We hold these truths to be self evident, not all customers are created equal.

Not all customers are created equal, some have a much higher propensity to buy.  Can your team put a bullseye on those most valuable customers, focusing marketing, sales and support to ensure resources are allocated properly?  Can your team create an ideal customer or buyer profile?  Did you know that Ideal Customers are ten times less likely to churn or leave, than those that don't fit the profile? 

Your most valuable customers cost less to acquire and are more profitable.  Now, what attributes do they have?  At the basic level there are five steps to identifying your most valuable customers.

Define the objective along with 5 to 7 variables that are distinct and contribute to the outcome. Test for dependency. Demographics or firmographics such as annual revenue, profit, industry, employees, people in the household, miles from a certain location, number of purchases, value of purchases, and so on.  This exercise requires a fundamental understanding of the outcome and contributing variables.  It also requires a certain amount of curiosity and bias aversion.  Are there outliers, not in your current data set, that drive the outcome?  Consider weather, commodities, consumer confidence, wholesale price index or other publicly available data.

Take all the data from your records, all the customers who bought in the past 6-months or year, filter out those 5 to 7 defined contributing variables and calculate the mean and standard deviation for each.

For every customer in the set, compute difference between the values in that customer and the entire set, divide by the standard deviation of the set.  This yields standard scores between the variables so they can be compared on the same scale. 

Next, compute the summary score for each customer or the average of its standard scores.

Order the customers from high to low based on those summary scores and the desired outcome.  Watch for the patterns to emerge, you’re now ready to build your propensity to buy formula.  Customers above the 80th percentile are your most valued customers. Now you can apply your resources to prospects who look like those customers; and focus your support efforts on the top 80th percentile. 

Does this approach apply to B2B, B2C, and Non-profit?  Yes.  Start-ups or enterprise sized organizations? Definitely.

What if you don’t have the all data necessary?  Companies like Dun & Bradstreet make a living compiling and cataloguing data on businesses. Geospatial and consumer data is more readily available today than ever before.  If you need data to fill in some blanks, there’s a list for that. 

Getting started requires your organization to do some primary research up front; structured interviews with personnel, buyers, consumers is a great place to start.  Validate and refine the contributing variables.  Be mindful of bias, look for the outliers.  The reward for running this exercise is  championship performance, can your team afford anything less?  Ascendiosa can help.

Author:  Mark Miller is Ascendiosa's Chief Commercial Officer

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