Today is all about finding your soulmates and lovers (no, not like that).
We’re talking about your best customers: those who genuinely connect with your brand, keep coming back for more, and sing your praises to anyone who will listen.
How do you find these VIPs among the sea of customers?
You’ll find out from today’s blog post.
Read on to discover the methodology large, global retailers use to identify their best customers, how to keep them happy using a CVO approach, and the CVO methodology to turn more customers into your best customers.
Defining “Best Customers”
The notion of “best customers” varies from business to business.
For businesses that sell one-time products or services (such as a real estate company or a wedding dress supplier), the best customers might refer to people who recommend the brand and bring new customers on board.
On the other hand, retailers who sell consumable products (wellness, fashion, groceries, etc.) might identify the best customers as those with high purchase frequency and significant Average Order Values.
To this end, we’ve compiled a generally applicable checklist meant to define the “best customer,” no matter the industry or type of product. Your “best customer” is someone who:
✓ Regularly engages with your content and products.
✓ Has a high AOV.
✓ Delivers high Customer Lifetime Value
✓ Demonstrates customer loyalty and recommends you to his peers.
✓ Provides valuable feedback and helps you improve your processes.
✓ Is easy to work with and doesn’t cause any conflicts.
Identifying Your Best Customers
While you might have a hunch about your ideal customers, it’s safer to back up your assumptions with data and steer clear of preconceived ideas.
Truth be told, in this day and age, it’s dangerous to be stubborn and refuse to change your mind about your beliefs. After all, it’s said that those who cannot change their minds cannot change anything else.
If you believe you’ve mastered your way inside your customers’ minds (without proving this assumption with hard data), your competitors will eat you alive.
This is why we strongly recommend you find a way to data-check your research into your customer base to identify your ideal customers.
At Omniconvert, we’re die-hard fans of RFM Segmentation – a methodology used by large, global retailers to make sense of their customer data and quickly identify and segment the best customers from the entirety of their customer base.
The RFM model is a segmentation strategy that looks at your customers’ purchase history and behaviors, then segments these customers into sub-groups based on a 1-5 scale for the three RFM variables: Recency, Frequency, and Monetary Value.
If you aren’t familiar with RFM segmentation, check out this comprehensive guide on RFM metrics and how you can use them to drive revenue growth.
The great thing about RFM is that its functionality and effectiveness are guaranteed by your first-party data. This means that every insight derived from the RFM analysis is based on hard data and past customer behavior, so it’s real and undeniable.
Identifying your ideal (or best) customers with RFM Analysis is one of the best ways to do it because you eliminate the need for guessing while increasing the accuracy of your findings.
How to Apply the RFM Model on your Customer Base?
There are three variables to RFM, each getting a 1-5 rank:
- Recency (how recently a consumer purchased from you)
- Frequency (how frequent are his orders)
- Monetary Value (how much money he’s spending on his orders)
On a 1-5 scale, the higher the score, the better your customer’s experience and the higher their value.
A customer can have a single score for R, F, and M at any given moment. Many combinations of scores will place your customers in one segment or another (we’re using 11 segments, to be precise), so let’s focus on your best customers.
- Soulmates (R=5, F=5, M=5)
Customers who are considered Soulmates are the finest and most elite among all types of customers.
- Lovers (R=5, F=4-5, M=5)
While their frequency isn’t as high as in the Soulmates segment, the two groups share similar customer characteristics regarding purchase behavior, which is the reason why they’re included in the “best customers” category.
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Both Soulmates and Lovers share a genuine interest in your products and organization. The customer satisfaction levels are high, so you don’t need to worry so much about marketing with them. They’re cutting your work in half, as they’ve already experienced progress with your help.
Your best customers will continue to purchase from you, even when faced with obstacles (such as a complicated checkout process).
Additionally, they will happily spread the word about your brand and encourage others to buy your products, read your blog, subscribe to your newsletter, and follow your social media channels.
These loyal customers are highly profitable, as you only need to acquire them once, then help them develop a habit of repeatedly purchasing from you.
