Low-Value Customers: Medium Recency / Medium Frequency
Who? : customers who have bought a relatively long time ago and not too often.
Tactic: Customer centricity implies that you don’t want to concentrate on these customers. How can you decrease spending on these customers? After all, they don’t generate a lot of value. Exclude them, for example, in specific paid acquisition campaigns and focus on “cheaper” acquisition by e-mail.
First Time Clients: Recency Very High
Who? : customers doing business with you for the first time.
Tactic: You have to subject them to an onboarding trajectory in which you encourage them to make a first repeat purchase. Example: provide your customers with a video that contains an instruction manual.
What happens if you don’t work customer-centric?
Big players like Amazon, Zappos, Coolblue, Bol have already fully integrated the customer centricity philosophy into their daily routine. If you do not start treating your best clients the best way possible (= customer centricity), your direct competitors will soon begin. Perhaps, they have already started?
Shoe giant Zappos has adopted customer centricity and knows how to satisfy its most valuable customers with a striking condition: free returns within 365 days. They do so because they noticed that their most loyal customers also have the highest return rates. This strategy is proving to be profitable for Zappos, despite the high cost of returns.
Customer loyalty is at an all-time low as customers leave your business without a blink due to increased price transparency and ever-growing competition. It becomes increasingly more expensive to acquire new customers at an acceptable ROI. A customer-centric approach counters these recent developments by raising revenue generated from your current customer base.
Research by Deloitte and Touche found that customer-centric companies were 60% more profitable compared to companies that were not.
Customer centricity is central to the success of your business. Increasing revenue generated from current customers will make the difference between growth and exponential growth.
“Charging everyone the same thing and treating everyone the same way, as retailers do today, is ‘Six Sigma’ thinking which is great for producing widgets on a production line, but it makes no sense in a world where customers are inherently different.
Peter Fader, author of ‘Customer Centricity’
What should your next step be?
As you have entered this part of the blog, you now know that it’s a shame to give all your customers the same amount of love.
Are you developing a new business strategy? Make sure that your best customers will benefit the most. It all starts with an RFM segmentation, analysis of the findings/data and ends with using/choosing the right technology to reach your newly-created RFM segments through various channels.
We are not claiming it is easy. Here are some of the biggest known issues when implementing a customer centric mindset.
This data is gathered from marketingsprofs.com
We are aware that not every company benefits from customer-centricity in the same way. It is partly due to the frequency of purchases, which is different for a car dealer than for a jewelry shop. The chosen strategy is a differentiator as well. Coca-Cola, for example, puts brand equity more central than customer equity.
🖱️ Click the banner above to read part I. We discuss ‘Customer Heterogeneity’ and how it impacts ‘Customer Centricity.’