Most people focus all their efforts on attracting new customers and hardly any effort on keeping and growing valuable customers. In a difficult economy you cannot afford to lose valuable customers.
Who are your best customers?
First of all I am assuming that you have a definition for a best customer. The definition will depend on your business situation and the data you have access to. Is it a customer who has:-
- been with you longest?
- spent the most with you this year / or ever?
- generated the most value (profit contribution) for you this year / or ever?
Where the data exists, then using value or profit contribution is best because two customers that generate the same sales revenue might have significantly different costs to serve.
It gets harder with more customers
If you have 2 or 5 or 25 customers you could keep track of which customers are continuing to buy from you and whether they are happy in your head. It's harder when you have 50 or 5,000 or 5 million, especially if they are more remote e.g. telephone sales or online sales.
You need a CLTV marketing strategy
Customer lifetime value marketing is a process to help companies grow the value of their business. Its about getting more customers to:-
- spend more per transaction
- spend more frequently
- for longer (i.e. to increase the customer lifetime)
It is not rocket science but it does require detailed analysis of your customers and marketing strategy to identify the best solution for your business.
Different analytical techniques can be used to identify the historical value of your customers. It is also critical to identify the future value of customers and this is what most companies find most challenging.
It works for smaller companies too
A small number of Britain's best brands have used these techniques to successfully grow customer lifetime value. And the good news is that these techniques can also work for small and mid sized companies.
What's exciting is that 5 or so years ago these techniques were often too difficult and prohibitively expensive for smaller companies. However, the growth of new systems, the internet and email marketing have smashed many of the barriers.
How does it work?
A scoring system is developed that scores customers based on their past and future value. This scoring can occur weekly / monthly / quarterly depending on the business needs. e.g. customers could be placed into 1 of 25 different value segments.
Rather than treating everyone the same, a specific marketing strategy is developed for each value segment based on its likelihood to maximise customer lifetime value. It could be that for one value segment the strategy is to telephone them today. For another value segment, it might be to send a personalised email with a specific message or offer.
The performance of each strategy is measured and refined based on the results.
Once the strategy has been developed it is possible to automate this where at the 'press of a button' your customer database is scored, placed into different segments with every segment getting a personalised email with a specific offer most relevant for them. Done well, this should help grow the value of your business and ensure that you keep your best customers and better still have more of them.
If you don't have the expertise do this it's worth talking to a web marketing expert.
Peter Hawtin is an internet marketing specialist with Brand New Way, a UK web marketing agency which helps companies to attract and retain valuable customers online.
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