Customers: do you really understand yours?

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Do you know if you’re getting a true return on the investment outlaid in marketing to customers? Customer asset value is the key to your business having a competitive advantage and ultimately improving shareholder value.

CLEAR CUSTOMER INSIGHTS AND BRAND AWARENESS

There are a couple of challenges to ascertaining if you’re getting a true return on your marketing investment. You must have clear customer analysis and insights enabling you to identify their affinities, characteristics, preferences and the like. This way, you understand customer needs and wants, and what drives their attitudes and behaviours.

You also need to have clear brand awareness. This knowledge will give you the ability to charge a 'premium' over others in the marketplace. It will also enable you to increase the 'life' of a customer by keeping them longer, and increase your marketing effectiveness by building customer trust and representing an aspiration or lifestyle to them. In addition, you should consider how your business meets the five basic needs of customers – attention, facts, options, action and efficiency.

Both your brand and your customers are business assets. Your customer asset represents the current income generated from the customer, the future income from the customer, and the advocacy and learning value of the customer. Your brand asset gives your business the ability to generate a 'premium' because of the brand and represents the tangible value of the brand if sold.

Your revenue comes from your customers’ purchases but most of your variable costs come from your customers’ actions. Identifying how these costs affect each customer segment is critical to your overall profit.

DON’T THINK OF CUSTOMERS AS A COLLECTIVE TARGET

When determining the cost for each segment of your customers consider churn, retention, and migration. Operational costs include those around payment method service, call centre, customer care, and product and delivery.

Customers themselves can cost your business money in a number of ways, for example with costs associated with returned goods, order cancellations, a change of details, late payment, and enquiries.

One of the best techniques to help understand your customers is to change your views about lumping your customers as a collective target. Instead think segmentation and focus on understanding customers needs and wants for each segment. Concentrating on the average customer will distort your business decisions. Start asking who shall I send this offer to and what offer should I send to each of my customer types?

Do market research and a customer analysis, and target the right customers for each campaign. Focus on understanding your customers. Consider them in terms of lifestyle and life stage – the best examples of meeting customer needs include targeting relevant customers for a campaign. This way, they will feel 'you really know me'.

When marketing your product and services develop an integrated brand communication. You can do this effectively with customer loyalty programs such as customer clubs, and interest/reward mailings, which are particularly good when targeting high spending customers, based on their lifestyle or their interests or needs.

Commercial mailings work well when targeting buyers at a particular time of year, for example 'back to school'. Special offers give customers incentives to spend more and can attract both new and lapsed customers. Coupons at the till provide a 'thank you' and an incentive to return.

Online marketing can be cost effective and play an important role in building loyalty. It can also provide you with important customer insights.

MAXIMISE YOUR CUSTOMER INSIGHTS

Appeal to a range of promotional aware consumers and maximise returns of your promotions investment. How? By segmenting customers by promotional behaviour and build a library of Key Performance Indicators for your promotional strategy.

To maximise your customers’ insights:

· Cherry-pick the recipients of product-specific coupons by tracking light and heavy users of products.

· Target previous redeemers and mail customers because these have a history of performing well.

· Prioritise customers most likely to lapse, especially during periods of high competitor activity.

· Make use of those customers who've requested contact and have a history of high involvement with your company.

· Ascertain which products your most price-sensitive shoppers need to buy – this will help you determine which of your products must be priced competitively.

· Consider whether coupons or on-ticket pricing be used to offer differential pricing and which products are substitutes for each other and allow for pricing differentiation in-store.

· Consider if the promotions you do are efficient – who is actually absorbing your promotional budget? Are you able to eliminate promotions brought by 'promotion junkies' without alienating your most loyal customers?

· Run fewer, more effective promotions designed to drive loyal customer satisfaction.