Four steps to identifying your best customers

If you‘re like most business marketers, your budget for re-marketing and communicating to customers is probably minimal at best.  Most of your budget goes towards finding new customers. That’s a mistake, but one you can overcome.

You don’t have to develop a program that communicates with every customer to generate major revenue and profitable gains. You just need to develop relationship programs with your best customers.  But the big challenge is figuring out who they are.

Oh, remember, not every customer is a candidate for your best customer listing.

So, where are they?

In truth, not all customers are profitable.  If you look closely you’ll probably find a bunch of customers that you’re losing money on or barely breaking even.  By identifying 20 percent of most profitable customers or customer segments, you can determine the amount of money you can invest in each of them. And of course, the returns on this kind of effort can be measurable.

How to find them

The first step in finding the customer types that you’re most likely to add to your best customer list is to keep track of each customer interaction in your database.  This includes purchases, preferences, payments, returns, responses to promotions and offers, inquiries, satisfaction surveys, brand perceptions, and, most importantly, complaints.

They’re hiding somewhere

The second step is to start looking around your organization.  You may already have a lot more data than you think.  It’s just in a lot of different databases across the company.  Some of it is probable in finance, some in accounting and of course others in marketing, sale and customer service, not to mention business units, channel partners, syndicated sources.

Consolidate your base

Step number three is to start consolidating these various customer databases.  Analyzing purchase history is a good way to develop your best customer list.  Once you do that you can get a good handle on the profitability of individual customers and customer segments.  But, the key is starting the consolidation process.  (Unfortunately, this is where many b2b companies get stalled – too many silos and not enough corporate willpower to make it happen.)

You bet your lifetime value

So before you jump to any conclusions about which customers to focus your relationship efforts on and how to segment them, you need to do step four – figure each customer’s potential lifetime value to the organization must be estimated.

It’s really a matter of doing the math. Lifetime customer value is the valuation of the ongoing relationship you have with a customer in the form of the resulting income flows that come from them when they continue to purchase over a period of time.  It’s an assessment of how much revenue you can expect to get starting right now and going until the end of the relationship. Lifetime customer value is the true arbiter of how much you should spend, or can afford to spend, on a relationship with a particular customer.

This does take some time and effort, but if 80% of your revenue comes from 20% of your customers, perhaps it’s time to  consider focusing some of your marketing dollars in a way that makes these top customers feel good about their decision to buy from you.  And ultimately turns them into brand advocates who can help you sell to new customers.  But then, perhaps that’s a subject for another blog.

Meantime, check out our e-Book “Embrace.”  Download it at: click here


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