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Identify and sell more to your most valuable customers

Being in a position to focus on your most valuable customers might sound like a luxury. After all, many small businesses are grateful for customers of any kind.

But every business finds that some customers are more valuable than others. This can be for a range of reasons, from the size of their purchases to the relative ease of managing their account. Successful businesses are generally those that identify these customers, build relationships with them and work to bring in new customers with a similar profile.

This guide outlines how to identify which of your customers are the most valuable to you. It also provides tips on selling more to them and attracting new high-value customers.

The benefits of understanding your customers

Understanding your customers helps you to sell more. The more you know about them and their needs, the easier it is to identify opportunities to sell them new products and target them with appropriate offers.

Profiling existing customers also makes it easier to find new ones. You can look for similar prospects, and sell to them in a similar way.

However, you must make sure that you comply with data protection regulations for any personal information on existing and potential customers that you collect, keep and use. There are specific rules for e-commerce.

You can use the information you have on customers to improve efficiency. Keeping a central record of customer details and sales reduces errors and speeds up transactions.

You can also improve customer service. Better access to information helps you deal with customers more quickly. You can tailor product offerings and provide personalised treatment. The right information makes it easier to identify and resolve any problems.

Finally, understanding your customers helps your planning. You can predict what they will buy, and estimate how much stock you need. Linking customer management to purchasing can dramatically improve profitability.

Learn about your customers

Your customers are a valuable source of information, so you should aim to collect data that lets you identify your customers and how they behave. This will vary depending on your customer profile. If you sell to individual consumers, you might want to know about their age, gender, income and so on. For businesses, you might want to know what industry they operate in and their size.

You should also try to find out what they think about you and your products and services. For example, learn what they like and dislike and why they choose to use you.

If you have just a few important customers, it's worth getting detailed feedback from them. Companies that sell to individual consumers sometimes use customer surveys.

If you sell online, you can use your website to capture some information automatically.

Of course, as well as collecting the information, you need to store it. The most effective way is to use a central database.

However, you must make sure that you comply with data protection regulations for any personal information on existing and potential customers that you collect, keep and use. There are specific rules for e-commerce.

Make customer information available

Making customer information available to employees can make them more productive. For example, you could give sales staff access to financial systems so that they can check orders and payments. You need to decide what information different employees might need, and how to make it available to them.

Technology can help. For example, you can share correspondence and other information on your computer network. Using caller recognition, staff can view an incoming caller's details and purchasing history before even answering the phone. Integrated IT systems help different parts of your business to share what they know.

It's important for information to be accurate. It's a good idea to update records regularly, taking care to delete duplicate entries. You could also consider giving customers online access, so that they can update their own details themselves.

You must ensure that any confidential or important information is protected against misuse or accidental deletion.

Remember you must also comply with data protection rules for any personal information on existing and potential customers you collect, keep and use. This may affect your IT systems and which staff have access to the information.

Analyse your customers

The right information will let you build up a useful profile of your customers. This typically includes the following:

  • who they are - the age and gender of individual consumers, or industry and business size for corporate customers
  • what they think and believe, what interests them and their opinion of you and your product
  • their purchasing behaviour - which products they buy, where they buy them, when, and how they pay

Profiling your customers in this way helps you group them into different segments, each of which can be approached separately. For example, you might produce customised products or services for different segments. You can also focus the way you market to different groups of customers. See our guide on how to group your customers into market segments.

You can use specific IT software to help you collect and analyse your data. For example, linking customer records to your accounting system makes it easier to see how profitable different customers are.

What makes your customers valuable?

Analysing your customers allows you to identify those who best fit your business priorities. These will depend on your strategy - for example, if you are launching a new product your aim might be to build sales as quickly as possible, whereas if you have cash flow problems you might value customers who pay quickly.

