You always have to remember that, at all times during a businesses’ lifespan, you deal with different types of customers. To be more successful, your eCommerce store has to be able to group these customers based on criteria such as shopping habits, how they are spending money, and all other kinds of traits. Depending on these various traits, one group of customers might be much more profitable to target than other groups, when it comes to spending your budget on content marketing, such as marketing emails, Facebook advertising, or calculating your total ad spend.
These much more profitable customers are called The Biggest Spenders. This should be your most important targeted group because these shoppers consistently spend above your store’s average checkout currency amount. If your average checkout is $100, for example, customers spending $110 would instantly qualify for this special group of big spenders. Of course, a one time higher than average purchase doesn’t automatically qualify them as the biggest spenders – you also have to be aware of the money they consider spending over time. This article will teach you everything about this special group of customers – and more importantly, will enlighten you with 6 of the best strategies to retain your biggest spenders.
Why Calculate Your Biggest Spenders?
To reason WHY it is so important to target your biggest spenders, you need to know about the Pareto Principle or the 80/20 rule. The Pareto Principle states that 80% of the consequences are derived from only 20% of the causes. Mainly, in the online shopping world, this translates as 80 percent of a company’s total revenue is generated from 20 percent of its customers. Identifying and paying more attention to your biggest spenders will improve the quality of your business significantly and will sway you to rather make efforts to retain them instead of planning more expensive new customer acquisition strategies.
Understanding who your biggest spenders are is crucial for plenty of reasons. First of all, these customers often generate loyalty value for your business, meaning they have indirectly established themselves as your brand’s online advocates, shopping often and suggesting your shop to other friends or relatives. Second of all, this group is safe for applying conversion tactics over general customers when it comes to digital marketing. And third of all, the big spenders’ group can often be trusted to respond well to changes in your business conducted by your marketing team and will give you an idea of how much advertisers are spending you need.
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It’s already clear that in the eCommerce world, not all customers are equal. Some typically spend more and some typically spend less on your online shop’s products or services, whether you are a consumer company or a media company. Yet identifying which ones spend more may be financially more healthy than trying to acquire new customers all the time.
How To Calculate Your Biggest Spenders
To calculate your biggest spenders manually isn’t an option anymore in 2020. You need to make sure that you are maintaining accurate reports on your customers through various powerful software, such as Omniconvert’s REVEAL. This allows you to always be up-to-date with customer and sales data to be able to accurately analyze each shopper’s habits, buying power, and other kinds of traits.
For each of your customers, you have to determine the overall amount they spent for a very specific period (hence, it’s safe to use weekly, monthly, or annual figures). Once you have determined their spent amount, start comparing it to your store’s average order value. This will start to shed light upon who your biggest spenders are. To have a true picture of profitability, please consider the following:
The Cost of Goods – The cost of goods is the actual cost you had to pay, as a store owner, for the items your customers are currently purchasing. This factor is very explicit, your cost of goods sold – or COGS – is crucial for setting up fair prices, both for you and your customers.
Try to think about your cost of goods as a floor. Setting prices below that floor can have a negative impact on your income. Keep in mind that selling items for lower than your cost of goods means charity. You will never make money.
The Cost of Additional Services – This represents the additional costs it takes to properly service your customers along the sales funnel, such as time spent on customer service issues, overall advertising budget, etc.
All that is left is to subtract the cost of goods and the cost of additional services from the balance your spender used on your products and you’ll derive the real profit margin. Keep in mind that for the number to be the most accurate, you also have to consider your percentage of overhead attributed to each customer, such as rent, utilities, or storage. You have to perform these calculations for every customer group to find out who your biggest spenders are.
Identify Your Biggest Spenders
You will soon find out that the Pareto Principle holds very true to the world of online shopping, for any media brand or consumer brand. The majority of your sales real income is coming from a rather small number of your customers (20%), compared to the rest of the spenders (80%). It’s why it’s so important to identify your biggest spenders and take special care in retaining them. It’s a basic marketing strategy. The following important questions must be asked and answered before further employing the 6 best strategies for retaining your biggest spenders:
● Should I be spending to acquire new customers? If so, how much?
● How can I fashion products to best suit my biggest spenders?
● Should I invest the budget in customer retention? If so, how much?
● How will I focus my marketing team on my biggest spenders?
Knowing who your big spenders are will allow you to constantly optimize your sales funnel for their best customer experiences. It is known that to retain an existing, spending customer, is much less expensive for your company’s marketing budget than to acquire some new ones, so try holding onto your biggest spenders. There are lots of strategies that you can employ in the quest of retaining them and giving them incentives to spend more. Mainly, you have to show them how special they are for your business.
You probably want them both.
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6 Strategies for Retaining Your Biggest Spenders
Your biggest spenders are fundamentally different from your average shoppers, so it makes sense that communications and marketing should be focused differently on them. To show them that you truly value their business, personalizing their marketing is a great starting idea.
Make Them a Priority
Your big spenders must always get the attention they deserve in order for their shopping experience to be enhanced. Make an effort to ship their orders first, always let them have priority when it comes to customer service, and if you can make that extra step, offer them access to new products first. Leveraging the stability of your biggest spenders means taking the right approaches to target them. Utilizing their habits successfully will grow your eCommerce business while maintaining their high morale:
Segment your big spenders:
First and foremost, you should be using software like Omniconvert’s REVEAL to properly segment off your biggest spenders. This will automatically enable you to send them customized emails that are only meant for them and them only, such as exclusive invitations or product previews. Segmenting your customer base is the core of email marketing automation.
Offer early access:
When you want to sell a new product or service, the first thought that occurs is largely opening the doors to all customers. But what if you’re opting for making sure you’re giving your big spenders the first crack at the new deals? You’ll keep them satisfied and perhaps even ensure that this new product will be instantly ordered.
Award a higher status:
Biggest spenders should be able to also differentiate themselves as an online presence, especially on social media, as such, giving them a certain distinction, such as Gold status or some Customized online avatars can mean a lot to them. Real benefits could also be added, such as priority when it comes to customer service or first access to new products, etc.
Showing your top customers that you appreciate them comes in a plethora of forms, as already seen. For your big spenders, gratifying their generosity could mean offering them a sales reduction coupon for X% off of their next purchase, simply as a way of your business expressing sincere thanks. Telling them how much better they are than other customers will also make them feel trusted, and will in turn trust your business more. Measuring their total spending over the year and comparing it to the average total spent on your products, basically specifying how generous they were, will certainly increase their loyalty towards your online shop. .
Knowing who your biggest spenders are, how they think, and how they react to your online store’s opportunities is a crucial step to attaining higher sales and improving your business’ likelihood of long term success. Here’s hoping our article shed some light on how to identify big spenders and how to retain them!