The Importance of Understanding Your Customer Data 

Throughout the years, one can see a pattern of world change, downturn and survival. No business has been immune to this and many are susceptible for the most part. We are living in an uncertain time. While this uncertainty need not be negative, one has to think of ways in which to differentiate themselves. One way is to devise a relationship marketing strategy.

Relationship Marketing Strategy was a huge buzzword back in the 1990s. The idea of getting close to your customers, being their friend, answering their needs not yours was 'de rigeur' at the turn of the century. This buzzword should be at the heart of every business success. Yet many business owners that I talk to only spend 20% of their time on existing customers, the other 80% is spend on getting new customers. The idea of 'Surely, once a customer, always a customer' is changing rapidly in the economy we're looking at. Every customer counts and should count - existing and potential.

The cornerstone of a relationship marketing strategy is customer data. Whether you are sole trader, small to medium sized enterprise or a large organisation, having clear, succinct data on your customer's buying habits is essential. When do customers buy, what do the buy, do the buy extra product/service one day and not the next, etc should all be written down and not be only in the memory bank of the business owner. When it is down on paper, all the information can be analysed and reanalysed.

While a loyal customer can be described as someone who purchases regularly from you, there are levels of loyalty which every business owner should be aware of. After analysing your customer data, you can find that your regular customers can be further segmented. This will allow you to devise different messages to each group of customers, depending on their profitability and loyalty to the company.

Customers can fall into four categories:

1. True Friends

These are customers who are loyal and profitable.

These represent the highest profit potential. By communicating consistently (but not too often) and delighting these customers, organisations can nurture a really profitable relationship. Customers in this segment will be advocates of the organisation.

2. Butterflies

These are customers who are disloyal but profitable.

These represent high profit potential. The customer is basing the exchange on the transaction not the relationship and organisations should look to engage with (but try to not marry) the customer at every transaction.

3. Barnacles

These are customers who are loyal but not profitable.

These represent low profit potential. There is a limited fit between the company's offerings and the customers needs. There is potential for cross or up-selling here, however it does depend on the size of the customers wallet.

4. Strangers

These are customers that are not loyal or profitable.

These represent the lowest profit potential. There is little fit between the company's offerings and the buyers needs. Organisations should not put any resources into these relationships.

By analysing customer data with a fine tooth-comb, businesses can become more aware of their profit potential from existing customers. Not all customers are the same. Just as friends, we have levels of friendship and that sits well with us. The same applies to our business life. Customers are not equal. Once you identify who are loyal and profitable, you can invest more in those relationships. Similarly, you can divest your time and resources from non-profitable relationships and see them for what they are.

In summary, by focusing on the relationship rather than the transaction, organisations can create mutually beneficial relationships with their customers in a tightening economy. This is how successful companies will survive the uncertainty.

©Denise Fay, Achieve Marketing

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