Today, I would like to introduce a guest blogger, Marc Sokol. Marc is the newest member of the M Squared Group team, and brings over 30 years of experience in leadership development to our organization. Marc will be applying his skills to marketing/salesforce alignment challenges and customer-centric organizational design.
How do you know what you know about your best customers? I used to think this was simple, just look at who spends the most. Mark Price then shared with me his framework — it’s really a combination of spend, frequency and customer attitude.
That got me to thinking, where am I a best customer? Later that day I was talking with my local wine merchant and proclaimed “I’m must be one of your best customers since I buy most of my wine here and tell others what a great store you have!” She smiled as I bought one of my usual bottles of wine, which are almost always under $20.
Then I got to thinking that it’s my assumption about being a best customer. What I really want to know is how do you as a business proprietor (or as the head of sales & marketing or as the line executive) know who are your best customers? In fact, how do any of us really know the answer to that question? So take a moment and ask yourself “how you know what you know.”
What assumptions guide what you actually pay attention to? Do you perceive differences among your customers and how you capture those distinctions? Is it a gut feel (“I know them when I see them”) or do you have some framework that allows you to convey to others what you look for? Is it based on some general mathematical assumption, like the Pareto principle (“We assume 20% of customers provide 80% of real revenue, so they are our best customers”) or have you refined this with real data and real modeling of your customer base?
Is it one dimensional, such as ‘overall spend’ within a time frame, or multi-dimensional, such as a combination of spend and the attitude they have toward your business? The multi-dimensional approach makes sense, since your best customers are probably not the people who feel trapped into a contract and then tell others they hate your service! Ask someone who is midway through his or her mobile phone contract and you will see what I mean!
Choosing how you know what you know about your best customers can be a matter of gut feel or it can be a highly analytic process. There are pros and cons to both approaches, but one thing is for certain; if you don’t take the time to think about who are your best customers, then it is unlikely you will treat them any different than your other customers. That also means it is unlikely you will make extra efforts to retain them, to increase value for them, or even notice when they cease to be among your best customers. That’s no longer a philosophical question; it’s about business revenues, sales and customer retention.
Of course if you haven’t asked yourself why you want to know who your best customers are, then maybe it isn’t all that critical to know how you know who they are. But once you have determined why you want to know about your best customers, and that you do want to have an impact on them, then the how becomes really important!
So how do you know who your best customers are? I’d really like to know!
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Mark: Great post, especially as it explores the multi-dimensional nuances of what makes a “best customer.” This also has me thinking that one metric could called “cost to sustain vs. cost to acquire,” that is, what it costs a company to keep engaging with an existing client to sustain that relationship and keep the customer buying, versus the cost of going out an getting a new customer. This might also be called “value to sustain,” what the net value is of the customer. One impact of this metric is that companies should think about “weeding” over-all low value customers and focus some attention on acquiring over-all high value customers.