This last week I had a number of podcast listeners contact me about the fact that I have removed most of my archived segments from my podcast site. Let me assure you that I am currently working on a special project that will allow all of you to not only access those podcast archives but also to gain access to a trove of relevant information on customer experience design and small business leadership. I’m extremely enthusiastic about the new project and will let you in on it before anyone else, but for now let me simply ask your patience as I finish the design and execution of that resource.
While in Australia this week, I have been talking to small business audiences about customer purchase value and customer referral value. I‘ve asserted that in more challenging sales cycles, it is wise to craft a business strategy that starts at your most loyal and profitable customer. While new customer acquisitions are important, I’ve been championing the notion that our first order of business is to take care of and sell more to our most loyal customers.
We are all aware that it costs substantially more to attract a new customer than to keep a current one – with some calculations suggesting that cost differential are 6 to 9 times greater for acquisition than retention. To that end, I’m encouraging small business owners to collect data on customers that allows them to understand the spend patterns of their current customer base. For example, you may know you average revenue per sale (let’s say it’s $50). That number is easily attained from almost any spreadsheet where you can find total revenue divided by the number of transaction from which that revenue is derived. For the sake of my example, we will assume you had $500 in revenue and 10 transactions. (What a terrible year that would have been.) While a number like $50 per transaction gives us helpful information for managing costs, a better number would be revenue per customer. In essence, how many customer s were involved in those 10 transactions. If you only have two customers, one who is responsible for nine of your transactions and the other responsible for one transaction, you know that you have two very distinct customer segments.
Data such as “revenue per customer” allows you to link transactions to real customers. What would it take for you to connect customer data to transaction data? For some it is as simple as a loyalty card, for others it’s capturing data early in the relationship and then using that data to code transactions with a customer id. Whatever it looks like for your business – now is the time to connect transactions to real people. Once that connection is made, you have a strategic advantage in understanding the annual average customer purchase value and more importantly the specific purchase value of each customer. With that information, you will gain knowledge of customer segmentation and can then create differing customer experiences, if necessary, to address the varied customer purchasing groups.
Joseph A. Michelli, Ph.D. is a professional speaker and chief experience officer at The Michelli Experience. A New York Times #1 bestselling author, Dr. Michelli and his team consult with some of the world’s best customer experience companies.
Follow on Twitter: @josephmichelli
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