Types of customers and how to segment them

types of customers

To ask ourselves why customers are essential for businesses would sound like debating if flying is possible for humans without using airplanes. The obvious answer is simple, but as it is with flying, when talking about customers it is not enough to acknowledge their importance for the business. The focal point for companies is to understand where to find their potential customers, who they are, what they like, what they need, and how you (the business) can bring customer satisfaction.

In addition to this, you will have to comprehend what the different customer types are. Nonetheless, as an entrepreneur, it is crucial to learn, understand, and apply tactics for identifying and serving all the different types of customers that you`ll encounter so you can grow your customer base. So let’s get right to it, and learn a few things about how the art of having a happy customer works. 

What is a customer?

It might not sound very interesting to start with definitions, but it’s essential to understand what you need to grow your business. For example, if you are a brand like Ferrari, one-time-clients might be just fine because one sale can do the trick for your car dealership. But if you are a mere mortal among us and have a small-to-medium business promoted on social media, you`ll want customers. That means people who will come to you customary. Those are the people that will habitually return to you and allow your establishment to develop sustainably.

In economics and sales, the customer is simply the recipient of a service, product or any other good that comes out of a process. In exchange, the customer gives away money or different types of consideration. Not long ago in our history we had an economy based on favors which meant that commerce created somehow permanent human relations. As economics developed, we translated to more transitory needs, we began talking more about different types of customers and customer relationships.

Customer segmentation

When talking about different types of customers we have to understand the concept of customer segmentation. Logic tells us that a customer may or may not be a consumer too.

Customers are usually divided into two categories: the entrepreneur/dealer who purchases for resale and the end-user who buys in order to use that product/service. The tactics will be different when trying to win these types of customers; but for our purpose here, we shall talk mainly about those customers who come to your doorstep to make the purchase for themselves.

What are the different types of customers?

As brands developed and became more and more accessible, we started talking about customers not only as single entities that will buy our products. Still, we created a whole industry to understand better how many types of customers are out there in terms of how they make a purchase. 

It is imperative to identify the types of customers before they make the purchase. That way you will be able to meet their expectations and win their hearts and credit cards. First of all, we have “the lookers” which are just scouting and only buying if something captivates their attention. We also have the “deal-of-the-day hunters” who are every one of us on Black Friday. They are attracted by a huge discount and great 1+1 deals and will buy in bunches if they feel they stumbled upon a bargain. 

Next, we have The Researcher and on the other corner of the room, we have The Impulsive Customer. While the ones in the first category will spend lots of time looking for the best possible price and quality and will turn out to be loyal customers. With the others you might discover they just bought the whole shelf, and the only thing that might scare them is a complicated checkout process. Make sure you are ready for them because they are known to be disloyal customers.

We have the customers that buy while always having in mind the price of the product, and this is important mostly because we have a natural tendency to look for and then choose the lowest price we will find. Most people will be interested in finding the best quality/price ratio. Still, we can`t forget about those who will deliberately go for the highest price to emphasize their material status or just to have the feeling that they chose what’s best on the market. 

While making a purchase, really important for a customer is the reliability of the product. We all have that uncle that is extremely proud of his 30-year-old car and who will always tell you “they don’t make them so good anymore”. Even though we are now millennials and we change phones and laptops every time a new version comes out, we all like things that we can rely on. Talking about nowadays` customers, compatibility is sometimes crucial when choosing a certain product over another one, and so is the experience we get out of its usage. Since we are no longer restricted to using only things that “will do their job”, we can now choose the best experience we can get. Having all the features that customers want or the best design in the market are also tie-breakers, but so is convenience, because we sometimes choose the accessible product over the one that needs 14 days to arrive at our door.

Key tactics for identifying and serving different types of customers

As we can see, there are certain patterns in this business. But identifying them it’s only the beginning of a complex process that might sky-rocket your conversion rates. Probably the most important part of the process is finding the best tactics to increase customer loyalty and attract these newly found customers.

Maybe the most active customer of all is “The driver”. Drivers are controlling and they make fast decisions. You`ll have to be there when they need you, otherwise, they will go looking elsewhere. They are not detail-oriented, but they have discipline. You can easily recognize them because they cannot listen, they will always come forward with comments and sometimes harsh inputs and they are in a constant need of control. The best way to transform them into buyers is to value their time as much as they do, act as an expert, cut short the small talk, and never be too aggressive.

We talked earlier about the researchers and will do it again because it is important to understand how to win this category. Opposite to drivers, the researchers are highly focused on details, they take their sweet time to come to decisions and they have high standards. You`ll recognize them for their tendency to ask lots of questions and this is the area where you can win this category: always bring your A-game in terms of data and make sure you use good and relevant examples. Have a lot of patience and be prepared for a long selling process that could look like an interrogation.

The easiest target in terms of customers might be The Buyers. They are usually sociable and friendly. Most important, they are great listeners and easy to get along with. When in your shop, you`ll recognize this type of customer because they use informal language and will need explanations in bunches. Winning them is fairly easy: make sure you build trust and pay attention to the customer relationship management and then just let the things flow. Act like you are their advisor and you are there for the whole purpose of helping them, ensuring they are making the best decisions, and showing constant interest in their needs. Always be a man of your word because this type of customer appreciates honesty.

