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Value Your Customers – In More Ways Than One Staffordshire

How much are your customers worth? Strange question? Well, think about it. You know, often instinctively, that some customers are worth more to you than others – they buy frequently, big-ticket products, through low cost sales channels, they are happy with the service and products they receive and so they recommend you to others.

D Booth
01299404303
Cold Harbour St. Johns Lane
Bewdley
 
E B C Corporate Consultants Ltd.
020-7621-0101
East India House
London
 
Fitch Consultancy Services Ltd.
Porters South
London
 
Abex Coal Ltd
100 Fetter Lane
London
 
Business Partners (Cambridge) Ltd.
01954-251945
35 Dunstal Field
Cambridge
 
Dovedale Management Services
01929459401
Pigeon Plottes Jennys Lane
Poole
 
Josephine Young
01202-420320
20 Kimberley Road
Bournemouth
 
Needham & Needham Ltd.
01923-242660
270 Hempstead Road
Watford
 
The Marketing Group
The Old Station
Solihull
 
The Caci Clinic
01963-371171
The Willows
Templecombe
 

Value Your Customers – In More Ways Than One

The most successful businesses are one’s that recognise the value of their customer base and exploit that value most effectively.

All too often businesses, especially small businesses, spend most of their sales and marketing time and money trying to find new customers, not realising the value of the one’s they already have.

This article explores why it’s important to realise the value of your existing customer base. How you can quantify the value of each customer and why a realisation that not all customers are equal could result in greater customer satisfaction, saving your company money and ultimately improving profits.

Customer Value
How much are your customers worth? Strange question? Well, think about it. You know, often instinctively, that some customers are worth more to you than others – they buy frequently, big-ticket products, through low cost sales channels, they are happy with the service and products they receive and so they recommend you to others. Clearly they represent better value to your business than customers who have bought once, having been attracted by expensive advertising, and who insist on seeing a salesman before they sign the order.

Have you quantified all sales costs and calculated the gross profit each customer represents to your business? Possibly not, but it’s well worthwhile doing. If it’s difficult to get down to an individual customer level in your business think about ‘types’ of customer rather than individuals.

  • Multiply the annual sales you make to the customer with the gross profit you make on each product they buy
  • Calculate the cost of sales, including the costs of advertising, promotional activities, your website, sales force costs, discounts and incentives.
Take the costs away from the profit on sales to give you a gross profit figure.

If by this stage you’ve started to get concerned about the degree of detail you might need to go into look at it another way. If you have thousands or even tens of thousands of customers you may prefer to start with a simple segmentation approach. Looking at value in terms of sales vs cost to sell on a simple 9-point grid.

Customer Value Segmentation

Without even looking at the detail it is obvious that you want as many customers as possible in box 1 – high sales value and low cost to serve, and as few as possible in box 9. In fact you might seriously consider divesting yourself of box 9 customers, perhaps through service or pricing strategies.

Once you’ve obtained a better understanding of customer value on this one-dimensional scale you need to think about the impact that TIME will have.

So, the next thing to consider is – what is your customer retention rate? Or to put it another way how many customers do you lose each year?

If you know your retention rate and your cross sales rate what are your objectives in this key area. And if you haven’t set quantifiable, SMART, objectives you should.

As if you need any proof that this is worth doi...

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