Customer A might be profitable. They might require less hand holding, purchase (and use!) your top product and refer others to you. Whatever the reasons are, the reality is all the same, not all customers are created equal.
Now, let’s scale the discussion. What if you have 2,200 customers or even 1.6MM? If you segment those customers by profitability, you’re likely to find the top segment delivers more than twice the profits than your average customer. In fact, it’s probably true that the bottom segment may be even losing you money.
Now let me ask, what if you switched gears and focused the efforts of your business on retaining more of the “best” customers? This is direct response marketing 101. It’s called the “best customer” strategy and it drives tons of profits.
Best Customer is not just a measurement. It’s a business strategy for dominating your industry. Think of it as a focus on serving the specific consumers who love buying from you. Let’s examine someone who understands the strategy.
Go to Staples.com. Check out the home page. What do you see? Ink, toner and paper towels. If Staples were the average business in America- chasing revenues and transactions, it would not merely have office supply products as the main homepage images. There would also be electronic equipment and office chairs- two high ticket items. Those are products that drive revenue. But Staples is different. They know that their long term repeat buyer is an office manager in a small to mid-sized company. That office manager frequently needs toner cartridges and kitchen supplies, such as paper towels. To take it one step further, Staples now oriented its web strategy to better serve the office manager, not to simply sell office supplies.
If they did not pay attention or understand who their best customer was, their homepage would more closely resemble a copier/fax and pen company. Instead, they appear to be a one-stop shopping solution for businesses of all sizes. It’s likely that Staples is also measuring the cost of each new office manager that it gets to buy its products.
I deal with enterprise level, world-class marketers all day long. They are smart. They are driven to compete. But honestly, the strategy they most often shoot for is built around revenues. I am frequently asked: How much of a revenue boost can you get us? What is the marketing ROI?
Rarely, am I able to pitch a company who is simply looking for the perfect type of customers and has the allowable to acquire them. In my opinion, companies should have multiple allowable: here are our best customers, here is a lower allowable for an average new customer and here is the ROI target for any marketing driven sale for an existing customer.
A “best customer” strategy is bulletproof because businesses need to constantly adjust themselves to communicate and serve the customers who pay the most and appreciate the value proposition you offer.
If you call interested in the beginning of an agency relationship, I will immediately qualify to determine whether you’ll be a transaction-oriented client or a customer-oriented client. If it’s transactions you seek, prepare to hear me growl and ruffle some feathers until you consider pouring available marketing funds into top customer segments.
That’s my strategy to make you one of our best customer customers.