Customers are not created equal,
so what strategies are you using to retain and maximise your high-value customers, up-sell medium-value customers and manage low-value customers?

Back in 1906, Italian economist Vilfredo Pareto outlined the basic observations of the Pareto principle – typically, 20 per cent of your customers are responsible for 80 per cent of your sales. In fact, most businesses can divide their customer database into high, medium and low-value customers. Medium-value customers typically make up 60 per cent of your base and contribute 15 per cent of revenue. Low-value customers will make up around 20 per cent of the base and contribute only five per cent of revenue.

According to Jeff Healy, from WA-based customer engagement consultancy Monkey Logic, a business owner’s first step should be to use their CRM database to analyse each group and get an impression of what each segment looks like.

“As a business, you have limited resources in terms of time, sales focus and marketing spend at your disposal,” says Healy. “It makes sense to allocate your resources according to the lifetime value of the customer.”

A segment analysis may also reveal better ways to engage with a particular group. “You may discover that a particular segment prefers face-to-face contact or communication on a platform like email or social media, for instance,” says Healy. “Targeting an offer to a segment or presenting it on a preferred communication platform may automatically increase the segment spend.”

High-value customers

If you have a loyal customer who already loves your brand, it can be tempting to focus your attention on up-selling medium-value customers or acquiring brand-new customers. However, it’s generally accepted that it costs businesses more to acquire a customer than to retain an existing one.

“You need to look at your retention strategies,” says Healy, “and your salesperson or team should allocate face-to-face time with these important customers or clients.”

Since these customers already love your brand, a simple way to strengthen the relationship and increase their spend may be to communicate with this segment more often. “If you are sending
out a newsletter or catalogue twice a year, why not double the frequency?” suggests Healy. “If a customer has an emotional attachment with your brand, they will welcome the contact, as long
as it’s relevant to them.” To help maximise engagement and brand goodwill, ask your customers how often they would like to be
contacted and what form of contact they would prefer.

Remember to let your high-value customers know about new
products or services; even better, let them know first, as just one
of the added benefits of being your best customers.

Medium-value customers

In order to increase share of wallet with your medium-value customers, Healy suggests looking closer at the sales techniques you are using with this segment. “Consider the offer, as well as the communications channel,” he says.

If you have a large customer base, you may even be able to test this. Send a unique offer (say, a straight 10 per cent discount) to 10 per cent of medium-value customers. Send a different offer (say, a free gift with purchases over $50) to another 10 per cent. Once you know which offer is more successful, send the best-performing offer to the remaining 80 per cent.

This testing method can also be used to compare channels, keeping the offer the same but the channel different.

Low-value customers

On the face of it, low-value customers can appear to be a poor business investment. However, one of your low-value customers now might be a university student with little disposable income but with huge potential lifetime customer value down the line. Low-value customers may also be the friends, family or colleagues of medium and high-value customers, so they have a role to play in both word-of-mouth marketing of your brand and social media.

“Nowadays, consumers are certainly in the driving seat in terms of the reputation of your business,” says Healy.

To maintain a respectful relationship that preserves goodwill, you might want to cut down on more expensive communications to this segment, instead channelling them to visit your website or follow you on Facebook or Twitter. Low-value customers are still able to join in brand conversations and have access to special offers on these platforms, but your targeted communications are focused elsewhere.

The views expressed in this article are those of the author and the interviewees, and not of Australia Post.

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