Due to their strong attachment to your company, they generate significant value and require minimal effort to be kept satisfied.
Essentially, you have won their love and loyalty for the long haul.
Since marketing strategy isn’t necessarily a concern with your best customers, you should double down on the customer relationship processes, build a deep connection, and ensure you’re never taking Soulmates and Lovers for granted.
Creating the Best Customer Profile
Once you’ve identified your best customers, you must look at the shared characteristics between these people and create an identikit picture for your Ideal Customer Profile (ICP).
The process is similar to the process of creating a buyer persona, yet it’s more advantageous, as the ICP is based on real data instead of assumptions.
You must include the following categories in this customer profile to ensure you know your ICP at a granular (even intimate) level.
- Personal Data (Demographic, Psychographic, Behavioural)
When asked about knowing their customers, a famous CEO once said: “if I don’t know my 20 best customers by name and birthday, then I don’t know my customers”.
When creating your ICP, it’s important to be mindful of customer values (and how they align with your own), their personal attributes, and who these customers are on a human level.
Only by knowing who they are and what they need (and expect) form you can you orchestrate retention and loyalty programs that keep your best customers engaged and eliminate any possible reason for customer churn.
- Professional Information
Understanding what your ICP does professionally helps you better identify their needs and preferences. In turn, you can adjust your processes to better meet your customers’ needs.
Even if you sell consumable products, understanding the professional side of an ICP provides valuable insights into their lifestyle, interests, and purchasing habits.
For example, if your ICP is a busy professional who travels a lot, you might want to adjust your shipment processes to ensure order delivery doesn’t inconvenience your best customers, affecting your customer retention.
- Pain & Struggles
For this step, you will need to conduct interviews and send out surveys to get qualitative insights about the challenges your best customers face.
While it’s a long process, it’s also a crucial one. The one surefire way to ensure your best customers keep coming back to you is by offering undeniable value and ensuring they make progress in their lives.
To ensure this, you must understand what it is that these people want to change in the first place. Walk a mile in their shoes, so to speak.
You can only craft the products, processes, and experiences people genuinely want and enjoy by seeing the world from their POV.
Growing Your Best Customers
Evidently, caring for your best customers doesn’t mean neglecting all other customer segments.
Yes, ≈80% of your revenue indeed comes from the top ≈ 20% of customers. However, there’s potential for most of your customer segments to climb up into the Soulmates and Lovers categories.
Here’s the customer-focused approach to growing the number of your Soulmates & Lovers through the CVO Methodology:
- Determine all types of customers your business has.
We mentioned earlier that we’re using 11 segments to perform RFM analysis on our clients’ customer bases.
While your business might not be big enough to deploy this approach, we advise you to identify and sort customers into the main four Categories: Power, Active, At-Risk, and Lost Customers.
By doing this, you get a clearer picture of your customer base and how healthy your business actually is.
For example, if the number of at-risk customers exceeds the number of active customers, it means there’s something wrong with the customer journey, and you need to stop and fix what’s broken ASAP.
- Conduct qualitative research to understand customers’ behavior, motivations, and needs.
You can’t improve what you don’t measure or create solutions if you don’t understand the problem.
Use interviews, surveys, and even focus groups to understand what’s stopping customers from buying more frequently or spending more in your shop.
Use the insights to create an action plan for fixing what’s broken inside the customer journey or delivering more value to customers and giving them a reason to appreciate your business more.
- Develop engaging and purposeful customer experiences.
Steer away from mediocre customer experiences and guide your customers through the customer journey by offering true value.
This means finding out what your customers need, then delivering that certain something.
For example, some customers need help in using your product or service, while others are searching for more payment options.
Most of the time, by adapting your processes to meet consumer needs, you demonstrate how much you care about your customers, which is enough to earn their loyalty.
- Craft a marketing strategy that’s tailored to specific customer RFM Groups.
Regarding the basics, your marketing strategy should serve a specific purpose: Retention, Prevention, or Reactivation.
