Exploring Customer Lifetime Value and Personas

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1 BEST PRACTICE GUIDE Exploring Customer Lifetime Value and Personas Published By

2 Introduction You have probably identified the customers that interact with you most frequently, but is this a good enough gauge for focusing your activities and resources? Can you reliably tell which customers are making you money? The reality is that not all customers are created equal; in fact some require such significant support that they could eat into your profitability or even generate a loss. To generate higher Return on Investment (ROI) opportunities a more detailed understanding is required to identify your most profitable customers. When you have a clear picture of your most profitable customers you will be able to develop a growth strategy that can: Define operational objectives Focus your marketing and sales activites Improve client communications Guide customer service and foster loyalty Ensure strong ROI in all areas and increase profitability. Organisations now have the opportunity to evaluate a wealth of customer data from all business functions to determine underlying customer characteristics. Utilising business tools such as a Customer Relationship Management (CRM) solution makes this exercise much easier and simpler. BEST PRACTICE GUIDE Exploring Customer Lifetime Value and Personas 2

3 In most businesses, 20% of customers account for 80% of a company s margins What do we mean by Profitable Customers? It is quite common to focus on revenues when prioritising which customers to invest in. Interestingly, spend only tells you half the story about their value. Picture a customer who spends a considerable amount with your company, but has unrealistic expectations about the on-going post-sales attention they feel they are due. Their high demands and the resources that takes up can quickly eat through the original profit and possibly create a loss. Unless high maintenance accounts have a service agreement that adequately compensates you for the support you give, avoid these types of customers. On the other hand, a more modest spender may require little investment to win over and minimal support, so could provide a higher margin. These are your most profitable customers. BEST PRACTICE GUIDE Exploring Customer Lifetime Value and Personas 3

4 Only 42% of companies are actually able to measure CLV accurately. Invesp, 2015 Calculating Customer Value To understand what an individual customer is really worth to your organisation, you need to calculate what is known as Customer Lifetime Value (CLV). With comprehensive data and the right tools at your fingertips, calculating CLV can be a fairly straightforward or a complex process, dependent on how deep you wish to delve. To leverage all this data, you need a platform to store it and make it readily accessible. A CRM solution makes customer information easier to retrieve with just a few clicks. To uncover the CLV avoid focusing on transactional value alone. Your calculation will need to consider the acquisition cost, along with the investment required to maintain the on-going relationship; such as further marketing communications, post-sales follow-up, servicing and time invested in managing the customer relationship throughout its lifetime. Value of CLV Understanding CLV is central to building stronger customer relationships. A clear idea of who your most profitable customers are and what characteristics they share will help you decide what marketing channels to use, how to set pricing or what angle your messaging should take. Revenue - Retention Resources = Customer Lifetime Value (CLV). BEST PRACTICE GUIDE Exploring Customer Lifetime Value and Personas 4

5 Building Ideal Buyer Personas Once you have identified your key target markets or customer groups through segmentation and your most profitable customers using CLV, you are ideally placed to take the next step and define profiles or buyer personas. Personas are fictional, generalised representations that provide a summary of the key factors that help you to understand your ideal customers needs, motivations, concerns and potential spend opportunities within your identified markets. Personas can be used across all functions of your business, helping to attract and relate to your customers as real people rather than just numbers. The Value of Personas Having defined personas helps you focus your marketing activities, creating content geared specifically towards your ideal customers and using channels that they would frequent. For example, targeting social media platforms and groups whose demographics, areas of interest and user traits simulate those of your ideal customer personas will provide improved return on investment. Your sales, customer engagement and success activities can be fine-tuned to better benefit from this detailed understanding of your ideal customer base. BEST PRACTICE GUIDE Exploring Customer Lifetime Value and Personas 5

6 DEMOGRAPHIC John Adey MALE, Married with 2 small children Decisive Lives in London Suburb BACKGROUND Head of Technology Worked his way up from Infrastructure Analyst to senior roles Typically stays at an organisation for 5+ years & moves due to promotion Value Orientated TONE Plain English but CAN TALK technical IDENTIFIERS GOALS Extremely heavy workload, can be a struggle to prioritise strategic vs tactical/operational decision making Always picks up calls but intermittent with response. Very responsive to face-to-face meetings Appreciates high touch, responsive & personal service Decision Maker Primary goals - minimise risk, manage growth, make informed decisions on how to spend IT budget Secondary goal- Put an IT strategy in place to align with growth, including changing current IT solutions Technology Savvy BEST PRACTICE GUIDE Exploring Customer Lifetime Value and Personas 6

7 CONCLUSION So as a business your most important asset isn t your building, inventory or even the brand but is, in fact, your customer base. Having detailed insight and true understanding of your customers needs and lifetime value will bring greater value to your business. Resources can be better focused on profitable activities and engagement. Communications can be honed to optimise impact with your target audiences and customer engagement and experience is improved. Analysing Customer Lifetime Value and building personas contributes significantly to these aims, but requires the capture of a wide scope of detailed data. Having such data within one central environment such as a Customer Relationship Management (CRM) solution will make assessment much quicker and easier. Have a chat with one of our CRM Experts to learn how Maximizer CRM can help you define your CLV and customer personas. BEST PRACTICE GUIDE Exploring Customer Lifetime Value and Personas 7

8 About Maximizer Maximizer CRM is fueling the growth of businesses around the world. To learn more contact the Maximizer CRM Experts Call or Our CRM solutions come fully loaded with the core Sales, Marketing and Service functionality business need to optimize sales productivity, accelerate marketing andimprove customer service. With flexible on-premise, our cloud and your cloud deployment options, tailor-to-fit flexibility, state-of-the art security infrastructure, industry-specific solutions and anywhere/anytime mobile access, Maximizer is the affordable CRM solution of choice. From offices in North America, Europe, Middle East, Africa and AsiaPac, and a worldwide network of certified business partners, Maximizer has shipped over one million licenses to more than 120,000 customers worldwide. AMERICAS ( HEAD OFFICE ) Maximizer Services Inc Smithe Street Vancouver, BC V6b 0P5 Canada Sales Phone info@maximizer.com Website EUROPE / MIDDLE EAST / AFRICA Maximizer Software Ltd. 1 The Courtyard, Eastern Road, Bracknell, Berkshire, RG12 2XB, United Kingdom Phone +44 (0) enquiries@maximizer.com Website AUSTRALIA / NEW ZEALAND Maximizer Software Solutions Pty. Ltd. Level 1, Suite 14, 32 Delhi Road North Ryde, New South Wales, 2113 Australia Phone +61 (0) info.anz@maximizer.com Website Copyright 2017 Maximizer Services Inc., Maximizer Software Ltd., Maximizer Software Solutions Pty. Ltd. All rights reserved. Maximizer CRM is a registered trademark of Maximizer Software Inc. Maximizer CRM, Maximizer CRM Live, Maximizer Contact Management, and other product names may be trademarks of their respective holders. This is for information purposes only. MAXIMIZER SOFTWARE INC. MAKES NO WARRANTIES, EXPRESSED OR IMPLIED, IN THIS SUMMARY.