September 2005 - Customers

Internet Marketing Tips Newsletter
“Customers - Who Are Yours?”

Publisher: Enable UK

Welcome to this months issue of Internet Marketing Tips Newsletter.

What every business has in common is that it needs customers. Sounds a little basic but what do you really know about yours? Do you know who they are, what they like, where they hang out, what they do when they’re not working? And if you know these things, are you targeting your sales message to your best customers? And if you are, are your new customers becoming good customers, buying again and again?

In this months issue we start a brand new series all about customers that will help you answer all of these questions and make your Internet Marketing more effective and profitable.

For further tips and advice on all areas of Internet marketing, visit http://www.enable-uk.co.uk

I hope you find the article and the whole series useful.

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Customers – Who Are Yours?

Who are your customers? Do you know who your best customers are? Do you know how much they buy, and when they buy it? Do you know how they use your web site?

How you gather the information to answer these questions can be a bit of a complex process. The clarification involves discussions between your sales and marketing departments, the web designer that built your web site and an amount of data analysis. Your marketing department should be able to clearly define who your best customers are and this should be backed up by sales data from your sales department. The web designer should be able to engineer a system to track the online behaviour of those customers.

What you need to identify first are your particular customer types. Customers fall into distinct categories. There are your most loyal customers, the ones who always buy from you and/or put in sizable orders. There are the sometime customers, those who purchase regularly from both you and your competitors and therefore have the potential to become better customers. There are the occasional customers who infrequently buy from you, particularly sale or special offer items. There are former customers who no longer shop at your web site and there are the browsers, those who have visited your web site but have never bought from you.

You can create a winning online presence by understanding how your customer base breaks down across these categories. The rule of thumb is the best 20 percent of customers generate 80 percent of revenue.

How To Categorise Your Customers by Profitability

Finding your top 20 percent of customers.
To determine your top, average, and lowest-performing customers, rank customers by total sales over the past year. Create a cumulative total sales column, starting with the highest-revenue customer. Develop a cumulative total sales percentage by dividing the cumulative total sales by total sales for the year. You can now easily identify which customers generated what percentage of total sales and simply identify your top 20 percent.
Determine whether customers are profitable.
To analyse these figures further you can determine a customers true worth by looking at their profitability rather than just their sales figure. It is worth calculating this figure if you market differently to different sections of your client base, as they will therefore have different associated costs. A customer is truly profitable when the revenue they generate exceeds the fully loaded costs (i.e., production costs, marketing, and overhead associated with servicing this customer).

A profitable customer = customer revenue — (production costs + applicable marketing costs + allocated overhead) > 0

As this analysis shows, all customers aren't created equal. To increase your profits, you must target your marketing to those segments with the greatest profit potential.

How This Should Translate To Your Internet Marketing and Web Site

Enhance your relationship with your loyal top customers.
At a minimum, acknowledge the importance of your loyal top customers, who comprise around the top 20 percent of your customer base.

Regardless of the software used, information extracted from the analysis of your web sites performance should help improve your marketing. Some of your best customers may always visit a certain area of your site. That may mean it should be featured more prominently on the site. Your best customers might use certain services on your site. These should be featured in your marketing. They might look for more information on certain products. Maybe you should feature that information in your sales efforts.

Use special touches to delight these customers and humanise the relationship. Consider creating a rewards scheme or a special by-invitation-only offers for your very best customers. It can enhance the cachet of being a preferred customer. Don’t forget that these customers also tend to refer other good customers.
Improve marketing to “Sometime” customers.
Many of these second-tier customers, the next 10 to 20 percent of your base, have the potential to become loyal top customers. Develop programs to make them feel special without sizably shrinking your margins.
Maintain promotion to the “Occasional” customer. Constituting about half your list, these customers will often purchase for the same reasons they did before, barring any change in either your offering or their circumstances.
Manage bottom-tier “Former Customers” proactively. The bottom 10 to 20 percent of your customer base probably hasn't recently purchased. You need feedback to understand why. Did they only purchase a gift? Did they have a bad experience with your company? Develop a plan to market to or drop these customers by segment.

Former customers can still be profitable, implement or extend a customer win-back program. Based on customer feedback, test different offers to restart purchasing. You already have their contact information and they already know your brand, so acquisition costs tend to be less than for a totally new customer. Every win-back creates a second customer lifetime value.
“Browsers”.
These are a slightly different kettle of fish as they are not yet customers. The topic of converting these browsers into customers is covered in depth in our series of DIY Internet Marketing Guides available here: http://www.enable-uk.co.uk/html/diy_internet_marketing_guides.html and will also be touched upon later in this series.

Ensure no profitable customer is left behind by tailoring your message to meet each customer’s needs and potential. All customers aren't created equal and understanding the dynamics of your customer base is critical, especially as online retailing matures and growth rates slow. Finding ways to maximize the value of each profitable customer relationship is even more critical to maintaining business momentum and maximising your Internet Marketing activities.

Is your web site driving high quality, targeted customers to your business? Learn how to make your web site work harder for you by downloading our DIY Internet Marketing Guides packed with tips, information and advice on all areas of Internet marketing. Stop losing customers to your competitors and start making more money from your web site TODAY.
http://www.enable-uk.co.uk

To catch up with previous issues of this newsletter, visit:
http://www.enable-uk.co.uk/html/internet_marketing_newsletter_.html

If you have any questions about any of the topics raised or any other Internet Marketing issues, feel free to Contact Us. I do my best to answer all questions or to cover the issues in future editions of this newsletter.

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