Instead of forcing products onto customers or manipulating them into making purchases, your objective should be to make it easier for customers to discover and use your products.
Adapt your marketing strategy to fulfill this purpose and provide real meaning through your campaigns.
Doing so will create a group of loyal customers and convert lower-tiered segments into Soulmates and Lovers.
- Refine your customer acquisition strategies by understanding the most valuable customer segments.
When advertising became a thing, marketers simply promoted random products to anyone concerned. This meant broad audiences, general copywriting, and low-quality products.
The current rise in acquisition costs forced us to change this perspective radically.
In the new, smarter way of doing things, you would build your audiences around your best customers, promoting the products they love the most.
If you want to increase the number of your best customers, you must acquire more like them. Even if you have to work more in the acquisition stage, the payoff is worth it, as your best customers will bring in significantly more revenue than bargain hunters.
Take Care of Your Best Customers
Taking care of your customers will (almost) always come down to personalization and relevance.
In more technical terms, to keep your best customers from churning, you need to craft prevention campaigns molded on the ICP.
Nowadays, consumers aren’t interested in the cheapest option exclusively. Instead, they need products and services tailored to their needs and journeys.
At the same time, the younger generation of consumers (starting from Millenials) is also very invested and interested in building deep and meaningful relationships with the brands they’re supporting; therefore, your customer relationship management becomes crucial.
One important principle to guide you here is that no one owes you their business. Just because you need to sell your products and you need a strong, loyal customer base, it doesn’t mean people will come.
It’s a two-way street.
If customers appreciate your brand, buy from you regularly, spend their salaries on your products, and bring new customers on board through referrals, you have to do something in return.
Demonstrate your gratitude to your top customers by offering them rewards, customized emails, and handwritten thank-you cards.
This approach will strengthen their loyalty to your brand and increase the likelihood that they will spread the word to their peers.
Last but not least, it’s crucial you understand what progress customers are trying to make with your products, then spare no effort in assisting them to reach the desired outcome.
For example, suppose your organization is a fitness retailer.
In this case, it’s safe to assume your best customers may be trying to achieve various fitness goals, such as losing weight, building muscle, or increasing their strength.
As you can see, each goal requires a different approach, and you need to be tactful about how you’re communicating with these people.
Those who want to lose weight might need recommendations for a training program, while those who’re looking for muscle might need protein supplements.
However, when you understand their objectives, you can offer tailored advice and recommendations to help customers achieve their goals.
Small, consistent, and customer-centric actions will ensure your relationship with your best customers is still meaningful, giving these people no reason to churn.
It’s a wrap on today’s story.
We’ve covered a lot of ground today, from the methodology to identify your top customers to the mindset needed to keep these people engaged and happy.
Your soulmates and lovers are the ones who keep your business going and growing, so keep nurturing those relationships!
Good luck and happy selling!
Frequently Asked Questions about Identifying Your Best Customers
To determine who your best customers are, look at the Recency, Frequency, and Monetary Value Metrics. At the same time, you can consider customers’ loyalty to the brand, their willingness to recommend your brand (NPS), and their overall lifetime value to the business.
If you want to identify your customers and gather more information about them, you can use a variety of methods. For example, you can start collecting customer data through purchases or surveys, analysing website traffic and social media interactions, and monitoring customer feedback and reviews.
The five core principles of a successful customer care are: providing excellent customer service, building strong relationships with customers, understanding their needs and preferences, offering personalised experiences, and continually striving to improve the customer experience.
The seven types of customers are loyalists, discount seekers, impulse buyers, need-based customers, wandering customers, skeptics, and window shoppers.
Loyalists are dedicated customers who consistently purchase from a brand, while discount seekers are primarily motivated by finding the best deals. Impulse buyers make purchases on a whim, while need-based customers only buy what they need. Wandering customers may browse without buying, while skeptics require more convincing before making a purchase.
Finally, window shoppers are primarily interested in browsing and not making purchases.