Last but not least, we have to understand the ways of dealing with those customers who are emotional. They talk a lot, they make bald decisions and love being in the center of the action. 

In front of them, your marketing strategy has to be simplistic: you will have to speak with great confidence and be able to show that you are up to the task. They will enjoy talking for its sake, so expect long conversations in which you will have to be at your best. The best way to deal with this type of customer is to explain how they will benefit from your service. Bring just enough data to understand that you have the expertise, but don`t get them bored. Also, speak based on your own customer experiences and present other`s opinions.

In conclusion, the key might be very simple advice: because every business’s goal is customer retention, be as flexible as you can be. At the end of the day, if they have money, they can be your customers. 

Source: https://www.omniconvert.com/blog/how-to-segment-customer-types.html

9 tips for getting the best value from your advertising spend during a crisis

As the fear of economic crisis looms on the horizon, companies have now had to cut back on their budgets. One of the first places that sees significant financial cuts is the marketing budget. As essential as these functions are for the growth and development of a business, a company needs to manage its marketing spending in line with what it earns. With less disposable income available in the broader economy, it makes sense for businesses to look at ways to shave budget demands that aren’t critical to the company’s basic operation.

Even with this marketing spend cut, companies still want to develop campaigns that keep their products and services within the public eye. The only way for that to happen is to be more efficient in their advertising spend. Getting the most value for the smaller ad budget available should be the most critical of a business’s marketing goals.

These entrepreneurs from Ad Age Collective  are familiar with making the most of a shoestring budget. We asked them to share their insights on how businesses can get the most value out of tiny advertising budgets. Here’s what they had to say.

1. Start with research.

You need to understand what your audience is going through before you launch any ad campaigns. Are they in a position to buy? Are all other systems such as logistics working? It only makes sense to advertise if people can still carry out normal buying activities. Learn about what’s happening with your audience so that you can make better decisions. –  Syed Balkhi , WPBeginner.

2. Focus on results.

This is a crucial time for many businesses and it has never been more important to focus on advertising spend that is directly attributable to a result. This may mean temporarily reducing your brand spend in favor of investments in performance-oriented marketing. Keep an eye on cost per acquisition — it’s everything right now. –  Michael Lisovetsky , JUICE.

3. Amplify earned media.

Find positive articles written about your company or the problems your solutions solve for customers and amplify those articles via social media. This way, you combine the credibility of third-party media with the precision targeting of digital advertising to get the most bang for your buck. By combining them in this way, you’ll fully leverage your public relations efforts and your ad dollars. –  Dan Beltramo , Onclusive (formerly AirPR).

4. Be flexible and listen.

During a crisis — and before — brands need to build in flexibility on their spend and be able to shift messaging quickly. Don’t do something off-brand, but show you are listening and have empathy. Turn to social or earned media in times of crisis to reach your audience quickly and authentically. And if able, realign ad spend and messages to address consumer needs at that time and as they change. –  Maggie O’Neill, Peppercomm. 

5. Invest more in acquisitions and SEO.

With many advertisers pulling back on ad spend and customers spending more time online, now’s the time to invest in acquisition efforts. CPMs are down with decreased demand and increased inventory, so prioritize high- and mid-funnel messages to build brand awareness, recall and trust. Also consider investing more in SEO. A high-quality, relevant online experience will help maximize sales potential. –  Chad Robley, Mindgruve.

6. Do fewer things and do them better.

Focus on a few things and choose them based on areas where you have the highest propensity to succeed. Build in the industries you already have built a reputation. Finally, go for one call to action and pour your heart into it. Remember, if you went on a first date and liked the person, all you’d want is a second date. What is your call-to-action equivalent of a second date? – Arjun Sen, ZenMango.

7. Tie advertising efforts directly to revenue.

Marketers and advertisers often despise sales, preferring to live in the world of ROI based on impressions, awareness and engagement. As antithetical as it may feel, in a crisis you need to make your peace with sales. Tying your advertising efforts directly to revenue in the short term will benefit your organization and give you resources to invest in longer-term initiatives as the crisis subsides. – Patrick Ward, Rootstrap.

8. Send the right message to the right people.

With several industries decreasing or eliminating their media spends, budgets can now go further than ever, so without sophisticated audience segmentation brands run the risk of hitting the same customers over and over or delivering ineffective messages to the wrong people (while results look better than before). It is time to segment your audiences more deeply to make the best use of the budget. – Reid Carr, Red Door Interactive.

9. Seize the competitive advantage and connect emotionally.

To win during and after a crisis, brands do two things: 1) As others cut ad spend, they seize competitive advantage to assure their brand’s share of voice is higher than its share of market; 2) They shift messages to connect emotionally at scale, displaying true commitment to serving communities and customers. The lift in brand affinity, purchase intent and, ultimately, market share gains deliver peak ROI. – Sean Cunningham, VAB.

