Not all customers are created equal.
While you value all of your customers, the reality is that some are more profitable than others.
Understanding who your most valuable customers are will help you improve your value proposition (read: get you selling better), and find new customers with similar behavioural tendencies. It will also help you maximise your ROI for whatever marketing or promotional activity your business is investing in.
But how do you figure out who and where are they?
Step 1. Define the value
Brad Fay and Ed Keller of Forbes claim that customers with ‘social value’ (a.k.a. customer advocates) may be more valuable than those who spend the most money. These brand supporters are defined as socially well-connected customers who love you and recommend you to others.
Inc.’s Erik Sherman says that when it comes to profitability, businesses should focus on the lifetime value of a customer (CLV), rather than individual sales. As he puts it, “The more incremental business someone does with you, the more you can amortise [offset] the often expensive cost of acquiring the person in the first place.” So consider how much ROI you get in your investment of each customer – whether this is time, money or a combination of both.
Step 2. Calculate your customers’ value
Now that you’ve started examining your customer base, how do you prescribe a value to individuals?
Patricio Robles of Econsultancy offers five metrics to help you identify your most valuable customers:
Track how often your customer purchases your goods or services.
Average order value
Calculate your customer’s average spend.
Customer lifetime value
Find out how much your customer has spent over the course of their relationship with you.
Assess whether your customer spends more when you offer them discounts or promotions.
Analyse their disposable income (data on demographics may help in this area).
Step 3. Go to your customers
Phil Frost of Main Street ROI, a consultancy agency, suggests a way of finding your most valuable customers online: “Check out your customers’ online hangouts and go participate with them. This helps you not only build a rapport with your customer base, but also police your brand’s image.”
Step 4. Apply your research
Now you’ve done your homework, what should you do with the data? Here are six tips to get you started:
Keep a profile
There are a number of profiling tools on the web that can help you better understand the behaviour of your customers, and in doing so, target your communications and products to suit their needs.
Personalise the customer experience
Create communications sales campaigns specific to your most valuable customers.
Reward and recognise
Thank your customers with VIP status, including access to special events, discounts and promotions. Remember, it’s easier to sell to your existing customers than it is to new ones.
Talk to them
Find out why your customer loves you and use this information in future marketing and communications in the form of testimonials. Peer endorsement is one of the most effective marketing tools.
Meet their needs
Tailor your products and services to your most valuable customers. Simply put, give them what they want and they’ll always come back.
Adapt with the times
The consumer landscape is always shifting, so continue to measure the effectiveness of your campaigns and refine them where necessary.