How Smart Retailers Build Ideal Customer Profiles that Drive Sales
Chances are you know when a customer is a good fit for your store. Nine times out of ten, you can tell by the questions they ask and the items they gravitate to whether they’ll become long-term customers. In other words, you know your ideal customers when you see them. So, how do you find and attract more customers like that? Start by creating – or refreshing – your ideal customer profiles.
In today’s ultra-competitive environment, successful retailers are using data to get more targeted in terms of the products they sell, the services they offer, and the experiences they deliver. When it comes to customers, it’s not about pleasing 100 percent of the people 100 percent of the time. It’s about knowing exactly which customer segments to target and going all in to meet their specific needs.
Most retailers will have between three and five ideal customer segments that they focus on to generate the traffic, sales, and retention rates needed to grow and maintain their business. Focusing on the right customers gives you increased clarity on everything from product mix and pricing to customer events and marketing campaigns. The key is defining the distinct segments and building out a detailed profile for each.
Whether you’re doing an annual refresh or starting from scratch, here are three essential types of customer profile information to include – all available via external sources, internal data compiled in a central point-of-sale (POS) system, or from your customers themselves.
1. Build a solid demographic foundation.
Demographics are ideal customer attributes that are expressed statistically, such as age range, gender, marital status, employment status, or income range. You probably have some educated guesses on these, but validate your hunches through data.
If your business is well established, look at the customer data captured through your POS system. Run a report showing your top customers in the last year and pull in demographics from your individual profiles. Or match demographics to the customers who qualified for the top tier of your store’s loyalty program. Are you attracting the types of customers you thought? Are there any demographic surprises?
If your business is just starting out or you don’t have a lot of existing data to work with, do some research around the types of customers you want to target. External sources such as the U.S. Census, local Chamber of Commerce, and industry-specific associations or databases are good resources for a range of demographic information. These sources will also help you understand the size of your target market segments.
Here’s a starter set of demographic questions to answer:
- What’s the age range of our ideal customer?
- What’s their gender?
- What’s their marital status? Life stage?
- What’s their occupation? Income range?
- Where do they live?
Related: Does Your POS System Have the Right Answers to These 3 Questions?
2. Add on psychographic intel.
Demographics begin to define who your ideal customers are, but that’s not enough. Next, it’s time to put yourself in your ideal customers’ shoes, and add a little personality to your profile. Psychographics are the attitudes, interests, and values that help determine why your target customers buy.
The best way to understand your ideal customers is to get to know them through your interactions with existing customers. Make collecting information a standard part of your customer experience. Don’t overwhelm shoppers with questions. Instead, create an individual customer relationship profile that’s a standard part of your POS, and fill in each person’s answers over time. Not only will this put valuable information in the hands of your sales team that can be used to personalize a customer’s in-store experience, but it also pairs with the demographic detail to round out your ideal customer profile.
Get creative. Craft questions that will deepen your insight into what your ideal customer segments need – and want. Consider collecting information like:
- Biggest challenge (For example, is it career-related? About raising a young family? Or a lack of time?)
- Style icons (An easy way to do this is to offer several recognizable people as options and ask them to pick their favorite out of the group)
- Favorite hobbies or places to travel
- Favorite movies, TV shows, or style of music
- Preferred social media channels
And, as you build customer relationships, conduct surveys to find out how they feel about your business. Ask questions such as:
- What needs or problems do your products and services solve for the customer?
- What would prompt a customer to recommend your store to a friend?
- What concerns does a customer have about your store or products?
3. Fill in ideal customer data details.
Now, it’s time to put your data to work. After defining the who (demographics) and the why (psychographics), take a look at the what and the how. Use the data within your POS to examine the purchase history for buyers from each ideal customer profile.
- What are the buying habits at the profile level, both in terms of products and timing?
- What’s the average transaction value?
- Which promotional campaigns or events does the ideal customer respond to?
You’ll be able to use this information as you make inventory decisions and determine pricing and promotions. You’ll also be able to further personalize shopping experiences to appeal directly to your ideal customers and create targeted marketing campaigns that resonate.
With ideal customer profiles that include demographic, psychographic, and shopping behaviors, you won’t just have a better understanding of your most valuable customers. You’ll also have specific data points to help you identify and market to potential customers who fit your ideal customer profile. Since you know the specific challenges you can solve for each profile and the products or services most likely to catch their interest, your marketing messages can be more direct and your in-store experiences more tailored.
To learn more about how retailers can harness the power of data and drive business growth, download our new guide, Data-driven Decisions: The Definitive Guide for Retailers. And, to explore what’s possible with POSIM, a point-of-sale and inventory management system designed to help you take your customer relationships to the next level, contact us for a demo today.