Customer loyalty means profit. And it’s really that simple — studies show that a repeat customer can be at least three times more profitable than a single purchase customer. The best return that can be generated on marketing dollars is when they are spent on customers who are already known to be, or likely to become high value, loyal customers. Many businesses are great at identifying who their most profitable customers are once they are on the transaction file, but imagine the value of loading that information into frontline marketing strategy. In other words, what if you could figure out who is most likely to become your best customer and market to them specifically?
Identifying Your Best Customers
There are really two aspects to implementing this idea successfully. The first and easier of the two is targeting known loyal customers and keeping them engaged. Much more difficult, but quite worthwhile, is to deconstruct exactly what qualities are shared by these customers. Once you do that, you can form a strategy around marketing to people who also fit within the same framework and are thus likely to mimic profitable and loyal buying behaviors.
This process begins with identifying who your loyal customers are. Start by looking for repeat buyers in your sales file; the true gold mine is to figure out which customers are not only loyal, but also high value, meaning they make the most profitable transactions. There is a strong correlation between loyalty and profitability, so isolate the top 10% of customers who made the most profitable purchases.
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Once identified, the big question is who are these customers? What makes them tick? The biggest things to look for are commonalities in demographics and psychographics. These can be any identifiable attributes such as tastes and preferences, household income, age, attitudes and influences. Some of this information may be in your sales file, but the most useful attributes are quite detailed and difficult for most marketers to obtain internally. To really draw a clear picture of who these customers are, it will likely be necessary to draw on big data supplied by a firm that specializes in marketing analytics like Neustar or Axiom.
Once enough commonalities of your best customers are identified, a model can be drawn of what this target segment looks like. With a full picture of exactly which qualities compose this target market, a campaign optimized around what products and messages appeal to them most can be formulated and implemented.
The media channel best suited to resonate with your segment will vary depending on the preferences of the people it contains. In direct marketing, behavioral media buys, email, and direct mail are often the most highly measurable and cost efficient tactics. The strategy should be further refined when retargeting existing customers by considering past purchase history in order to offer complementary products. Couple this with online landing environments that speak the target’s language, and you will be set up to win.
Social Influence
Another technique being explored by smart marketers is the utilization of social media to learn about and speak to their highest value customers. Working in this space requires a great deal of finesse, as maneuvering the social stratosphere has not yet been mapped by marketers or retailers — it is still considered to be the Wild West. Flush with opportunity.
Despite the great unknown and risks of upsetting customers, social media is a valuable asset to work with because the marketplace is changing. Word of mouth has long been the most valuable marketing communication available and social media has enabled wild growth of consumer to consumer communication. This has largely come at the expense of business to consumer communication, which is losing relevance in customer decision making.
That, however, does not mean that businesses are completely powerless. Not only can business to consumer communication still be effective when used properly, but businesses can also influence consumer to consumer communication. To do this, it is imperative to learn who the key influencers are in the consumer to consumer space. They will be the people that already have a relationship with the business and this can be confirmed by cross-referencing with an existing transaction file.
These influencers are the gateway for businesses to reach out to through social media. Never designed as a sales outlet, many users have heightened sensitivities against entities unknown to them. There are also many privacy issues that make reaching out to new customers who do not want to receive marketing media a challenge.
This is why it is so important to leverage the influencers in social media spaces. The first and simplest way to do so is to engage with them directly and let them evangelize for you as proxies. The second way is to use them as gateway or bridge to other users, which helps mitigate the awkwardness of marketing to brand new customers. If they see that someone they are connected to has a relationship with you, then it makes your marketing more organic and genuine and the customer less defensive. Think of it as a digital referral or endorsement that opens a door to communication.
No matter how you reach customers on social media, it is massively important to be as unintrusive as possible. People who like your business on Facebook have given you de facto permission to communicate with them, but that permission is quickly revoked the moment you intrusive to their personal communication. It is therefore of the utmost importance to balance marketing tactics with respect for the customer.
Finding Success
If social media strategy seems unclear, that’s because it is. In fact, nobody has quite figured it out yet — There have been a few notable social media success stories, but monetizing that success into conversion numbers has been elusive. Social media is ripe with customers and that’s what makes it such an attractive arena worth pursuing, despite the unknowns and how much harder marketers have to work to succeed in it. The potential and incentive is so high that effective and proven social media strategies will eventually become commonplace. In the meantime, it should continue to be explored and developed with a degree of caution.
Whether using traditional advertising channels or emerging ones, high value customers are worthy targets of pursuit. Profitable customers are also loyal ones, it makes sense to engage in loyalty efforts. Keeping loyal customers engaged while also targeting people who fit the model of these customers should be primary goals of any valuable marketing strategy.
Ryan Woolley is Senior Vice President, Digital Marketing Services of Response Mine Interactive. a digital agency that helps clients acquire more customers using hard-core direct response marketing. Woolley is a digital marketing expert who leads both system design and operations; he is a strong client advocate with a focus on new business development and strategic planning. With 13 years of interactive marketing experience, Woolley has managed and grown the strategy and relationships for key clients including Terminix, Staples, SPANX, Travelzoo, and Carter’s/OshKosh B’Gosh.
