Each Wednesday at 2pm Eastern Standard Time listen to Charles George’s Publish to Thrive Radio Show on the International Business Growth Business Network.
Season 2 – Episode 5
The objectives of today’s show are to help you identify the characteristic of your best customers. I’m going to first share why understanding your best customers is critical for your growth.
Why understanding your best customers helps generate more revenue for your business?
Why understanding your best customers helps you attract new customers to your business
Plus, we are going to talk about the three different ways to increase revenue for your business and why going after new customers is the most expensive way to generate revenue.
Why do you need know who your best customers are?
What are the characteristics of your best customers?
How do we find more customers like are best customers?
All customers are not worth the same amount to your business.
Understanding the 6 Types of Customers – (Customer Journey)
Suspect – people you think are interested in your business
Prospect – people who have raised their hand, but have not purchased yet. (leads)
First-Time Customer – customers who purchased from you one time.
Multi-Buyer – customers who have bought from you more than once.
Loyal Customer – People who purchase from you on a regular basis
Advocate- Your most valuable customers. They spend the most, are least sensitive to price, and tell others about you. (referrals.)
Understanding who your best customers is incredibly valuable for several reasons
What You Need to Know
Five different ways to segment a customer database, so you can learn more about your customers.
Geographic – where are our customers located? by Country, state, zip code, neighborhood, block, street.
Demographic – age, gender, education level, income level, occupation, type of housing.
Psychographic– lifestyles, attitudes, beliefs, value systems (activities, interest, opinions).
Social – culture, subculture, social class rank, peer group reference
Behavioral – Transactional data, Time Transaction Took Place, The Method of Response, Location of Response, Types of Products Purchased, What Promotion They Purchased From.
How to increase revenue?
There are only 3 ways to increase revenue for a business.
The Loyalty Effect- for every 5% customer retention, a business experiences 100% growth, and 25% profits.
Acquire New Customers – This is finding our ideal customers and converting them from prospects into first-time customers. (Increasing Market Share and Growth.)
Increase Average Transaction Size– if the average transaction size is $200, how can we increase the average transaction size to $400. If we have the same number of transactions, this will double our business. If the same number of customers purchase, this will double revenue.
Increase Frequency Customers Purchase – If, on average, customers purchase from us 2 times per year, how do we double the average transactions to 4 times per year? If the same number of customers purchase, and the average transaction size remains the same, this will double revenue.
What You Need to Do
First you need a customer database or CRM. You can do what I am going to share with you with Quickbooks or other accounting software.
Segment your customer database into the top 1%, 2%, 5%, 10%, 20%, 50%, 75%
Grocery store example sending out merchandise to thank customers based on which percentage of customer.
80% of all revenue is generated by the top 20%
So by targeting only the top 20% of customers with offers it will give your response rate which is known as lift.
Lift – by targeting only the top 20% of our customers, it decreasing overall revenue, but increases profit, because we are not targeting the bottom 80% of our customers who are most likely not going to respond.
Create products that cater to the different customer levels. You need some low-priced products and you want higher priced products. Travel & experience example
Once you know who your customers are then you can go find more people similar to them.
The more you know about your customers, than the better your offers will be. How you present the offers will resonate with your audience more.
Customer Avatar Sheet for your best customers –
Remember the reason you want to understand your best customers
- You can identify prospects who are mostly likely going to respond
- Decrease the amount spent on people not likely to respond
- Most importantly increase response rates
Understanding Who Your Best Customers Are
Easiest way is to rank your customers by the monetary value of each customer.
RFM Calculation – Recency, Frequency Monetary Value -Gives each customer a weighted average and a score. List customers by score
Ways to Learn More About Your Customers
Facebook – Audience Insights
Facebook Page – Grow your page until your page shows up in Audience Insights
Finding New Customers
Uploading Your Email List to Facebook Ad Platform – Creating Look-a-like audiences
Audiences from people who have interacted with your Facebook page, who visited your page
Database Selects – Experian, Melissa Data
Using the data to find new customers vs. targeting your best customers.
Facebook Look a Like Audiences
Dedicated emails to targeted lists,
Direct mail lists
On next week’s show, we are going to be talking about how to build stronger relationships with your customers. This week we are identifying who your best customers are. Next week we are going to talk about how to actually build stronger relationships with your customers.