Marketing Maven Test:

Q: Can you correctly rank  the following company behaviors in order of importance to your customers?

> Offers customer-relevant, quality products

> Shares customer data across department lines

> Offers online self-service

> Empowers employees

A: Click here for the answer

Discovering Your Top Customers - What You Need to Know - Part II

by Paul Schwartz

In the last issue we began the process of defining our best customers by doing a basic decile analysis of revenue.  We'll continue by adding other metrics to the analysis.  Then we will create a plan to utilize the results generated from our analysis.

Step 1 - Complete Analysis: Do the same revenue decile analysis for recency of purchase and product penetration.  Recency of purchase analysis is done by ranking customers by the time lapsed since their last purchase. Product penetration analysis is done by ranking customers based on the number of products purchased.  

Step 2 - Identify Top Customers: Take all three analysis categories - revenue, recency, and product penetration - and look for the customers that rank high in all three. Some other categories you may want to consider that are relevant to your business are profitability, length of relationship, or customer survey/loyalty scores.  Your goal is to find customers that rank high in all the categories you choose.  

Step 3 - Track Changes: You have now identified your current top customers and the ones you really need to invest in retaining.  Be sure to track changes in these measures amongst your customers over a defined period of time.  Decreases can highlight customers you may be losing them or have already lost.  Increases will highlight some new top customers that you will want to invest in keeping.

Step 4 - Identify Common Characteristics:  Now you need to examine the characteristics of these top customers to see what they might have in common.  You can look for common demographic data such as age, title, or income.  You can look for common firmographic data such as industry, company size, or geographic location.  You can also look at psychographic data such as satisfaction and  loyalty scores, or level of commitment and fit to see what your top customers have in common.

Step 5 - Use Customer Profile to Find Prospects:  Take the common characteristics you came up with in Step 4 and assemble a profile of your top customers.  It might look something like this:

• Annual revenue is $430,000

• Purchase every 30 days

• Purchase 19 products with each purchase

• Company size: 100-200 employees

• Industries: Manufacturing, telecommunications, travel and leisure

• Located in: US cities with population > 500,000 and within 100 miles of a division office.

This profiling exercise produces two sets of actionable information.  First, you will have identified your top customers and those your risk losing. This allows you to create a strategy to retain or win-back your best customers.  Second, you can now target prospects that are a better fit for your business by matching them with the profile of your top customers.  This should improve your acquisition rate and your profitability as you bring on customers you know and can serve well.

Remember, this is a basic example of how to highlight your best customers and improve your new customer acquisition efforts.  Make sure the process and the analysis fits your business model and your business needs.

Next Steps: The analysis described above gives you a current picture based on historical data.  Don't take any actions yet to cut loose the lower tier customers.  You'll want to look at some sort of calculation of lifetime value for different customer segments.  Not all customers start out as your best customers, they become so over a period of time.  A plan should be implemented to migrate early stage customers into top producing customers.

Want to learn more about your current customers and how you can use that information to improve sales?  Attend this local workshop on June 8th for some hands-on experience.  Questions or comments? Please contact us to see how CONGRUITY can provide unique insights that help you identify, keep, and grow the right customers.  Visit us on the web at www.congruity.biz.

Copyright © 2006  CONGRUITY.

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