Know where your money comes from
As statements go this one seems pretty obvious, you will almost certainly know the names of the top customers you have, those that spend more with you, the ones it would hurt to lose.
Many companies find that 80% of their revenues come from 20% of their customers, the 80/20 rule crops up throughout business. A closer look often shows that those top customers have things in common. If you can identify common links among your top customers then you can focus on finding similar customers rather than taking a scattergun approach to your marketing. This helps you maximise the return on customer investment that you make.
To take this work further you need to do a little bit of analysis of those top customers. What we will look for is patterns that can make it easier to find similar customers. Hopefully you have a database of customers that includes:
- Customer details
- Products bought
- Services bought
- Dates of purchase
To do business effectively you will have stored more than that but for our purposes that will suffice. If you have multiple entries for customers who have bought more than once you need to group these into a single line of customer details and total amount spent.
Once you have your list you can start playing with it. We are looking for customer segments, group of customers who have some buying criteria that are the same or similar enough to exploit.Take a look at the values in the total spent column, you are looking for a point where you can say that the customers above the line are worth extra effort to nurture and those below the line more opportunistic in that you will take their money again if they offer it but are less likely to put effort that way. Total up the values above the line and those below the line. If you have a significantly larger total above the line then you have the split you need to start analyzing your best customers. If this didn’t work then you need to look for other factors that will bring the largest revenue sources to the top. You can try:
- Geographical location
- Business type
- Date of purchase – possible end of year driven
If these don’t work for you you will have to be more creative. You have the ‘total spent’ column to sort on, all you have to do is find the commonalities that link those customers and are less applicable to the customers lower down your list.
Hopefully you will have found some common denominators that link at least some of your top customers. Each of these customers must be convinced to provide you with a reference, armed with these references you are ready to start looking for customers with similar traits and when you find them you will have references to show them.
The other thing you need from this customer group is their reasons for buying your product or service; they will almost certainly be different from the things you list in your brochures, unless you have worked through some of the other chapters in this book of course.
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