Inflation-Proof Marketing: Customer Segmentation
Welcome to the third edition of The Steadfast Series: Inflation-Proof Marketing.
Previously, we covered inflation messaging strategies and how to re-think your pricing and promotion in times of inflation.
Next, we’re going to talk about customer segmentation. When you need to keep your marketing resources focused, you need to zero in on your customer and database that is most likely to buy.
Most of you likely know the 80/20 rule: 80% of your revenue is generated by 20% of your customer base. Or, quite often, 80% of your revenue comes from one core key customer profile.
But did you know?
- 65% of your revenue likely comes from repeat customers.
- The top 10% of your most valuable customers are likely spending three times more than your average customer. This means that for every high-value customer lost, your business is losing the financial equivalent of three customers. (Source: HubSpot)
We have a customer electronics customer of which 75% of their total revenue comes from 10% of their customers. This is an enthusiastic and passionate group that we nurture with loyalty programs, special VIP events, and ambassador partnerships.
How to Identify Your MVP Customers:
The easiest way to identify this group is to look at your Customer Lifetime Value (CLV), or calculate their average order value plus the number of purchases.
Many businesses already do this, but almost as many are not diving deeper into more about…
- When were they acquired?
- What did they buy in their first purchase?
- What was the discount code campaign?
- What channel brought them in?
- Where are they purchasing from, etc., to create the most profitable offering?
- What customer “tag” do they have? They should be tagged with a special attribute to define them, whether it’s a referral program or a part of a newsletter campaign, etc.
This is relatively straightforward, but not everyone has easy access to this data.
Some alternative ways to track this may be:
- Rewards Program: Any one that has signed up for your rewards program and+ points program fits within the valuable customer segment.
- Social Mentions: Finding the group that is mentioning, reviewing, and tagging your brand.
- Google Analytics (GA): GA can access the topline data of those that are spending the most time and converting on your site.
Acquiring and Retaining High Value Customers:
Now that you’ve identified them, what do you do next?
Here are a few key strategies on how to retain and upsell your existing customers and attract new ones:
- Adjust your media strategy accordingly: If you have first-party data (emails, names and customer data), you can use that data to target look alike audiences in media.
- Develop a kick-ass referral program: Incentivize the group to advocate on your behalf.
- Learn more about them: Provide quizzes, surveys, and other methods ways to collect first-party data to further inform ways to generate more engagement and sales.
- Level Up Your MVP Incentives: Never stop celebrating them: birthdays, anniversaries, VIP rewards. This group has earned them all.
“Think with Google” presented a terrific case study about the Carlson School at the University of Minnesota. The school wanted to maximize its budget across 10 unique offerings, and also justify combining the investment of reaching new students and personalized messaging. An ambitious project? Yes, but the school focused on CLV, which turned out to be a very actionable plan.
The school set a value—by program—for each student, along with goals for every stage of the decision cycle. Additionally, the school took the value of alumni relationships into account. By singularly and consistently focusing on driving profitability by maximizing CLV, the school achieved more flexibility with its budget across the whole purchase journey. When the first year ended, the Carlson School at the University of Minnesota was rewarded with an increased enrollment of 28%—and no increase to its marketing budget. By the second year, the school doubled its investment in this strategy, which surpassed its yearly goal in a matter of a few months.