Your Existing Customer Base
Have you ever considered looking through your existing customer base and figuring out if they have more potential? It’s always easier to sell to existing customers, and yet so few business owners take the time to look.
It is so tempting as an entrepreneur to always be on the look out for new customers. But it is time consuming, and to be honest it’s the slowest way to bring in more sales. Your existing customers already know you, they have the relationship with you, so to spend time nurturing that relationship and working better together is a really effective way of growing your business.
I encourage you to put some time aside and do the exercise. It doesn’t take that long, and it can highlight massive opportunities for your business.
If you do the exercise first on your Top 30 customers – that will help you identify which customers are worth investing in. But take it that one stage further and segment your customer base for even greater impact.
There are many ways in which to categorise your customer base. You can do it by geographical area, behaviours, industry, products they buy, gender, age – all of which may be suitable for your business. The key to a successful segmentation exercise is to identify which is best for your future growth plans.
Customer segmentation is a marketing technique which helps you to break down your mass data base into smaller, more manageable, more targeted sections.
Once you have a number of different groups, each of which has different needs, then you can begin to market more effectively.
The key criteria to customer segmentation is:
• It must be large enough to enable you to create sufficient profit growth
• You must be able to calculate profit by sector
• It must enable you to highlight growth opportunities
• It must be stable
• The companies or individuals within each segment must have the same requirements or pain points
• It must be possible to measure
• There should be the least amount of categories to make it manageable, but enough to enable new customers to be added to existing categories
There are a number of reasons why you should break down your customer base into smaller sections. The main reason is that business growth demands focus. And focus comes when you more…
Clearly understand your Customer Base
1. All Customers are not the same
Marketing is all about understanding the customers’ pain points and showing how you can remedy that pain. By breaking your customers down into categories which help you identify and separate those issues, you can tailor your marketing to demonstrate that you can meet that group’s requirements.
Customer needs tend to change with time. Segmentation allows you to better monitor those changes over time, and respond faster to those changes. It also enables you as the supplier to limit the product range you offer to particular segments, which makes marketing much easier.
2. Some Customers require more of our time (and hence cost more)
When you take time to combine customers who have the same characteristics, you can begin to identify why they take up more of your time (and money) than others, which in turn can help you reduce cost more effectively.
For example, you may identify that large corporates are more costly because there are more management layers to navigate to get an order processed and paid. Or perhaps you’ve found that a particular market sector is the best way to categorise your customers and that the public sector is particularly time consuming as the decisions are made by committee and take more time.
3. Different sectors have different levels of potential
When you are making decisions about where to focus your efforts in order to grow your business, you need to make sure that the growth area has the right level of potential.
You wouldn’t want to plan to double your business over the next few years, and then choose a part of your customer base which doesn’t support that growth plan.
It can be difficult to quantify the growth potential of your entire customer base. But when you break it down into smaller sections, you can estimate the potential more accurately. When you can quantify the potential, you can begin to make informed decisions about where to focus your business growth efforts.
4. Customers from different sectors may buy different products
You will generally sell only a part of your product range to different customers. This may be because that particular sector doesn’t need particular products. Or it may not.
When you use customer segmentation to highlight gaps in your sales, you also need to be aware of the potential to “sell the gaps”. With a complete understanding of each segment you can quickly identify which gaps are potential and which could never be filled.
5. Customers from different sectors pay different prices
You may sell the same product to all your customers. And yet all your customers may not be price sensitive. When you break down your customer base, you can more easily identify opportunities to either raise your price, or to reduce your price to sell more product. Sometimes volume wins over price, sometimes the opposite is true.
6. Customer segments may be affected by seasonality or trends
There may be a seasonality effect in some particular customer segments. For example, if you sell a range of accountancy services, you will know that the category “self-employed people” will get busier around tax return time. If you sell clothing, you notice that demand for bikinis increases in summer. Offer black out blinds to consumers in winter and you’ll find less people take up your offer so you focus on marketing that product in summer.
Understanding what you sell, to whom, how often and in which industry will enable you to build a firm foundation for growth going forward. Your marketing will become more tailored and subsequently resonate more strongly with your clients and be more successful. You will be able to calculate the benefit of your marketing campaigns and hence focus your efforts where there is highest benefit, which in turn will reduce the effort you have to invest in order to get to where you want to be.
To learn more about this technique you can register for my free E-Book – it’s a short read but it explains the process in more detail and is easy to follow.