Who are Your Most Valuable Customers?

December 10, 2008 at 7:00 pm Leave a comment

Identifying which customers represent the greatest value to your business helps you develop an effective marketing plan and put in place the marketing strategies and marketing tactics to:

  • Retain your most valuable customers and keep them loyal
  • Attract customers who have the same or similar characteristics to your most valuable customers
  • Increase customer ratings on the characteristics most important for your business’s success

Key characteristics to look at when identifying your key customers are:

Average Transaction Value
This is the average value of transactions over a year. You first need to work out the average for your business eg. on average your customers may spend $100 per transaction. Then you look at each key customer and see if they are spending more or less than $100 per transaction with your business. Overall your objective should be to increase your total average transaction value each year.

How loyal is the customer or customer group to your business? Look at how long they have been a customer and also would it be easy for them to switch to a competitor.

Look at how often you need to discount your product or service price with your customers to attain a sale. Ideally you shouldn’t need to discount to gain sales from your key customers as this affects the profitability of your small business.

Strategic Value
This relates to how important this customer or customer group is to the future of your small business eg. do they provide a number of referrals, but maybe not spend a lot of money with you? Are they opinion leaders in your market?

Increased Business
Look at whether your customers are increasing their business with you each year, such as buying additional products or increasing the frequency of their purchases of your products or services.

This relates to how reliable your customers are with regard to their payments eg. do they pay on time? This is important as it affects your cashflow and also ties up money that you could be reinvesting in marketing your small business.

Service Costs
This relates to the service costs involved in gaining a sale or after a sale to ensure customer satisfaction. Ideally you would want minimal service costs for your small business whilst still maintaining a high level of customer satisfaction.

Gross Margin
This relates to the sales price of your product or service less the costs involved in producing the product or service for the customer. For example, if you provide a service but it takes you twice as long to provide the service for a particular customer then this customer will be of lesser value to your business.

Do you have any tips to identify your most valuable customers?


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Entry filed under: Customer Behaviour. Tags: , , , .

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