Best Customer Marketing (BCM) is, as its name implies, all about directing the major part of your marketing efforts toward your best customers - those who bring you the most profit. To many, the principle sounds obvious; too obvious to even discuss. But, in fact, few companies practise BCM effectively.
Like so many other aspects of the marketer’s life, there isn’t a clear cut ‘right way’ or ‘wrong way’ to conduct your BCM activities: in fact, what you do depends largely on what you want to achieve. The objective is always the same, though - to increase the number of best customers while decreasing the number of least profitable customers. Again, a simple idea, but one that hasn’t yet hit home for all too many companies... which are still losing vast amounts of their profits to needy, over-demanding customers. There are three obvious ways of employing BCM to change and re-shape the customer base:
1. A long-term loyalty program
This involves the use of a loyalty program to identify and segment customers into groups, and then the use of different marketing strategies for each segment. This approach has the advantage that not only do you get to know your customers and your business more fundamentally, allowing targeted marketing, but you also have the information to allow you to modify other aspects of the business so that it meets the needs of the best customers more closely. However, costs are more difficult to project and, to be successful, the program has to become central to the business.
2. A short-term best customer program
This involves a short-term marketing program (say three to six months) designed to appeal more to best customers than to the others. It may not lead to such detailed knowledge of the business’s individual customers but it does reward the best customers most, and moves customers up from lower segments to higher segments. The great advantage of this method is that a substantial return on investment can be expected during the actual program. Particularly if an experienced best customer marketing specialist is brought in for the task, lead-in time can be very short and the results can be quite accurately predicted in advance.
3. Use both types together
The first two methods can be piggy-backed, one on top of the other. This is probably the ultimate solution, and is used by many successful loyalty program operators. The basic loyalty program is the foundation, and customer data is collected and acted upon. However, in order to maintain customers’ interest in the program over time, and also to stimulate sales and profits on a regular basis, a short term best customer program is run on top of the permanent program. In this scenario, customers must be members of the long-term loyalty program in order to take part in the short-term program, which in turn drives more customers to join the permanent one.
How does BCM work, practically? Well, it’s a technique that dates back to when marketing began. It was the cornerstone of the ‘mom & pop’ milk-bars or corner stores that were so prevalent until the 1950s. All you have to do is find a way of identifying your best customers (say, the ones who make you the most profit) and reward them for their patronage, then find ways of growing their spend with your company while reducing the patronage of those customers who cost you the most money to service. If you can segment your customers into ‘spending bands’ before and after a successful BCM campaign, you’ll see a huge shift from lower-spending bands into higher-spending bands. And it’s a “double whammy”: not only do you grow your most profitable customers, but you also lose your least profitable customers... and where will your cherry-pickers and complainers go when they leave you? To your competitors. Now you can see why you should be the quickest and best at BCM in your sector: if you’re not doing it already, the chances are that your competitors will do it to you first! But, in order to identify the best customers, you need customer data. Enter the customer loyalty program.
Good vs. bad: the real cost...
In one example, drawn from real customer data from one of Europe’s biggest retailers, the customer base was divided into 11 segments based on the average amount spent in-store each week. Almost four out of 10 customers (38 per cent) spent less than €£4.00 per week and, altogether, they made up 6.51 per cent of the retailer’s turnover. At the other end of the scale the best customers spent over £150.00 per week. Only two per cent of customers fell into this segment, yet they made up 10.34 per cent of the store’s turnover. A simple calculation reveals that each good customer spends about 30 times as much as each worst customer.
Some examples suggest best customers can be worth around 1000 times as much as bad customers. In theory, if your customers are all identified and arranged into spend-based segments, your marketing budget can be allocated in proportion to their value as customers, maximising your return on marketing investment very quickly.
G.E.T. is the largest group travel management business in Australia. Visit www.get.net.au for further details.
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