Catering to high-value customers can be key to improving profitability. I know this from personal experience as a business owner and as a consultant.
In the early days of my marketing studio, Tote + Pears, I made the mistake of trying to attract any and every customer, thinking it would lead to more profits. But I found that that actually led to us more frequently bringing on the wrong type of customer, which had the opposite effect. Longer onboarding times can cost us in multiple ways. We saw increased costs, lost traction in the market, and lower team morale as a result of the misalignment. It wasn't until I focused on finding and investing in our high-value customers – people and businesses who shared our values and valued our expertise – that things began to fall into place.
When you’re running a business, every resource and effort counts, and identifying and nurturing high-value customers could be just what you need to help increase productivity and profitability.
How Do You Identify Your Best Customers?
When it comes to customers, what is a high-value target? The first step in identifying your high-value customers is understanding your business's unique selling proposition (USP). What sets your business apart from your competitors? What are the key benefits that your products or services offer?
Once you have a clear understanding of your USP, you can begin to identify the types of customers that can be most likely to be interested in what you have to offer and tailor your marketing efforts and resources toward bringing them to you. Then, as you grow your customer base, you can use any number of analytics tools to better understand the customers who are driving the most revenue. Here are a few tips to help you find and nurture your most valuable customers.
1. Pay attention to Average Order Value (AOV).
Customer value can extend beyond sales volumes. You also should try to understand their profitability, which can be measured through Average Order Value (AOV), a performance metric used frequently by retail and e-commerce businesses to evaluate the average amount of money customers spend during a transaction.
To calculate AOV, you divide the total revenue generated from all orders within a specific time frame by the total number of orders during the same period. For example, if a clothing store generates $10,000 in revenue from 500 orders in a month, the AOV is $20 (AOV = $10,000 / 500 = $20).
This metric can provide insights into customer purchasing behavior and can help you make informed decisions about pricing, marketing strategies, and revenue projections. It can also be important to understand what you’re investing in marketing to get customers to have a clearer picture of profitability.
Comparing the AOV across customers can lead you to your high-value accounts, the customers who are spending more at your business.
2. Consider customer lifetime value (CLV).
Timing can be important when searching for high-value customers, and data analytics tools can help you identify high-value customer segments quickly. By evaluating your sales over time, you may be able to determine which customer types will likely have the highest lifetime value. To help measure customer lifetime value, you can look at retention rates and net promoter scores.
Once you learn how to identify consumer segments, you may then use those findings across your organization, from marketing to operations to customer support to finance, to connect with high-value customers in multiple ways, helping to lead to greater profitability.
For example, if you run an e-commerce store, you can use data and analytics tools to track the purchasing habits and interests of seasonal customers and then create retargeting marketing campaigns to engage them throughout the year. You can build on those communications and engage over time to further drive CLV.
3. Encourage reviews and social media engagement.
When making purchasing decisions, customers may rely more on earned media like peer reviews and social media posts than traditional corporate advertising. Your most loyal customers can also be your best source of reviews. Consider encouraging them to leave a review on your website, online storefront, other review site, or join a conversation on social media. Consider offering them a reward, such as a coupon or a chance to be entered in a drawing for a shopping spree, to incentivize their participation and continue the relationship. This investment can help build customer loyalty that provides long-term returns.
Even when you target repeat customers expecting them to have only positive things to say, try to be prepared for negative reviews. However, negative reviews can present new opportunities when handled with care. By addressing their concerns, you can show them (and potential customers who may be watching) that you’re listening and committed to meeting their needs which, ultimately, can be what high-value customers want.
Unlocking the full potential of your business may hinge on a strategic focus on identifying and nurturing high-value customers.
4. Focus on retention.
It's can be more cost-effective to retain existing customers than to find new ones, but sometimes, as business owners, we can get so focused on getting new customers that we may forget about the ones who have been loyal to us for years.
Having long-term customers can help contribute to sustained profitability and many other benefits. These customers may buy more products or services, which helps increase profits. They may also become brand advocates, telling others about the company and leaving positive reviews. Investing in high-value customer retention may pay off in many ways.
Creating an engaging communication plan, building loyalty programs, and offering an exceptional customer experience can be just a few low-cost and easy ways to help keep your most high-value customers coming back.
5. Add on products or services.
Cross-selling and upselling can be powerful tools for enhancing profitability. By offering customers a range of products or services that complement their existing purchases, you can help increase revenue while building strong, lasting relationships with your most valuable customers.
Consider providing personalized recommendations and reliable customer service to help build trust with your customers. You can start by using data and analytics tools to help identify your high-value customers. When you understand their preferences and purchasing habits, you may then use those data-driven insights to target high-value customers with customized recommendations.
6. Find and partner with the right influencers.
Influencer marketing and brand collaborations can provide opportunities for connecting with high-value customers. The right partnerships can help you engage with new audiences (and offer more value to yours), which may help lead to increased brand recognition and customer engagement, and ultimately, to more orders, revenue, and higher customer lifetime value.
To find potential brand ambassadors, consider doing thorough research to ensure alignment with their ethos and values. Then you can work together to create a high-value customer strategy that can help engage your existing customers and bring new ones to your platform.
7. Seek out and respond to feedback.
Customer loyalty can be an integral part of any high-value customer strategy. And gathering high-value customer feedback can be one way to identify new opportunities to connect with your customers. When you know what your customers are experiencing (the good and the bad), it can allow you to make improvements to products, services, and your customer experience that you may not have known about. You can start simply with just an email questionnaire or you can partner with a marketing agency to gather detailed results. Then, you can use the findings to help prioritize improvements to your products, services, and experiences. Consider keeping your customers informed of your progress so they know that you’re listening and that you care.
The Value of Your Most Valuable Customers
Unlocking the full potential of your business may hinge on a strategic focus on identifying and nurturing high-value customers. This approach is more than a business mantra; it can be a dynamic strategy that helps to drive profitability, cultivate customer loyalty, and foster sustainable growth. Regularly evaluating your customer base can be essential to ensure that resources are channeled effectively.
Key tactics can include leveraging customer relationship management (CRM) tools, consulting marketing experts, and prioritizing high-value customer feedback to help gain valuable insights into improvement opportunities. Prioritizing these customers can be crucial to engendering customer loyalty that resonates over time.
Understanding your unique selling proposition (USP), evaluating average order value (AOV), considering customer lifetime value (CLV), embracing buzz generation, focusing on retention, cross-selling, upselling and forging influencer partnerships can all be vital components of a holistic high-value customer strategy. By focusing on high-value customers, you can help to forge a path toward greater profitability and enduring success.
A version of this article was originally pubished on September 04, 2012.
Photo: Getty Images
