Memorable marketing solutions exclusively for small businesses in Buckinghamshire, Berkshire and Oxfordshire    Jan 2007

 

 

 

Customers aren't always the same

Understanding which of your current customers generate the most profit for you and why, can be very revealing and, when correctly used, can help you to focus your marketing on attracting more like them.  Here are a few tips ...

Biggest isn't necessarily best

It is easy to assume that your most profitable customers are those that buy the most of your products or services in revenue terms. However, that doesn't take into consideration the mix of products and services that they buy (different products and services generate different margin levels) or all of the costs involved in servicing those customers. 

For example, it might easily be the case that your biggest customer generates a relatively poor level of net profit because they consume a large quantity of a low margin product.  Similarly, another customer may purchase a large volume of a high profitability product, but erodes all of that profit through a high cost of servicing because they are very demanding of your time, expect exceptional discounts, rarely pay invoices on time, require specific documentation, and so on.

Take a closer look

To find out which customers really generate the most profit you will need to do some simple analysis. 

Start by looking at the profit potential on each of your product and service offers and rank them accordingly.  Make sure that you include your normal costs of sale and average discounting levels in the calculations so that you are working with 'real life' figures.

Second, look at your customer list and work out the real cost of maintaining their current purchase levels.  Here you need to consider the individual characteristics of each customer and account for exceptions to the norm, especially those that are most demanding and those that are generally poor payers.  You can then rank the customers by their cost to serve.

The final step is to combine the real life profitability of your offers and the cost to serve of each customer with the purchase volumes that each customer makes.  This will quickly identify which customers really are generating the most profit ... and which aren't.

Memorable Marketing

Thinking and working pragmatically like this will help you to make your marketing work better for you in a more memorable way. This means that your target customers will be able to differentiate your products and services from those of your competitors and clearly see the value in buying from you.

If you would like some advice on memorable marketing techniques for your own business, or you know someone at another business who might need help, then please contact us. The sooner you start, the sooner you will benefit.

 

The 80/20 Rule

Download this handy guide which highlights how you can use the 80/20 rule to make decisions on allocating scarce business resources to achieve the best available returns and deciding how the business should grow.

Written by the Chartered Institute of Marketing as part of their ‘10 Minute’ series, this document makes easy reading for business people of all experience levels.

 

Marketing Effectiveness Assessment

A free service to small businesses in the Buckinghamshire, Berkshire and Oxfordshire area, the Marketing Effectiveness Assessment delivers a professional audit of how a business is using the tools of marketing to communicate to existing and potential customers. It also includes a series of simple and cost-effective marketing activities that the business can implement immediately and at low cost.

Download the factsheet now.

 

Useful Links ...

Adduce Marketing

Chartered Institute of Marketing

Marketing UK (information portal)