Beyond demographics: how to read your customer's mind

How well do you really know your customers? Do you genuinely understand who they are and what they are looking for? When are they most likely to buy from you? And why would they choose your business over another?

If your business is like most, you are probably relying on fairly limited demographic segmentation to understand your customers. This means you classify your customers by these kinds of attributes:

• Location
• Age
• Sex
• Education
• Income
• Family status

plus other visible or physical attributes. You may, perhaps, have integrated this demographic research with an understanding of your individual customers’ buying patterns. But you're really only seeing the tip of the iceberg.

Why demographic segmentation is no longer enough

Thanks to the digital revolution, customers are far more demanding than ever before. When they interact with you, they expect you to leverage all available data to understand their needs, and respond accordingly. Increasingly, customers expect the information you provide to them will be customised and relevant – particularly if they have had an interaction with you in the past. They are also starting to expect this level of service at every stage of the sales cycle – from their very first interaction with you, to after a sale has been made. 

Business consultancy, Walker Information, says that by 2020, thanks to the availability of data and innovative technology, customers will be largely in charge of the service they receive. In their article, The Future of B-to-B Customer Experience, Walker says that “customers will expect companies to know their individual needs and personalise the experience” and that “immediate resolution will not be fast enough as customers will expect companies to proactively address their current and future needs.”

How data can help ensure a superior customer experience

Fortunately, when it comes to meeting these rapidly evolving customer demands, the digital revolution has also meant there is now a potentially vast set of rich data available to help you understand your customers and their needs.

Now, it’s possible to examine a customer’s behaviour – in detail – not just their attributes.

By looking at customers’ use of social media, for instance, we can find out how they express their identity: what they like, who they like, and how they spend their time. This can help us understand how a customer is likely to respond in a certain situation, and whether or not they are likely to make a decision.

Through conducting in-depth social media analysis and paring this with demographic information, we can gain a much broader understanding of customers’ needs. We can also then utilise data from online retailers to identify positive patterns in these customers’ buying behaviour.

This rich data is far more valuable than traditional demographic data, as it tells us how people behave rather than simply who they are.

How demographic segmentation is limited: an example

Let’s look at the characteristics of a sample demographic group:

• Male
• 40-50 years old
• White collar professional
• Lives in Suburbia
• Earns over $100K per annum
• Married with 2.3 kids

If we drill down into this group and examine their buying patterns, we quickly identify some vast differences. Some individuals within this group, for instance, enjoy listening to classical music; others are into rock. Others love cycling. Some read home improvement magazines and spend a lot of their time going to the theatre. A few ride Harleys, one is a member of a knitting club, and another is a volunteer at a local dog shelter.

Individuals in the group may be statistically similar but they also have some very different interests, which can translate to very different buying patterns. These individuals may respond to certain marketing campaigns in similar ways. However, if we are targeting them on their demographic alone, our success is limited.

Together, behavioural and demographic data can get results

By incorporating behavioural data from the above example – and looking at this data over time – we can understand the needs of this group of customers in far greater detail. A cyclist who has just had a new baby may, for instance, be very interested in purchasing a bike seat for his road bike. A fan of classical music may be interested in discounted opera tickets. By targeting individual according to their preferences, not their attributes, you have a much greater likelihood of success.

This doesn’t mean that demographics should be ignored altogether. They still play a very crucial role when it comes to marketing. Today, however, they need to be considered as part of a much bigger picture.

How well do you know your customers?