For decades, marketers have invested a great deal of time into understanding the demographic characteristics of their core customer base—those characteristics related to the easily measurable characteristics of a person, but they’ve rarely taken the time to apply such a segmented and rigorous study to the psychographic dimensions of their customers.
The difference between demographic characteristics and psychographic characteristics are that demographics measure how someone is (age, gender, location, income, etc.) and psychographics measure who someone is. Psychographic dimensions can include things like technical sophistication, pain points, responsiveness to urgency/scarcity, responsiveness to social proof—a wide variety of parameters that make up the holistic picture of who someone is and why they do certain things. Obviously, demographics can influence psychographics, in that 45-year-old men making $50,000 per year living in the same city may have similar life experiences, but they’re not nearly adequate to enable creating a customer-centric marketing experience that customers love and drives growth in sales.
Psychographic dimensions are especially important for buyer persona analyses of customer cohorts for inbound marketing because inbound marketing is attraction based—and attraction is a psychographic rather than demographic characteristic. Inbound marketing is about creating an end-to-end experience that specific customers will love rather than one that everyone sort of likes—and that requires a deep understanding of their motivations and mentality. Buyer personas are very powerful tools for inbound marketers because, as we’ll see later, not all customers are created equal.
There are two primary types of buyer personas: Inclusionary and exclusionary. Inclusionary personas include the types of customers that drive profitability and growth for your company. Exclusionary personas include customers that are less profitable—or even negatively profitable. If you have an effective buyer persona profile for each customer you convert, you can identify and do more of the marketing that attracts good customers and less of the marketing that attracts less profitable customers.
4 Valuable Inclusionary Personas
1. Low Acquisition CostSome customers are cheaper to acquire than others. Perhaps they have a shorter sales cycle due to their level of decisiveness, or perhaps they have less influencers in their decision making process. Perhaps they purchase cheaper products, or are in a higher income category. For whatever reason—they’re cheap to attract and convert. These can be very valuable customers to focus on attracting, especially in the early stages of growing an eCommerce business where cash flow is extremely important.
2. High Lifetime Value
3. Best Unit Economics Ratio
The previous two cohorts take into account two factors; acquisition cost (sometimes abbreviated COCA or Cost of Customer Acquisition) and LTV. These two metrics, when combined, give you the customer-centric unit economics for the buyer persona. That’s way simpler than it may sound: If you spend $100 to acquire a customer and they bring you $300 in net profit over their lifetime, their ratio is 1:3 (or just 3 if you want to make life simple and reverse the ratio to get a whole number). This ratio is the most fundamental and critical metric for a customer-centric growth company. You’re acquiring and nurturing customers, not just farming transactions. Just because a customer has a high LTV doesn’t necessarily mean that they’re your most profitable cohort to focus on.
In my Starbucks example, those tech-company employees have twice the LTV of the average customer. However, would it really be worth it to have a barista in that company’s front office? The cost of acquiring and servicing might be quadruple the average customer, and therefore, they would have a worse ratio and be less interesting to invest in attracting and converting. The balance of this ratio—how much it costs to acquire a new customer and how profitable they are over the long term—is how you determine what inbound marketing tactics are bringing you the most valuable customers for growth.
Evangelists are customers (or even non-customer contacts) that help you spread your content and brand to other customers. Although they may not themselves spend valuable amounts of money with you, their love for your brand can help you lower the acquisition costs for future customers. Evangelists may sign up for and engage with all of your emails, read all of your ebooks and gated content, and be highly engaged in social media. If you’re able to identify these customers, you may want to consider marketing to them differently in a way that reinforces their existing behaviors—ranging from giveaways for recruiting a certain number of customers with their unique coupon code to simply just changing the calls-to-action that they see from “buy” to share.”
In your buyer persona analysis, you’ll find these four types of customers. As a modern, inbound eCommerce professional, your task is to do more of what attracts these customers. Write more of the kinds of blog articles that they read. Engage in the social networks where they’re active. Position your brand’s voice in a way that they respond positively to. This will lead to attracting more of these customers, which in turn will lead to greater profitability and growth.
Number 4 image courtesy of chaiwat, FreeDigitaPhotos.net
Sam Mallikarjunan is head of Marketing at HubSpot Labs.