Do you know who your most profitable customers are? They may not be the ones who buy your highest-priced items, the ones you talk to the most often or those who shop the most frequently. They’re the ones who bring in the most profit per customer over the long term. There’s only one way to truly discover those customers with the greatest lifetime value: know the data.
“The dividing line in gaining this knowledge has to do with how automated you are,” says Joanna Krotz, CEO of communications firm Muse2Muse Productions in New York. “It starts with your database. As a business owner, I know it can be difficult to take the time to put one together, but the payoffs are tremendous.”
You may already have a database in place, but the right software can turbo-charge what you do with it. There are a variety of customer relationship management (CRM) software packages and online services that now exist for small business, such as Salesforce.com’s Group Edition, ProphetCRM, RightNow Technologies, NetSuite and many more.
And if you already use Microsoft Office, you have a fairly powerful tool in place. Business Contact Manager, which comes bundled with most versions of Outlook, offers more than 20 different reports and a range of helpful fields to populate, says Krotz. “Whenever you communicate with customers, whether it’s in-person or online, you want to get as much data as possible and do it with their explicit permission.” She adds that the typical data you might want to collect, depending on the business you’re in, include:
- customer name,
- cell phone,
- names of family members,
- spouse/children’s birthdays, and
- when kids are entering and getting out of college.
You then add the data you’ll track ongoing to their profile: the annual amount they spend with your company, a history of past purchases, special offers acted on, any loyalty clubs, events or promotions in which they’ve participated and their service history.
The first part of the data collection can assist you in terms of contacting customers. For example, when you know when birthdays are, you can send personalized notes. Or, if you have a financial services firm, knowing when the kids get out of college tells when it’s time to ping that client regarding setting up a meeting to deal with newfound disposable income. The tracking data helps you learn about who spends the most money with you on a longer-term basis. Why is the service history important here? “If a customer buys a high-end product or service from you every week, but then takes 10 hours getting help on the phone from you after the sale, you need to account for that time and include it in your estimate of their overall value,” Krotz explains.
Once you know who your best customers are, it’s about communication. That’s when you can effectively up-sell, cross-sell or provide timely rewards or discounts. “When you contact these people, you know you’re not wasting your time,” Krotz observes. “You can create ‘inside deals’ for them and communicate in a medium they prefer—e-mail, phone or even fax. The communication is designed to make customers feel recognized, so thank them for their last purchase and let them know that you’re extending a better deal because you know they’re truly valued customers. Your goal is to get best customers to return and buy more or buy more frequently. Remember, one good lifetime customer can pay for all the effort you put into your database efforts.”