How to identify your most important customers. (Hint: They’re not who you think they are)

If you think your most valuable customer is the VIP who spends big and spends often, you would be… well, not wrong exactly, but missing out on an entire segment that is potentially more valuable than even the biggest of big spenders.

“Brands often get most excited about high-spending VIPs,” says Adam Simms, the co-founder of LoyPal, a customer-growth platform that uses data to drive value from brands’ consumers. “They often gravitate towards the customers spending the most within a specific time period – say the top spenders over the past six months.”

But that means losing sight of a potentially larger, more valuable, customer: those with “potential future value”.

 

Simms points to three types of customers that are often overlooked by brands:

Lapsed big spenders.

Customers who were previously high-spenders, whose transaction patterns have stalled. “At LoyPal, we describe these customers as ‘At-Risk Heroes’,” says Simms. “For some reason, these customers have disappeared –maybe they have started shopping with a competitor. Whatever the case, reactivating these customers can deliver incremental revenue, immediately.”

 

Enthusiastic short-term spenders.

Customers who haven’t spent the most over a long period of time – say six months or a year – but who have spent a large amount in a short time period over several transactions. “At LoyPal we would call these ‘Superheroes’,” says Simms. 

 

One-time purchases.

Customers who have bought from your brand once. “One area that is often not given enough specific focus is getting to that all-important second purchase,” says Simms. “Many brands may have in excess of 70 per cent of customers only ever purchasing once, but lack specific mechanics to help change this. The second purchase helps build a deeper relationship with the brand and payback faster on the cost of acquisition.”

Instead of focusing on acquiring new customers or concentrating your retention marketing solely on big-spending VIPs, brands need to re-engage these three types of customers lost in the retail wilderness. 

How? Re-engaging customers starts with smart segmentation, explains Simms.

“Segmentation and targeting are incredibly important for loyalty marketing as it ensures a brand can focus marketing resources and dollars in the most efficient way – by targeting the right activity, at the right customers, at the right time.”

 

How to engage customers with ‘future potential’

 Once you’ve identified lapsed big spenders, ‘superheroes’ or one-time purchasers, the next step is targeting them with the right marketing approach.

“Different audiences require different types of interactions, whether that is content, engagement or campaign-focused,” says Simms. “Different audiences may also respond better or worse to different communication channels – email, direct mail, retargeting or outbound calling.” 

“Sending an email to a previously high-spending customer that has not recently opened an email is unlikely to achieve much of a response, therefore an outbound call may be more appropriate. For new customers, where brand education is of particular importance, email marketing likely remains king.”

 

Where LoyPal comes in

And it needn’t be a guessing game: data can lead the way. 

LoyPal, which works with leading Australian brands from endota spa to LVLY, Bared Footwear and Mater Lotteries, helps businesses unlock value from their existing customer base. 

At a time when acquisition costs are skyrocketing, LoyPal focuses on retention – and how to identify and engage valuable customers. 

“LoyPal combines customer analytics, AI and machine learning across an entire customer base to ensure that every customer of a brand is understood in terms of their value opportunity. Proprietary models have been developed and refined over time and over a range of industry verticals to give a high degree of accuracy, and therefore enable a high level of confidence in the actionable insights they generate.”

Simms notes that marketers can often find themselves overwhelmed by the vast amount of data available to them, and uncertain how to make best use of that data.

“Marketers will often try and ‘pan for gold’ in a customer base using trial and error. For example, they might say ‘Let’s see what happens if we target people who purchased something specific in X timeframe and then send them an offer for Y.’”

LoyPal, on the other hand, can instantly identify the most valuable segments “a little like presenting this ‘gold’ directly into the marketer’s pan”.

And rather than adhoc or infrequent segmentation, LoyPal’s models continually refresh so they never go out of date.

“The value of opportunity in an audience is calculated by LoyPal and is tailored for each brand based on factors including their product range, product mix, repeat purchase rate, and average order value.”

And now’s the perfect time to hone that retention strategy. “During the pandemic we have seen examples of brands enjoying an influx of customer acquisition to e-commerce channels, but these customers then not returning or developing any regular purchase behaviours with the brand,” says Simms. “To keep up with these acquisition levels post-COVID, brands are needing to spend an increasing amount on acquisition, and this is becoming uneconomic. LoyPal helps a brand to yield the customers that have been previously acquired into a brand to drive incremental value.”

After all, as the saying goes, knowledge is power.