4Rs of optimising the profit from your customer base
by: Shweta Jhajharia
Shweta Jhajharia, founder of The London Coaching Group, explains why marketing is not just about lead generation and looks at the 4Rs of optimising the profit from your customer base.
|Most business owners hear the word marketing and believe it’s all about lead generation; pulling in new enquiries and gaining new customers.
However according to Shweta Jhajharia of The London Coaching Group this is not the whole picture. Marketing is actually about getting more business. And that includes getting more value out of your existing customer base.
In order to understand how to achieve this there are two customer terms that need to be defined:
"Profitable" – i.e. the customer is bringing you high value. This is the absolute gross profit taking into account the volume of sales.
"Active" – i.e. the customer has made contact or otherwise engaged with you, within a set period of time. This will vary depending on your business.
Here is Shweta’s advice on the 4Rs of segmenting your customers and marketing to them:
High Profit, Active Clients – Retention
Those who are bringing you high profit and are active. Generally, these will be the 20% of customers that give you 80% of your business. You need to keep these.
Think about retaining them. Have they stopped communicating, are they buying lower margin products, or not buying at all?
1) Loyalty strategies. Think personal gifts, loyalty programs, rebate points, special deals and freebies. Highlight the higher margin products to prevent them dropping into a lower profit category.
2) Referral strategies. Decide how, who and when to ask for referrals. You can download a simple 3-step referral system here.
3) Closed-door sales. Take the 15-20% that give you 80% of your business and really making them feel special. This is what customers stick around for and how you create raving fans.
High Profit, Inactive Clients – Reactivation
These are the customers who may have once been purchasing at a profitable level, but have started to communicate less with you. Find out why.
You are just reaching out to them - not selling. You want to remind them that you exist, and keep your brand in their thoughts.
1) Email Sequences. Prepare three emails to go out to them, that are punchy and straightforward, offering real value to them when they re-engage with you.
The point is to be appearing in their inbox, and associated with valuable content. So when their need does arise, you will be the first one they think of.
2) Telephone Calls. While emails are effective, a phone call can double your reactivation rate. This is a customer care call. Extending a free invitation to an event is a great reason to call and a good reactivation funnel.
3) Find out if something has gone wrong. Then rectify the problem.
Remember that if you truly believe in your product or service, then sales is an education process, and not reaching out is doing a disservice to your customers.
Low Profit, Active Clients – Reconditioning
These are your Comfort Zone clients. You may be afraid to touch them in case they stop buying from you altogether, but the truth is there is more that you can do.
Focus on reconditioning the situation, so that the customer is getting more value and is giving you more value in return. Ask yourself, "What is the lever I need to move here?"
1) Change the product mix or options so that they become more valuable to both you and the customer.
2) Increase your prices. Remember most customers are more interested in value than cheap.
3) Negotiate with suppliers to bring the price down; your customer does not undergo any change, but you increase the value they are giving you.
Low Profit, Inactive Clients – Reach
Don’t place your emphasis here but do have a strategy ; they may become more valuable in the future.
Reach out with minimal effort.
1) Automated follow up. They should not contain a hard sell. You are simply regularly showing them you are of value, until they have need for you again.
2) Social media. Post regularly to remind them about you. Use automation software such as Buffer and Hootsuite to save time.
Once you can clearly place your customers into these categories, you will be far better positioned for stability and smart growth.