A business can't thrive without customers, and for that reason, the efforts of marketers are often focused on new customer acquisition.

Unfortunately, many companies neglect their existing customers and one of the reasons this happens is that they don't ask a simple question: who are our customers?

The good news is that companies are increasingly interested in learning more about their customers and, of course, identifying the most valuable customers (MVCs). Thanks to Big Data and more increasingly sophisticated analytics tools, that's often easier to do today than it was just a few short years ago.

And the potential pay-off is big: when you know who your most valuable customers are, you know who is most important to retain and you can focus your existing customer marketing efforts on the customers with the greatest potential.

So what metrics can companies use to segment their MVCs? Here are five.

1. Purchase frequency

Tracking how frequently your repeat customers order from you can serve as a foundation for some interesting customer insights. One of them: identifying customers who purchase most frequently.

While you probably shouldn't jump to the conclusion that your regulars are 'loyal' -- true loyalty is hard to come by -- frequent sales activity suggests that they will be easier to retain, making this group of customers worthy contenders for MVC status.

2. Average order value

How much does a customer spend on average, and how does that stack up compared to other customers? For obvious reasons, customers who spend the most should be identified as high-rollers. In some cases, you may even want to be notified in real-time when an order above a certain threshold is received.

3. Customer lifetime value

The heavy hitters who can make your week with a single purchase are very important, but the MVC competition isn't a sprint, it's a marathon. Tracking how much a customer has spent over the course of his or her relationship with you is one of the best ways to identify high-value customers.

Because customer relationships vary in length, however, it's important to do accurate comparisons. For example, when looking at a relatively new customer with just six months of purchasing history, you'd want to measure her value-to-date based on where longer-standing customers were in their first six months.

4. Price sensitivity

Purchases are motivated by different reasons, and some customers are very price sensitive. While a customer who is highly influenced by price isn't necessarily eliminated from MVC status, it can be very useful to evaluate customers through a price-centric lens to identify hardcore bargain hunters who aren't likely to complete a purchase unless they see a deal.

A relatively easy way to do this is to determine which customers have increased their purchasing when sales or discounts were offered. For more accurate results that reflect the fact that some discounts are steeper than others, trying weighing your calculation based on the amount of the discount used.

5. Affluence

While you probably can't peek at your customers' bank accounts, depending on how much information you collect from customers, you may be able to indirectly guess which ones likely have thick wallets.

Affluence, of course, doesn't necessarily translate to sales, but knowing who has the money to spend can be very helpful in determining which customers are worth engaging and, where necessary, fighting to retain.

Patricio Robles

Published 30 January, 2013 by Patricio Robles

Patricio Robles is a tech reporter at Econsultancy. Follow him on Twitter.

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Comments (3)

Jacob Ajwani

Jacob Ajwani, VP of Strategy at Yieldify.com

Glad you mention #4 and #5, those are not tracked as often as the others.

over 5 years ago


Russell O'Sullivan

hey Patricio, really great to see these points collated in one place and added value of point 4 & 5.

I am a strong believer that taking the above in to account will give longevity to your company, not just to grow, but keep on growing for years. Retention and acquisition really need to have a 50/50 split within any company marketing strategy!

over 5 years ago


loyale' 99, http://www.loyale.in/ at Loyale.in

In today’s business scenario, knowing your customer’s lifestyle is an extravagance. Personalized loyalty programs (http://www.loyale.in/)are designed to sustain consumer glee.By adding a need that is created like no other, such as alluring bonus,provides a distinctive sponsorship to customers for the loyalty they have shown to the company . As a result,you create lasting bond with your patrons. Engaging customers from the very first purchase till loyalty, can only be achieved by adding uniqueness .

almost 3 years ago

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