Understanding What Defines Your Most Valuable Customers
Knowing how valuable your customers are is incredibly important. It’s not just about how much money they send your way every month. It’s also about who they are, what their future plans are, and what they bring to the table aside from money.
Understanding customer value might seem trivial, but when you go beyond looking at the raw numbers on a spreadsheet and begin to get a better understanding of your customers, you reap unexpected benefits.
For example, knowing which customers are most valuable helps prioritize customer feedback, it allows you to plan your strategy around the most important clients, and provides a way to focus your marketing on acquiring new and more valuable customers. These examples are just scratching the surface, but there’s already a clear theme: when you understand what makes your customers valuable, you’ll be able to focus on the things that really matter.
Knowing that some customers are more valuable than others is the easy part — the hard part is figuring out what makes a customer valuable to you. It’s radically different for every business, and it’s going to take some time to get the formula just right. To help speed this process along, we’ve gathered the most important criteria you should be using to define your most valuable customers.
Who They Are:
To start, you should research your customers’ brands and position in their market. While company names might all seem equal in a row on a spreadsheet, companies have reputations that extend beyond how much money they make. This can be both good and bad. On the upside, having their logo on your landing page could be a big selling point when trying to reach their competitors. Similarly, some companies have bad reputations, and you’ll want to distance yourself. It’s important not to overlook or dismiss these hidden reputations.
What They Bring:
Customers bring money: that’s what makes them customers. But there’s more to this relationship than just dollars in the pocket. Beyond simply looking at the money, you should be looking at two other key areas when searching for valuable customers: referrals and feedback.
With referrals, many customers bring their weight in gold by referring other customers with much larger wallets. Because this value isn’t directly tied to how much money the referring customer is bringing in, it often gets overlooked when prioritizing customers. This is a mistake: even if a customer is only a company with a couple of people, the fact that they’re successfully referring customers many times their size increases their overall value to you. In the short-term, you may take a loss by subsidizing the smaller customer, but it can pay off in spades over the long-term.
For feedback, many customers contribute to the bottom-line by sharing sharp insights into how the product can develop. While you may have a great understanding of where your business is headed, it’s nothing without feedback from your customers. Sadly, many people don’t willingly provide feedback, which can make it difficult to plan a product roadmap that’s focused on fostering customer success. By putting an emphasis on the value of feedback, you’ll begin nurturing a cycle where customers give you feedback, which makes you treat them better, which fosters better and better feedback. The value of this feedback can’t be understated.
What They Take:
It might seem counter-intuitive, but customers also steal value from you. Sure, they might technically be paying at the same rate as all of your other customers. But as we’ve seen, money isn’t the only measurement of value.
When evaluating how valuable a customer is, it’s important to look out for any untallied costs. These can show up in support tickets, where customers are asking unnecessary questions of your customer support staff on an hourly basis. Or, it could be that they have somehow forced an integration that is costly to support and only benefits a small number of customers. Where these costs hide changes depending on the organization and the types of products being sold. What doesn’t change is that there are always hidden costs.
It’s also important to look at how much is being spent to acquire customers. Most people understand that if you spend $100 to acquire a customer and they only spend $1 every month, it’s going to take some time to be profitable off of that customer. What many people don’t realize is that the cost of keeping them as a customer should be added onto the acquisition cost. If you find yourself investing a significant amount into keeping a customer after already spending a large amount to acquire them, it may be worth asking how much value they’re really bringing to the table. It might be less than you think.
This doesn’t mean you should start ignoring or disrespecting less valuable customers, but it is important to not be ignorant of where you’re spending your money.
What The Future Looks Like:
What we’ve examined so far hasn’t required a large amount of hands-on research. This is great, as it means defining valuable customers is a small investment that immediately pays off. Sadly, this is only a surface-level analysis. This will be fine for many companies, but those that want to truly understand what makes customers valuable need a deeper analysis.
This analysis centers on the future of both what you’re selling and what your customers are planning. To begin, learn through research and interviews what the future of your customer’s business is going to look like. Are they about to release a new line of products? Maybe they’re expanding to a new region. If you can accurately predict how much and where they’re going to grow, you can begin to plot how valuable they’ll be over time.
Then, look at how much value you’re going to be able to provide to your customers if they grow. For many companies, just because a customer is growing doesn’t necessarily mean they’ll be spending more on a particular product. This is especially true if there is a ceiling to the number of people a product is designed for, or if there’s better pricing in bulk from competitors. More common, however, is that as the company grows, so will their monthly payments to you. This is great news, because it means that you can focus on solidifying the relationship early and not have to worry about losing them as a customer once they scale.
This type of analysis can be time-consuming, but it’s something that any company should be able to handle. It’s as simple as asking your customers
Customer value can change how you do business. If you focus on learning what your customers bring to and take from the table and how your products align with their future growth, you can begin to prioritize some customers over others. This is vitally important for both planning out your strategy and making sure that the most important customers are the ones getting their fair share of hands-on attention.