This article points to the identification, an important stage in subsidy targeting. Identification of vulnerable groups or households is important from efficiency aspects of governmental provisions and transfer payments. We define targeting and clarify various procedures of targeting systems with emphasis on identification position in them. Then main methods of individual identification especially "means test" and "proxy means test" reviewed and we will declare some imperfections of these two methods. To get rid of the weaknesses, we will introduce Two-Stage Identification (TSI) Test with Endogenous Household Clustering (EHC) method and will try an experiment with Iranian raw household data in urban areas. The results of using TSI method show five different household groups with derivation of varied characteristics of household such as Head (Gender, Marriage, Employment), Members (Age Composition, Number of Employee, Size, Education), Home (Occupation, Number of Room, Width, Framework) and Expenditures (Total, Food and Durables). Also with this verification, policy makers acquire a rich database for employing one or various targeting systems.