Blog posts tagged lifetime value

Not all customers are created equal…

Let me explain...

What I am talking about here is customer segmentation, and identifying the 'best' customers for your business.

The 80:20 rule comes into play very often when analysing customers — where it's typical to find 80% of your profit coming from 20% of your customers. This is WHY all customers are not created equal — some of them make you a lot more profit!

You should never just want ‘more customers’; you should always be looking for more of the RIGHT customers. As soon as you know in business who your 'best' customers are, you can start to be strategic in your Marketing (and usually by 'best' we're talking most profitable customers — but it can be other measures).

And remember it is the LIFETIME VALUE of customers that is important in analysing your customer base i.e. how much profit you will make from a customer over the ‘lifetime’ that they buy from you, and not just the first or one-off purchase that they make.

So once you've found out who your best customers are, what do you do?

Easy — you find more of them. If you know who they are, what they buy, how they buy, and what they pay, you can put yourself in media where they are. And if you don't know the answers to these questions, now is the time to ask your customers and find out the answers.

Remember you don't just want 'more customers’; you want more of your 'best customers'.