However, most businesses want customers who are as profitable as possible. Customers tend to be more profitable if they:

  • buy high-margin products
  • pay full price without negotiating discounts
  • place a small number of large orders rather than many small orders
  • do not cancel or amend orders
  • pay on time, without being chased for payment
  • do not require extensive after-sales service

By analysing your records you can assess how profitable each customer is. In some businesses, just a few customers are responsible for almost all the profits. Some of your largest customers might be among your least profitable. You may even find that there are some customers you would be better off without.

You should also try to look ahead. For example, a business customer that is expanding might become more profitable for you in the future. It's important to anticipate changes and how they might affect different customers.

Enhance the customer experience

Looking after your customers helps build customer loyalty. Selling more to existing customers can be far more cost-effective and profitable than finding new ones.

However, you will still need to divide your time up between finding new customers and selling more to existing ones depending on your business.

Focus on your most valuable customers

  • Tailor your products and service to meet their specific requirements. If a customer prefers delivery before noon, organise your delivery schedule to make sure that happens.
  • Don't stretch yourself too thin. Make sure enough time is given to managing each of your key accounts.
  • Identify and resolve problems quickly. It is better to under-promise and overdeliver, but make sure you always live up to your promises.
  • Keep in touch. Let them know when service contracts need to be renewed or when better deals become available.
  • Build personal relationships with key decision-makers.
  • Consider offering preferential terms - e.g. a bulk discount.

Technology can help you improve the service you offer. For example, you might be able to let customers track deliveries through your delivery company's website. You can use your website to provide useful information, such as product details or instruction manuals. Also, ensure that staff are given adequate customer service training - they can make or break your reputation with customers.

For more information, see our guide on how to manage your customer care.

Market more effectively

The more you know about your customers, the more effectively you can market to them.

Understanding your customers lets you tailor your marketing to different segments. You can ensure that each customer gets the right marketing messages, at the right time. Advertising and other promotions can be more effective if they are targeted.

This also affects the type of media you use. For example, if you market to 15-24 year olds, you might consider marketing via text messaging, using "viral" emails or by sponsoring music events. Viral marketing or "refer-a-friend" email campaigns allow people to forward on promotional emails to friends, thereby increasing market reach for your business. But remember you must comply with privacy and e-commerce rules for emails and texting.

You can also sell more effectively. Understanding your customers helps you see which of their needs your product can satisfy. You may, for example, be able to up-sell, explaining why a higher priced product would suit them better. You may also find opportunities to cross-sell other products that fit their profile. For example, if you know why they are buying a particular product, you can tell which other products they may also need.

Technology can help automate some of these processes. For example, you can set up different mailshots or emails to go to different customer segments. E-commerce software can allow you to offer discounts to particular customer groups, or send selected customers "e-coupons" to use in your online store.

An important part of effective marketing is customer service. See the page in this guide on how to enhance the customer experience.

Find new customers

Understanding who your most valuable customers are helps focus your efforts to find new customers. Often, the most effective approach is to look for similar prospects.

At the same time, diversification is important. It's risky relying too heavily on just a few key customers. Even if you have many customers, it's risky if they are too similar. A change in circumstances could mean that all of them reduce their purchases at the same time – e.g. if your three largest customers are based in the US, a change in the exchange rate could see them drastically reduce their orders.

As markets change, you should regularly review your marketing strategy. Particular market segments may become less profitable as competition increases. Customers' requirements may change, for example, as individual consumers become older.

Continually review how valuable your existing customers are. Over time, customers who used to be highly profitable might demand lower prices. Other customers may increase their turnover with you as they grow. See the page in this guide on what makes your customers valuable.

Keep an eye on customers' future potential as well. It may be worth nurturing a relationship with a small customer with high growth potential. Working with your customers can also help you identify ways to develop new and improved products.

Original document, Identify and sell more to your most valuable customers, © Crown copyright 2009
Source: Business Link UK (now GOV.UK/Business)
Adapted for Québec by Info entrepreneurs

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