How to better understand your customers and the reasons why.
Your customers are a powerful marketing weapon. They can be a brand advocate when they believe you are really great or a brand terrorist when you disappoint them.
You‘ve probably outlaid a considerable amount of money, time and resources on marketing in order to attracting customers and make sales. But do you know if you are getting a true return on your customer investment?
Customer asset value is the key to your business having a competitive advantage and ultimately improving shareholder value.
To ascertain this you need to have clear customer insight. You need to be able to identify your customers’ affinities, characteristics, preferences and the like so you can understand what drives their attitudes and behaviours.
Before you can do this you need to have clear brand awareness.
Your brand should impact some of the following levers between the consumer and the business:
- the ability to charge a “premium” over others in a marketplace
- increase the “life” of a customer by keeping them longer
- increase marketing effectiveness:
- by acting as a customer signpost and building trust
- representing an aspiration or lifestyle to consumers
Your brand is an asset - you can sell it.
Your business has in fact 3 types of assets:
Customer asset
- the current income generated from the customer
- the future income from the customer
- the advocacy and learning value of the customer
Brand asset
- the ability of the business to generate “ a premium” because of the brand
- the tangible value of the brand if sold
Other assets
- the organisation or intellectual property in fulfillment/customer service
Customer asset value
Your revenue comes from your customers’ purchases.
Also most of your variable costs come from your customers’ actions – the sale, the call centre, enquiries etc.
If you are determining the cost for each segment of your customers you need to consider:
- churn
- retention
- migration
- operational costs including payment method service costs; call centre and customer service costs, cost of product and delivery; and others.
Customers can cost your business money in a number of ways. Consider:
- returned goods
- order cancellations
- move/change of details
- late payment
- enquiries
Add these costs to your business costs. Consider:
- billing errors
- direct mail offers
- new product development
- advertising
Costs that impact on customer profitability.
There are 3 broad types:
- Fixed costs - a fixed or set cost which cannot be associated to each customer
- Net margin costs - operating costs in line with revenue generated by the customer, such as cost of goods etc.
- Customer service costs - costs associated with each customer, but not related to income, such as marketing, billing enquiries etc.
What are the most common reasons customers leave you?
- Your brand is no longer relevant to them
- Your brand no longer engages them
- Your brand has reneged on its promise
- Your brand fails its loyal customers
- “The influencer group” or community has a new brand
Your customers are a powerful marketing weapon. They can be a brand advocate when they believe you are really great or a brand terrorist when you disappoint them. Recent Australian research suggests that positive word of mouth is the prime reason consumers or buyers choose a product or service.
Customer segmentation
Change your views about lumping your customers as a collective target – think segmentation.
Customer Relevance Management is the new CRM model. It advocates:
- forget concentrating on the average customer because they distort your business decisions
- start asking who shall I send this offer to and what offer should I send to each of my customer types.
- stop measuring just churn and learn to appreciate how customer behaviour over time generates value
Integrated brand communication
When marketing your product and services consider the importance of developing an integrated brand communication. Typical examples of this are:
- customer clubs
- interest/reward mailings are particularly good when targeting high spending customers based on their lifestyle or their interests or needs
- commercial mailings are good when targeting buyers say at a particular time of year for example “back to school”
- trade drivers/special offers which give customers incentives to spend more and can draw new and lapsed customers
- coupons at till which provide a “thank you” and an incentive to return
- online marketing - this can be impactful and cost effective. It enables customers to receive regular communication on news and special offers including click through to buy.
- direct targeted marketing to homes as well as in-store. This can play an important role in building loyalty and can provide you with important customer insights.
It’s important to do the research and target the right customers for each campaign. Consider your customers in terms of:
- lifestyle and life stage - select relevant customers for the mailing and they will feel “you really know me”
- loyalty to your product, company or service - their habits will allow you to drive their spend
Tips
- Cherry pick the recipients of product specific coupons by tracking light and heavy users of products
- Target previous redeemers and mailing customers because these have a history of performing well
- Prioritise customers most likely to lapse especially during periods of high competitor activity
- Make use of those customers who have requested contact and have a history of high involvement with your company.
- Ascertain which products your most price-sensitive shoppers need to buy – this will help you determine which of your products must be priced competitively, can coupons or on-ticket pricing be used to offer differential pricing and which products are substitutes for each other and allow for pricing differentiation in store.
- Consider if the promotions you do are efficient – just who is actually absorbing your promotional budget. Are you able to eliminate promotions brought by “promotion junkies” without alienating your most loyal customers?
On a final note
Run fewer, more effective promotions designed to drive loyal customer satisfaction, appeal to a range of promotional aware consumers and maximize returns of promotions investment.
How? Segment customers by promotional behaviour and build a library of Key Performance Indicators for your promotional strategy.