Finding high value customers?
admin | Feb 22, 2009 | Comments 1
Customer segmentation, or market segmentation, is the practice of dividing customers into groups of individuals with common characteristics. These segments help companies gain a better understanding of customers, then grouping them into categories to better optimize marketing programs and spend.
Many companies will also divide these groups into high, medium and low value brackets, measuring the customer’s gross or net contribution margin. The reason behind this value based segmentation is the goal of attracting and retaining the highest value customers which would logically drive a higher ROI.
But, in the Routes to Revenue research, over 50% of the marketers polled say they do not have good insights into retention rates, customer profitability and lifetime value of their customers; leaving half of the marketers targeting all customers in a group regardless if they are high value, low value or no value. This type of strategy dilutes customer equity since the dollars spent are averaged, and the cost of acquiring, retaining and recovering customers becomes equal. Remember Liz saying, “What good is marketing and creating loyalty on a customer that does not pay their bills?” Targeting an entire group which would include “no value” customers in attempt to up sell or cross sell most likely will result in not growing customer equity.
The definition of Customer Equity differs, but in general it means the propensity for new or existing customers to continue to do business with you now and in the future. (Think Apple) Some estimate the customer equity value by revenues minus the cost of acquiring, retaining or recovering a customer. In fact, Roland T. Rust stated that a number of studies indicated customer equity is closely tied to the company’s market capitalization. (Again think Apple)
If marketers were to identify and target spend on profitable, high value customers and then create loyalty by driving messaging that is personal and relevant and grow customer equity.In fact, the Routes to Revenue research reported that personalized messaging that is more relevant and precise is the top strategy for 60% of marketers polled. Growing customer equity is a key strategy for 2009, and I think TransPromo is one proven vehicle that will deliver relevant messaging to the most profitable and valued customers – creating conversations that will drive loyalty now and in the future.
If marketers could identify high value customers and target spend by driving personalized messaging, customer equity would grow. In fact, the Routes to Revenue research reported that personalized messaging that is more relevant and precise is the top strategy for 60% of marketers polled. TransPromo is one proven vehicle that can deliver relevant messaging to the most profitable and valued customers – creating conversations that will drive loyalty and increase long term customer equity.
Filed Under: data analytics
Correct as usual, with one quibble that might help.
You say “If marketers were to identify and target spend on profitable, high value customers and then create loyalty by driving messaging that is personal and relevant and grow customer equity.
It might say, “if marketers kept their focus on when, where and why profitable high value customers gather and then nurture the probablity that they will give you their trust and loyalty, by giving them information that is interesting…”
The sometimes under appreciated aspect of transpromo (or should it be transinfo?) is that if executed correctly, the process can supply real time data on the formation and disbanding of gatherings of high value customers. It can also help define that magic bullet of marketing, “What will be interesting to that customer at that time.”
I remember that in an earlier post, you referred to this capability as predictive analytics.