How To Identify High Value eCommerce Customers
How to Identify High Value eCommerce Customers
In business, the quality of your customers is equally important as the quantity.
The best customers purchase frequently, have a high average order value (AOV), and are typically low-maintenance. On the other side of the spectrum are the high-maintenance customers who return orders, spread negative word-of-mouth, and are typically not worth the effort.
Overall, a sort of Pareto principle applies here: The top 20% of the customers drive 80% of the business. This Spyder case study is proof of that: 81% of Spyder’s revenue comes from 20% of customers.
Now, imagine 100% of your customers are like the top 20%. Mathematically, that’d mean 4x the business!
However, realistically, it’s impossible to have 100% quality customers.
With some effort, though, you can increase the number of high-value customers. And it starts with identifying your best customers.
4 Ways to Identify Your Best Customers
To identify your best customers, look for customers with these characteristics:
First, build an online community if you don’t have one. The benefits of providing your (potential) customers with a platform to talk with each other are unreal (The overall average ROI for advanced communities is 70x!).
Of the many benefits of online communities, one is you can identify your best customers.
Statistically, 7% of members in online communities perform actions and answers, 25% provide validation, and 11% share. All these active community members are generally your top customers — they are loyal to your brand and have good things to say about your products and services.
Those who share positive word-of-mouth about your brand on social media are among your best customers. They like your product or service enough to share about you, tag you, retweet your tweets, comment on your posts, respond to your polls, emoji-reply to your stories, etc.
For example, Jackson (thanks, Jackson!) tweeted praising Social Snowball as a must-have Shopify app:
Only a fraction of your best customers share about/interact with your brand on social media. Most of them are silent purchasers who do promote your products but in private DMs or during conversations with friends and family.
To identify such silent promoters, you can run NPS surveys. NPS (Net Promoter Score) is a gold standard for evaluating customers’ loyalty towards a brand and their likeliness to promote your product to a potential customer.
Here’s how it works: All customers are sent a question like this:
If you sell frequently-needed items (like clothes, food, etc.) and a customer buys them from you frequently, it’s a direct indicator of an ideal customer.
On the other hand, if you sell something (like watches) that won’t attract high purchase frequency, you can still accurately guess the best customers. For that, you’ll need to look at LTV (Lifetime Value). If a customer has purchased products worth more than the average LTV, the customer is most likely on the “best customer” side.
There are two primary reasons to identify the best customers:
- To keep them with you forever. After all, they bring in the majority of your business revenue. Plus, increasing customer retention rates by 5% boosts profits by 25% to 95%.
- To leverage your bond to attract new customers. The best customers are already your brand ambassadors; however, you can proactively ask for more and get more from them.
Here are the things you can do to achieve both goals:
Firstly, and obviously, create an affiliate program for your business if you don’t have one.
An affiliate or a referral program incentivizes customers or influencers to bring customers to your brand. Here’s how it works: Each affiliate or referrer is given a trackable link/coupon code, which they can share with potential customers. Then, when the potential customer buys through that link or coupon, the affiliate (typically) gets a % of the sale as a commission.
Paypal’s referral program is a good example. Paypal paid its customers $10 for referring a friend and exponentially grew to over 100 million users in two years:
By paying your best customers to bring more customers, you motivate them to spread positive word-of-mouth even further.
And these new customers your best customers bring will be on the “best customers” side of the spectrum — the kind that you want more. These statistics are proof:
- Referred customers bring a 25% higher profit margin.
- A referred customer is 18% more loyal than a customer acquired through other channels.
- Customers referred by other customers have a 37% higher customer retention rate.
I know of no one who doesn’t read reviews before making a purchase online. Reviews are the lifeblood of online businesses. And the more positive ones you have, the better the conversion rate will be.
Once you have identified your best customers, make extra efforts to get reviews from them. Go beyond just the product reviews that you ask from everyone; ask your best customers to leave reviews on Google My Business, Facebook, etc., too.
They’ll likely have nice things to say about you.
UGC or User-Generated Content is any type of content — videos, images, text — actual users share about the product they received or experience they had.
79% of people say UGC highly impacts their purchasing decisions. Meaning, if you sprinkle some UGC at crucial points of the customer buying journey, it’ll increase the conversion rate.
Here are a few ways to gather quality UGC from your best customers:
- Send emails to your top customers and offer them a reward to post their experience with your product on Instagram. Then, reshare it on your profile so potential customers can see it.
- Run a contest on social media to encourage fans to create something and tag you.
- Ask your favorite customers for video testimonials.
In the book Marketing Metrics, the author shares an interesting statistic: The probability of selling to a new prospect is 5-20%. The probability of selling to an existing customer is 60-70%.
Because your best customers already know your brand and trust your products, they are most likely to buy from you. Therefore, sell more to them instead of looking to acquire more customers (of course, that’s only if you had to choose from one). This way, you’ll increase your revenue from just the low-maintenance customers.
Here are a few things you can do:
- Give them loyalty points that they can use in-store.
- Recommend them products based on their purchase history.
- Create a membership/VIP club and invite your top customers, so they purchase from you every month or quarter.
All in All
You can identify your best customers by:
- Noticing active community members,
- Running NPS surveys,
- Analyzing their shopping patterns,
- Or seeing their social media interaction with or mentioning your brand.
Once identified, ask them to:
- Become an affiliate and promote your brand,
- Rate your products and brand all over the internet,
- Share their version of product photos, use cases, etc.,
- And buy more.