For many businesses, the majority of revenues come from a relatively small group of customers. This is explained by the Pareto Principle, which states that 80% of consequences (in this case, sales) come from 20% of the causes (customers). We refer to these customers as your Most Valuable Customers (MVCs).
MVCs are a company’s most valuable asset. They are the business’s most loyal patrons and brand advocates, spending more - more frequently. Yet, many companies fail to identify and acknowledge their MVCs and don’t differentiate them in any way from the remainder of their customers. This is both a mistake and a missed opportunity that can change a company’s fortunes if recognized and corrected.
“Your best customers are worth far more than your average customers.” - Seth Godin.
In addition to providing the bulk of a company’s profits, identifying and focusing on your MVCs can result in 5 key benefits:
Benefit 1: Retention. Retaining MVCs is critical to the ongoing success of a business. Identifying your MVCs allows you to put in place strategies to acknowledge them and express appreciation for their contribution to your success. These actions reinforce loyalty and drive revenues.
Benefit 2: Referrals. By definition, MVCs are delighted customers, and they spread the word to their family, friends, and co-workers. These personal, trusted referrals are the most effective advertising you cannot buy.
Benefit 3: Targeting and Acquisition. Developing an “ideal” customer profile based on existing MVC characteristics reduces advertising waste and delivers accurately targeted prospects similar to your best customers.
Benefit 4: Feedback and Collaboration. In addition to being your most valuable asset, MVCs are also insightful “business consultants.” As they are primarily responsible for your company's success, they represent an excellent resource to obtain feedback and test ideas.
Benefit 5: Team Unity and Purpose. Teams are happier and more productive when there is alignment regarding who the company serves and why. Identifying and gaining insight into the customers that drive the business unifies everyone around a clear purpose.
Despite these clear benefits, many companies pour most of their effort (and money) into acquiring new, unproven, and often mismatched prospects. They pursue a “quantity over quality” strategy. These businesses feel that MORE customers of any sort will translate into business success. This approach ensures that they will be investing significantly to attract mostly the wrong customers. The result is constant customer churn, stress on the organization, and a wasted advertising budget.
Savvy business operators understand that, first and foremost, they need to retain their existing most valuable customers. They also leverage their MVCs’ profiles to target and attract more of the RIGHT customers. And perhaps most importantly, they engage with their MVCs to gain feedback and insights to help the company chart its course forward.
The first step to achieving these benefits starts with understanding exactly who your MVCs currently are. How do you do this? Begin by looking at your data. Virtually every business keeps sales records, point-of-sale data, CRM data, online transaction data, etc. The analysis can be as simple as exporting data to a spreadsheet and doing some sorting based on purchase amounts and purchase frequency.
This process results in the identification of the customers that truly move the needle for you. These are the customers that justify your primary focus. They are your lifeblood, and you can’t afford to lose them.