By Kevin McSpadden, Managing Director of More2
As a starting point, business is quite simple. A business exists to create products and services to meet a need or solve a problem.
It’s customers who purchase these services or products. A business who does not understand its customers and customer base, cannot hope to understand the different needs and motivations that drive them to buy or return.
Once a business has this knowledge, it enables them to ensure their products and services are relevant and compelling to each segment of their database, driving both retention and acquisition.
Understanding what each customer is worth to a business, over a year and longer (lifetime value), is vital; it’s also important for companies to understand how this value changes dependant on the customer type and recruitment method so they can balance the cost of recruiting new customers with the costs of retaining and growing the relationship with existing ones.
Data is the vital ingredient needed to understand customers and their lifetime value. Businesses who do not understand the value of their customers normally make mistakes when recruiting new customers. If they under-estimate the value of a customer, they may under-recruit or conversely, may spend too much recruiting and never get the sales revenue back to cover the marketing costs of recruiting them. Recruit the wrong profile of customer and ultimately, your long-term business suffers.
This insight will determine which areas of the business need to be developed and what new products or offerings need to be created. For example, if young people are the most valuable customer segment in your database, developing services specifically with them in mind will be a worthwhile and effective strategy for moving the business forward.
By making sure that the data you collect, manage and analyse is processed and interpreted correctly, you can build an accurate understanding of your existing customers profile, which in turn will allow you to find similar customers and grow your customer base and business.
Similarly, data can be used to boost retention rates of existing customers. Most profit normally comes from existing customers as they have already bought into your offering, making them cheaper to market to and easier to serve. By marketing to existing customers, in almost every business you will get a much greater ROI from marketing to existing customers.
Furthermore, by understanding your existing customers and the various segments within them, based on profile or product history, you can ensure your marketing messages are segmented to be relevant and targeted to each individual recipient.
If you assume all customers are the same and send one message to everyone, you will get, at best, an average response. At worst, you risk alienating your customers to the point that they may leave and choose one of your competitors.
Asides from customer management, data can help you to make a number of business decisions that will ultimately help your to grow and impact your bottom line. For example, if you are a retailer, you can use your existing customer profile to help you select the best locations for new stores. However, even though data does have specific uses, the main advantage it offers is a means of evaluating and qualifying everything you do. You cannot improve anything in your business if you do not measure its success.
If you do not use data intelligently, you risk spending lots on marketing without really understand whether it is contributing to your sales and profits in the short and long-term. There is no reason in this day and age not to measure campaigns, and those who choose to partner with experts and make sure they are making the most of their data and what it can offer their business are the ones who reap the rewards.
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