In eCommerce, first impressions can make or break the future of your brand’s relationship with your ideal customers, so if you want better retention, start with smarter acquisition. While many variables influence retention, one thing is for sure: building your acquisition strategy based on your Ideal Customer Profile (ICP) has a massive impact on the chances to transform a new customer into repeat customers.

Focusing on the right customers is one of the key principles in Customer Value Optimization. It applies to all eCommerce businesses regardless of their focus – winning market share or retaining existing customers. 

Because they are interdependent, there should never be a debate on the importance of customer retention versus customer acquisition. It all starts with acquiring better customers. 

Identify and define the Ideal Customer Profile

Identifying and defining the ideal customer profile is a massive responsibility for the entire company.

The ICP is a strategic asset that is frequently treated superficially, based on assumptions, or created around fictional personas or buyer personas. If so, the ICP is nothing more than another task checked that brings no added value to the company’s strategy. It doesn’t reflect who the ideal customer is, and it doesn’t support the acquisition and retention efforts with valid information.

So, what’s the right approach?

Define your ideal customer profile based on insights revealed by analyzing customer data, not on assumptions or visitor data you extract from Facebook and Google Analytics. Not all your visitors become customers, so the data from these two platforms is misleading, and you might focus on the wrong leads. You want to define your “Ideal Customer Profile,” not your “Average Visitor Profile.”

Identify your ICP by using RFM Segmentation

To move away from the vicious circle of guessing, many eCommerce companies use RFM Segmentation to identify the ideal customer based on transactional data (first-party data that is 100% in their control).

RFM Segmentation starts with analyzing your customers based on their recency, frequency, and monetary value by giving them scores for each variable using a scare, usually a scale from 1 to 5. Once you calculate the scores for your entire customer base, it will be clear who your most valuable customers are by looking at the ones with the highest score for all variables.

We want to focus on the ideal customers, so if you need more details about RFM, check Juliana Jackson’s article on effective customer segmentation through RFM Analysis and check our guide on all RFM segment types.

For your acquisition efforts, you’ll want to use what makes loyal customers stick to your brand and focus on learning more about your high potential customers who had just placed their first order.

To identify your current ideal customers, you need to look for your Soulmates. We call them Soulmates because finding your ideal customers is for eCommerce what finding a soulmate is for single people. 

Both people and companies have to find their Person or their People, with capital P. It’s a highly complex thing to achieve in real life. Sometimes this aspect is out of our hands. But, fortunately, in eCommerce, you have RFM segmentation to help you.

Your Soulmates are the customers that:

  • Bought very recent
  • Bought very frequent
  • Have the highest monetary value

You want to understand every aspect of their behavior so you can build better customer experiences from the first interaction for any new potential customer that resembles the same characteristics as your ICP.

Now that you know who your Soulmates are and how many customers are in this segment, you’ll need to perform qualitative research, answering questions like:

  • Why do they love your brand/products?
  • What would make them stop buying?
  • Which alternatives are they aware of? 
  • What are their perceived frictions? 
  • What do they consciously expect from you?
  • What demographics can tell you about them?

The ICP isn’t revealing just for marketing; it’s for merchandise too. Once you identify the ICP, many of your online business’s departments will have new insights about your customers. 

But you need to go beyond transactional data and set interviews with some of the Soulmates to find the motivations behind their purchase decision. This will help define the ideal customer profile with qualitative data collected directly from your most valuable customers. 

Define your ICP by using the Jobs To Be Done Framework

You’ll find many suggestions regarding the structure or the template you could choose to present and use your Ideal Customer Profile internally, but that should be the last concern for this project. 

You need a reliable framework to make sure you get authentic feedback from your ideal customers, and Jobs To Be Done is one of the greatest tools for disruptive customer research.

Jobs To Be Done is a methodology developed by Clayton Christensen and adapted by Bob Moesta for companies that want to find what motivates their customers to purchase from their brand and what outcomes they seek from buying a product or a service.

