Sometimes, you need to divide and conquer versus try to take on everything at once. And when it comes to your customers, you might want to try this approach.
The first step is to rank them based on two simple questions:
- How long have they been buying from us?
- How much have they spent during that time?
Once you’ve done that, you should have a graph that looks like this:
So what do you do with this information? Well, let’s start off by defining the 4 portions or quadrants of the graph.
- Quadrant A: High Time, High Spend (upper right)
- Quadrant B: High Time, Low Spend (upper left)
- Quadrant C: Low Time, High Spend (lower right)
- Quadrant D: Low Time, Low Spend (lower left)
Now, here’s what you might want to do with each of the groups:
Quadrant A: Protect and Serve: These are your best customers. They have been with you the longest and have spent the most money on your products and services. Unless you are constantly lowering your price, chances are pretty good that this group likes you for reasons beyond ‘low price’ – so instead of sending this group “Save Now” offers, you should find out what other benefits they value.
And show them random acts of kindness as a way of letting them know you really appreciate their business.
Quadrant B: Improve Under-performing Accounts: Quadrant B are customers that have been buying from you for a long time but aren’t your top spenders – so they key here is to find out why. Then, devise a plan for moving them from B to A!
In some instances, I have found that a good number of these customers are spending the majority of their budget with you so they should be treated just like those in Quadrant A (Protect and Serve). And others are still testing you before committing a larger dollar amount to your business so you need to identify them and make sure they get the best service possible.
Finally, some will be using your business as a secondary or even tertiary option – meaning they turn to you when their primary supplier can’t serve their needs. For these customers, you need to determine if growth is an option or if you will be their emergency problem solver forever.
Quadrant C: Lifetime Commitment. These customers have walked in and spent a lot – so your goal is to find out how to motivate them to make a lifetime commitment to your business. For those of you selling to businesses, you might want to see if the buyer is someone that moved from Company A to a new position in Company B – and you better check in with Company A!!
Or did they drop another vendor (your competitor)? If so, why? (And does that open the door for you with more of your competition’s business?)
Word of caution – you should focus on service and satisfaction with these customers rather than hitting them with offer after offer. You need to make sure that their experience exceeds expectations so that you increase your chances for a long-term relationship.
Quadrant D: Dating. Quadrant D is filled with customers that came in, made a purchase and are still thinking about whether or not to come back and buy again. This is your more typical new customer – and your goal is to identify those with the greatest opportunity for short and long-term growth.
Why did they buy from you? What is their annual budget? How can you motivate them to become a long-term customer that spends 100% of their budget with your business (ending up in Quadrants A or B)?
What about that block in the middle of the graph? Those are the customers you would want to make certain are participating in your loyalty program, if you have one. You can probably make a greater impact on them with fewer resources because they have made a good commitment of time and money to your business already. The loyalty program should provide them with the right mix of rewards and incentives.
What do you think? Can this approach to segmenting your customer base help you focus your resources and increase retention and revenue?
