The 80:20 rule applies to most things in life. Customer spend is often one of them: in most businesses, 20% of customers provide 80% of the sales revenue. This group of “super-customers” are the key to growing your business. These are the customers who can be most easily persuaded to spend even more and who are likely to remain customers for the longest period of time. Specifically, these are the customers with high Customer Lifetime Value.
But how do you identify them early? What are the keys to finding, growing and retaining big-spending super-customers?
There’s been a lot of research that has examined the biggest e-commerce companies around as well as large retail brands. It turns out that they all focus on identifying potential super-customers as early as possible in their relationship with them. Catch them early and you have the opportunity to grow ordinary customers into super-customers, and to retain them longer.
So, who are the super-customers? How do you identify them? What are the clues? Here are the eight factors we at mThinkDigital like to focus on – if a customer falls under any three of these, then they should be getting significantly more attention then the rest of your clientele:
#1: Size of first order
It seems obvious that a bigger first order shows that someone likes you, but it’s surprising how few marketers consider it. It shows that the customer not only likes your products but also your brand. It means you have the foundation of a longer-term relationship already in place.
#2: Time spent on website
Again, a great indicator of someone who really enjoys your products and presentation. And of course, the more time they spend on your website, the more brand messaging and product variety they are exposed to.
#3: Email engagement
People that interact with email campaigns are more likely to become high value customers. An email “open” indicates a greater level of interest and potential lifetime value, while clicks can give even more insight into how to develop the relationship further.
#4: Multiple product lines in first order
Buying multiple types of product from you indicates that you are being considered as a one-stop shopping destination. Don’t mess it up by getting your shipping wrong. A customer with a baby rattle and some men’s shoes in their first order is more likely to become a super-customer than one who is simply buying a coat (even if the order value is identical).
#5: Traffic source
You probably already know that some of your traffic sources convert better than others. If you have progressed to calculating Customer Lifetime Value across different segments you will know that traffic sources vary dramatically in terms of how much profit can be gained from each customer as well. At mThinkDigital, we encourage clients to use CLV to evaluate their media campaigns – it’s a much more insightful metric.
#6: Time between first and second orders
Potential super-customers tend to allow less time to pass before they order from you again. The shorter the time between the first and the second order the higher the likelihood that they will become a super-customer. Time between orders is a key indicator of customer brand enthusiasm and satisfaction.
It won’t be a surprise that customers in Manhattan are likely to spend more and have a higher Customer Lifetime Value than those in Boise. Location data (zip codes at the simplest level) can indicate average income levels and differing spend patterns – really useful data for identifying your potential super-customers.
Holiday shoppers are harder to convert into super-customers. They probably came to buy a gift or a one-off purchase. This means that it’s important to try and use that one transaction to introduce them to other product lines and marketing messages, and also to then be prepared to downgrade their priority for promotional dollars so you don’t spend valuable marketing resources on them.
In addition to running mThink.com and the Blue Book, Chris is also the CEO of mThinkDigital, a San Francisco-based digital marketing agency focused on e-commerce and customer acquisition. www.mthinkdigital.com