Know your customers and boost your profits
Do you know which of your customers are the most profitable?
Do you know which of your customers are the most profitable? Are they repeat customers who buy often, but spend less per purchase? Or are they customers who purchase less regularly, but buy high-margin items?
Being able to tap into this kind of knowledge about your customers is really important for all businesses. The more you know about your existing customers, the more you can do to increase their spending on your goods and services.
Just as important, this kind of knowledge can help you focus your marketing efforts where they’re likely to be most effective and lead to greater sales opportunities for your business.
Building customer profiles doesn’t need to be complicated. If you’ve been in business for any length of time, you’ve already gathered a lot of information about your customers. Having a better understanding of your customers can lead to stronger relationships with them.
Here are some tips to help develop your customer database.
Keep track of where they live, their gender, how they heard about you, and who referred them.
Know the type of business, its size, the sector it operates in, suppliers used, and how the owner or manager heard about you.
Additionally, make sure you:
Any information that will help you build stronger customer relationships and identify future sales opportunities should go into your database.
There are a number of ways to use detailed customer profiles. Sending personalized holiday or birthday greetings, or a simple ‘thank you’ for their business, are some possibilities.
And depending on the nature of your business, reminding customers of regular check-up, maintenance, cleaning, or renewal dates is another.
Use your database to group individual profiles into market segments, so that you can target each segment with specific offers. Here are a few ways you can use the information in your database to better understand your customers and boost your profitability.
All businesses love to see recurring revenue streams. Having money come in weekly or monthly can provide much needed cash flow. But are these customers profitable? For instance, regular customers who take up a lot of your time or your staff’s time may be less profitable.
Are there ways for you to reduce your costs with your regular customers without compromising service? For instance, consider directing telephone or customer service enquiries to your website.
Tap into your staff’s knowledge to anticipate customer enquiries. Use this information to compile a list of frequently asked questions you can post to your website, and make sure customers know about it.
Look at the purchasing patterns of your customers who purchase less frequently. Customers who buy less will often be more profitable if they purchase goods with the highest mark-up, or if they use less of your time.
Consider doing a survey of your less frequent customers to gather more information about their needs. Are there ways to up-sell or cross-sell based on your findings and your customers’ spending habits?
It may seem counter-intuitive to turn away business, but sometimes it pays to retire certain customers.
A customer who spends a lot of money may seem ideal, but if that customer is using up more resources (staff time, technology, or materials) than they’re paying for, it’s not really productive.
With the help of your accountant, determine the cost rate and billable rate for you and your employees. If you don’t already have a time-tracking system in place, set one up. These steps will make it easier to determine which customers are less profitable.
These are just some of the ways that your database can help you spot patterns in your business and boost your profits.
By building a profile of your most profitable customers, you’ll know where to deploy your resources most effectively when prospecting for new customers.