Many marketers I meet still think that bringing in additional revenue just means bringing in additional customers. They forget something that is near and dear to me from years of creating and running programs to existing marketers — the value of customers beyond the first purchase. Individual customer needs change over time and, if you are prepared, you can help them meet those new needs while helping them shortcut the buying cycle. Its all part of that long-term, mutually beneficial relationship I’m always talking about.
The basis of long-term, mutually beneficial relationships is the concept that customer may have different needs at different points in time but they remain your customer. They don’t go away after the Purchase stage in the buying cycle. Your work with them is not done. Its the same way with a leaf on a deciduous tree. Even when the leaf changes color from green to yellow to orange to red (as in the photo illustrating this blog post), it is still a leaf.
In the same way, the customer has purchased from you in the past and doesn’t have to be sold on your overall value as business or the quality of your products/services (if you’ve done a good job with the post-Purchase phases of the client journey). They also expect that you’ve retained the information from past interactions and that you apply it to future interactions so it will be easier to buy from you than from some other organization that doesn’t “know” them.
To the buyer, this is simple logic, something they assume is built into the customer experience. Its very much how they expect people in general to treat each other. You’re more formal with people you’ve never met before but you can relax more among people with whom you already have a standing relationship. However, not everyone is clear on what a mutually beneficial, lifetime brand/customer relationship and why its valuable to the organization.
What it is
A big, burly male co-presenter at a conference I attended a while back once talked about how he’s a VIP customer at Sephora, the makeup company, and Victoria’s Secret, the lingerie company. This shocked some people until he explained that he buys birthday, anniversary, and other gifts for his wife and daughters at those places on a regular basis. In fact, their email reminders help him never miss a big day and stay in his family’s good graces. As a result, he never strays from these brands to look for other makeup or lingerie vendors – and all it required was the simple application of a little data and some email automation.
As his daughters get older, his needs as a buyer may change just like the colors of the leaf. He may want more to change the colors of the lipsticks he buys his daughters from teenage pink to college student red, for example. However, he will still search for those new things with his trusted vendor. He may also trust suggestions on what he should buy from this vendor, based on how well the vendor knows his buying patterns and industry trends (i.e., the resurgence of false eye lash).
Similarly, a business buyer might need to purchase more advanced products/services from you as his organization improves along its business maturity model. He might not even know he needs certain things to achieve the next rung of maturity but he’s a lot more likely to listen to suggestions from an existing. trusting relationship (with you) than from someone brand new.
Why its Valuable
At its most basic, understanding and supporting the evolving needs of existing customers over time is about revenue. As we discussed earlier, data shows that the most successful organizations generate 75% of their revenue from existing customers and even average companies generate 45% from existing customers. People prefer to come back to a vendor they know rather than taking the time to search out something new. In fact, if the relationship is strong, I’ve found from personal experience that you can actually increase the average selling price of the purchase over time by pitching more complex or bundled solutions.
Beyond the basic value of repeat purchases, however, is the glorious world of predictive analytics. By looking at previous purchaser data and seeing how well an individual buyer matches that, organizations can determine a customer’s likely customer lifetime value (CLV). You can certainly use CLV to calculate potential future revenue. However, calculating CLV allows brands to do much more.
With regard to existing customers, some need a lot more support than others. However, that takes effort. Knowing the CLV of all the major customer segments helps the brand determine which customers are “worth” the extra effort. Of course, calculating CLV before you start making post-Purchase outreach is one set of data. Be sure to calculate it again once you’ve started your outreach efforts and see if, with just a little support, you get greater CLV from other segments who weren’t quite as happy with you before. In this way, you can use CLV as a key performance indicator and the old number as a level you want to improve upon. You might even consider setting CLV goals for your business as part of your maturity modeling.
Beyond these areas, ambitious organizations also use CLV to determine what sort of products to pitch over time to each type of buyer or even if your brand is pursuing the right type of buyer in the first place, meaning the cost to acquire the customers is worth the long term revenue they will give back to you. You can also use CLV to segment out different kinds of customers and create programs – or even product/service bundles – that will support high CLV customers across their various lifecycle stages.
Knowing CLV also helps you adjust how you think of campaigns for super valuable customers. Instead of a campaign pitching one product/service, link multiple single campaigns together in a seamless way to take into account the changing needs – and relevant products/services – of the buyer over time. Its highly personalized, sometimes down to a segment of just one target buyer, but, for really high CLV, the effort can more than worth it.
Start small by adding value-add activities into your marketing transformation process but keep moving forward with post-purchase programs and analysis of your data and ensure that your employees and transformation team is crystal clear on the potential financial value of customer loyalty so they make it a priority.
Comments are welcome, especially if you have examples of how your organization build long-term, mutually beneficial relationships.