How to spot a valuable customer and keep the focus on the right place

July 03, 2019

How to spot your most valuable customer

In business, everything revolves around customers. Whether it’s about how to attract more, how to deal with rude customers, or how to keep them happy, it’s always about them and that’s the way it should be. 

Therefore, small businesses usually think the more the merrier. But is it really? As bad as it sounds, not all customers are equally important for your business. That’s why knowing which one is a valuable customer for your business is highly important.

In business, you’ll learn, it’s quality over quantity. Especially in the long run. Therefore, you should identify your most valuable customers and keep your focus on them.

One of your more valuable customers could be more worth to your business than 10 others combined together. And it’s not just about how much money they spend on your services or products. There are other factors you should consider as well.

6 simple ways to identify who’s your most valuable customer

Identifying a valuable customer will help you with customer retention. And as you may know, investing in the retention of your loyal customer base is cheaper than attracting new customers.

The following examples will help you learn from someone else’s experience and to identify the most valuable customers. That will help you come up with your own formula.

Good company culture fit

With all the mistakes I’ve made as an entrepreneur, I would say that the biggest thing that I would go back and tell my younger self is that client fit should be a bigger focus than client budget. My most valuable customers have been people that I get along with personally. In our sales process, before we even send a proposal out we ask ourselves “Is this someone I would want to hang out with?”

Just because someone has the money and wants to work with you doesn’t make them a good fit for you, your company, or your employees. My biggest successes in business have come from working with people I like over people who can pay me. I try not to subject myself or my team to work with people who aren’t kind, genuine, and caring above all else.

We turn down a lot of business now because the vibe isn’t right. We don’t want to work with just anyone who can pay our fees – we want partners.

Larissa LaMaster, COO and Co-Founder of Boundless Media

Vocal brand advocating

The way we identify our most valuable customers is quite simple. They are those who recommend us to friends and family and are vocal brand advocates on social media.

We know when a customer has come from a recommendation or referral because we offer referral discounts and we find our brand advocates using keyword analysis tools like Meltwater, which allow us to sort through our social media impressions and incoming brand mentions.

By tracking which customers are actively and positively passing our name around social media, we have a good idea who our most valuable customers are because these are the people who are essentially doing free marketing for us. Then, we try to turn our followers into customers.

Bryce Welker, CEO at CPA Exam Guy

Repeating purchases

As time goes on you will begin to see which customers come back for your services. If someone is always eager to work with you again then you can easily notice that they are an important customer.

Customers that are always eager to work with you again should always be treated as if you were friends. Be casual with them and don’t try to haggle with them.

Transparency is always best when you find a loyal customer because they will appreciate you being honest with them as a business. Once this trust is established then you will find that they will be even more inclined to come back for more and tell others about your company as well.

Chris Gadek, Head of Growth at AdQuick

A tested formula

The marketing formula I have used over years to identify the most valuable customer is the Customer Lifetime Value formula. The method looks at customer’s average spends on your business and their frequency of purchase. This method also pays importance to what it costs to acquire the customer, the cost of servicing the customer, etc.

To calculate the Customer Lifetime value, use the following formula: Customer Lifetime Value = (Average Order Value per Customer) x (Number of Orders per Year) x (Customer Retention Rate) – (Cost of Acquiring the Customer).

Veron Black, CEO at Asaa88

Highly supportive and engaged

Tracking down your most valuable customers won’t be tough because these customers definitely stand out amongst the rest. These are the customers who are very loyal to your service and show a keen interest in what you do.

While analyzing the frequency of customer sales is one way to draw up a list, you could go one step further and take a look at the relationship your customers share with your brand. Your star customers will be highly supportive and engaged with everything you do. This could be anything from sending more customers your way, leaving great Google reviews, getting in touch with you to share their appreciation, or subscribing to your services long-term.

Harry Morton, Founder of LowerStreet

Multiple qualities

To identify our most valuable customers, we look at three factors: length of time spent using our software, fleet size, and interest in sharing and promoting our service. Since our services are subscription-based and we charge per vehicle, it’s obviously a goal of ours to attract businesses with large fleets that stay on our service indefinitely.

However, we also give a lot of weight to business customers with smaller fleet sizes that promote us within their industry, leave us positive feedback in online reviews, and recommend us to friends. We call this good reach, and the customers with good reach are often the key to our expansion and growth. Retaining them is just as important to us as retaining larger customers who technically bring in more money.

Daivat Dholakia, Director of Operations at Force by Mojio

Conclusion

Identifying your most valuable customers is based on factors like purchasing power, brand advocating, social proof, etc. This makes customers with lesser purchasing power which are excellent brand advocates equally valuable as big spenders who are shy on referrals.

What’s important is to have a personalised relationship with your valuable customers and reward their loyalty appropriately.

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