The idea of focusing more on valuable customers might seem luxurious to some as small businesses need customers of all kinds. However, there are still customers, both in small and large businesses, that matter more than the rest because of certain qualities they possess that make them the most valuable. This article talks about the metrics for recognizing the most valuable customers (MVCs) and why businesses must build stronger relationships with them.
Why do you need to learn more about your customers?
Before talking in detail about how to recognize which are your most valuable customers, you must understand why it is important to do so. The simple answer is to sell more. Knowing more about your customers empowers you with knowledge of their needs, buying behavior, opportunities to sell to them and helps you to figure out ways to target them. This can also enhance the customer service you offer. Further, this information can be used to provide them with customized experience and services tailored exclusively for them.
Also, understanding your customers better leads to informed decisions that help you make better plans. You can be prepared in advance for what and how much your customers are going to buy. This can significantly improve profits.
Customer profiling is important to not only sell better to existing customers but also to find new ones. New customers exhibiting similar behavior can be targeted and sold to. While finding out your MVCs, it is important to comply with data protection regulations. There are many tools available for use that can establish customer profiles while not violating any rules.
Five Metrics to Identify your MVCs
- Frequency of Purchasing
Start by finding out how frequently a particular customer buys from you. The insights about purchase frequency can be the basis for finding out customers who purchase your products or services most frequently. While customers who buy frequently must not be confused with loyalty, it definitely suggests that these customers are comparatively easier to retain. Therefore, these customers can be considered worthy of being MVCs.
- Price Sensitivity
The next thing to note is price sensitivity in customers. Purchases are motivated by various reasons and there can be customers who highly sensitive to price. While these price-sensitive customers cannot be eliminated from your list of MVCs, it is very useful to know which of them are only likely to buy when there is a good deal while which ones can still go through sales even if the price fluctuates a little.
An easier way to determine this is to know which customers have increased the purchasing when the prices are lowered. Try to intelligently pick up the customers who buy from you at all times while their frequency might increase during sales.
- Average Value of Orders
Average order value is an important metric that points towards how interested a customer is in buying from you. While this alone cannot be the reason behind whatever you decide, it will make it quite clear if your customer will stay with you long term or not. You might set up a system where you are notified when you receive orders above a certain value.
- Total Value of Customer
Another significant metric to consider is customer lifetime value. This value refers to how much a customer has spent in total since the beginning. This is important because there can be customers who can make one big purchase in a week and not appear again. However, identifying customers who have spent the most over time and tried to maintain a relationship is a good way to determine MVCs.
- Customer’s Capacity to Buy
It is impossible to look at your customers’ bank accounts and even if you can, they might not give a very clear picture of their buying capacity. It is only from the buying behavior that you can determine which customers are affluent and will continue to buy from you over the long term.
It is crucial to keep reviewing your customers and adding and removing your MVCs. It will help you plan your efforts. Keep checking this space for more insights.