Customer data analysis is necessary but not sufficient. You know what products your Soulmates buy most often, what brands they prefer, but do you know why they started buying from you and why they keep coming back? The JTBD framework will help you find answers to everything that customer data can’t reveal.

The Jobs To Be Done interviews will help you understand your ideal customers’ path before deciding to buy from you. Without their direct input, their struggling moments and decision-making process might remain a mystery to your company.  

The Jobs To Be Done process includes six steps:

  1. Frame the question
  2. Set up the interviews
  3. Conduct the interviews
  4. Find the patterns
  5. Detail the clusters
  6. Prototype opportunities

While making sure you get as much information as possible during the interview is the most critical part, the success of JTBD depends on how you prepare the interviews and how you transform the answers into actionable data. You can learn all about each step in this article.

Improve the acquisition and retention strategies based on the ICP

Identifying your most valuable customers by using RFM Segmentation and defining the Ideal Customer Profile by using the JTBD helps you define new opportunities, improve and refine existing strategies for better customer acquisition and retention.

There are multiple ways to use ICP so you can focus on attracting more power customers and retain them in the long term.

  • Identify why Soulmates stop buying from you.

Beyond natural customer churn, some former Soulmates (we call them Ex-Lovers) stop buying from you even though you could prevent it. You need to find why they stopped buying from you and what your company has to do to keep them happy and loyal. You can achieve this by sending NPS surveys to get customers’ feedback.

Sometimes, you can reactivate this segment of customers, but the focus here is to avoid problems by treating their objections in real-time as they are your most valuable customers. 

  • Improve your traffic acquisition.

When you have an accurate and validated ICP and know who your most valuable segments are, you can use all this information to: 

  • Create better lookalike audiences for your paid ads efforts and improve the algorithm;
  • Adapt your message and offer to attract new customers;
  • Use your budget to attract people that are most likely to convert and become your next Soulmates;
  • Place the ads on channels/ locations that bought you the best customers;
  • Place remarketing ads designed for your ICP.
  • Design VIP treatment for your ICP.

You can’t afford to treat every customer like a VIP because not all customers bring the same value to your store, and investing your best resources in them is not beneficial for your long-term health. 

The VIP treatment for your Soulmates might include:

  • Ticket priority
  • Special loyalty discount
  • Free delivery/ return
  • Gifts & small treatments
  • Discounts to your partner shops
  • Thank you cards
  • Exclusive resources 

Mixing these tactics, adapting and updating your loyalty programs should be part of your ongoing efforts to retain customers in the long term and increase their customer lifetime value.

  • Treat your most valuable customers’ objections in real-time.

When it comes to customer loyalty, the last thing you want to do is make valuable, loyal customers feel that you don’t care about them. Keeping your Soulmates happy is crucial to your business. Companies that track customer sentiment using NPS could react quickly if a customer gave the store a low NPS. Based on NPS tracking, the company can create a system that can send a priority ticket to the customer support or the customer success team, so the Soulmate’s objections are treated right away. 

  • Improve your product range.

Understanding your customers’ preferences help you refine your assortment and build better customer experiences based on top products and services. Some products might look good in sales but are related to high customer churn rates due to their low quality. 

You can use your store’s data to seek correlations between high customer retention rates and product performance. Once you have identified products that are more likely to generate sticky customers, you can improve your product range and eliminate problematic items from your offers. 

  • Improve your email campaigns

Translate the VIP treatment into your email marketing effort designed for your Soulmates. For example, on Black Friday, give your regular customers one day in advance to buy the things they need. They might think the stocks won’t last until they get to buy their items. A customer will appreciate the gesture from a company they’ve been faithful to for such a long time. 

Wrap up

Your customer acquisition and retention strategies go hand in hand. You can’t improve either of them if you don’t know who your ideal customer is. Even worse, you can’t expect better results in acquisition or retention if your existing ICP has nothing to do with what your transactional data and real customers tell you. 

For more details on how to use your power customers to generate sustainable growth, we recommend you start the Customer Value Optimization Course, where you will find expert advice on improving customer acquisition, retention, and experience.