.
Getting Valuable Insights
Customer profiling is an often-underrated instrument for defining and aligning business opportunities with potential customer bases. Underestimating customer profiling for retail may lead to missing revenue or even business failure in the long term.
Customer profiles apply to multiple stages in a retail business. While defining these essential profiles before starting business operations is often mandatory, many retailers can successfully utilize crucial information far beyond that phase. Staying informed and ahead of the competition requires reliable and up-to-date information about surrounding customers, especially in a brick-and-mortar retail business.
Retail businesses can utilize a data-driven approach to derive insightful customer profiles using sophisticated data platforms such as Mapchise. Mapchise leverages numerous data sources and allows for in-depth target market research. With a rich set of features, retail businesses get relevant information while saving substantial time and effort to conduct market research from the ground up.
Know your Customers
Reliable data at all stages. Whether you are just starting, expanding, or need to realign to recent developments in your market, Mapchise offers a single platform for various business needs. Leverage the platform’s valuable features to shape your business with confidence. Contact us today!