Source: https://insights.newscred.com/tips-getting-best-value-from-ad-spend/

10 key e-commerce metrics you should measure to increase user engagement

10 Key E-commerce Metrics You Should Measure to Increase User Engagement

Experts from Zyro suggest that it’s crucial to develop a viable strategy for measuring key performance indicators. This includes identifying and prioritizing your short term and long term goals. Also, you’ll get to indicate the main objectives as of what you’re aiming to achieve and set an eCommerce metrics dashboard.

With that in mind, here’s our list of the 10 core eCommerce metrics for increasing user engagement. 

1. Average pageviews per visit

Pageviews is one of the core metrics that refers to the number of times a particular page has been viewed by visitors. 

Measuring pageviews will help you understand how often people visit your website and how they engage with different pages. Additionally, pageviews can indicate when visitors are traveling through your website, failing to find needed information. 

How to calculate average pageviews per visit? 

Average pageviews per visit = Total Number of Pageviews ÷ Total Number of Visits 

2. Conversion rate 

The conversion rate implies the percentage of users who completed the desired action that you want them to perform. These actions vary based on your objectives and can range from subscribing to your email list to completing a purchase after visiting your website or viewing a particular product page. 

Conversion rates are particularly important if you’re running multiple eCommerce digital marketing campaigns. Measuring conversion rate allows you to identify which advertising channels perform and engage users better than others.

How to calculate the conversion rate? 

All of the following formulas are valid and can be used to calculate the conversion rate. The choice of a formula depends on your definition of a conversion event and how you measure website traffic. 

Conversion rate = (Total Number of Conversions ÷ Total Number of  Sessions) × 100

Conversion rate = (Total Number of Conversions ÷ Total Number of  Unique Visitors) × 100

Conversion rate = (Total Number of Conversions ÷ Total Number of  Leads) × 100

3. Retention rate 

The customer retention rate refers to the percentage of customer rate returning to your website after completing a purchase. 

By keeping track of the retention rate, you’ll get a better idea about the longevity of your ecommerce websites. Also, it will help you figure out why customers return to make another purchase. 

How to calculate the retention rate? 

Retention rate = (Number of Active Customers ÷ Total Number of Customers at Start of Time Period × 100

4. Customer Lifetime Value 

 Customer lifetime value (CLV or CLTV) refers to the prediction of the total revenue attributed to the future relationship with a customer. To put it simply, it’s the amount of money a customer is expected to spend on your products during their lifetime. 

CLTV is a key metric because it basically shows you how much your clients are worth to you on average. Use CLTV to distinct customers that are economically more valuable to you. 

How to calculate CLTV? 

To calculate customer lifetime value, you first need to identify lifetime value (LTV). 

LTV = Average Value of Sale × Number of Transactions × Retention Time Period 

Now, when you know your LTV, you can calculate CLTV. 

CLTV = LTV × Profit Margin 

5. Gross margin 

Gross margin is a core eCommerce metric that implies the total sales revenue you retain after incurring the production costs. In other words, gross margin is the actual profit you earn per each sale. 

Understanding how much you earn per sale is paramount to increase user engagement and ensure your ecommerce business is scaling properly. 

How to calculate gross margin? 

Gross margin = (Revenue – Cost of all Goods Sold) ÷ Revenue 

6. Average Order Value 

Average order value (AOV) refers to the monetary value of an average customer order on your website. While average abandonment order value (AAOV) is the average value of an order that a client had abandoned during either checkout or in a cart. 

Keeping track of both AOV and AAOV is crucial to increase user engagement. You want to know which elements stimulate customers to complete a purchase and to, oppositely, abandon their orders. 

How to calculate AOV? 

AOV = Revenue ÷ Number of Orders 

7. Cost per acquisition 

Cost per acquisition (CPA) is another key eCommerce metric that refers to the amount of money you have to spend to gain a new customer. Cost per acquisition includes the following factors: 

  • Email campaigns costs
  • Advertising costs
  • Discount offers (and anything else it took to make a sale)

Keeping track of CPA gives you a perspective of how much costs and efforts you spend to engage and acquire new customers 

How to calculate CPA? 

CPA = Total Advertising Spendings ÷ Total Attributed Conversions 

8. Cart abandonment rate 

The shopping cart abandonment rate refers to the percentage of customers who add items to their shopping carts, then abandon carts without completing a purchas . This is a crucial eCommerce metric because it gives you an insight into how many customers are intending to buy products but never complete their purchase. 

When it comes to the cart abandonment rate, the value of items added to the cart, the number of items, and the total shipping time are all important. By comparing this rate to other metrics, you can figure out a viable strategy to increase user engagement and decrease the cart abandonment rate. 

How to calculate the cart abandonment rate? 

Cart abandonment rate = 1 – (Number of Shoppers Completing Transactions ÷ Number of Shoppers Adding Items to Cart× 100

9. Checkout abandonment rate 

The checkout abandonment rate refers to the percentage of customers who first initiate checkout and then abandon the purchase. 

Even though the checkout abandonment rate is similar to the cart abandonment rate, they should not be confused. When customers abandon items during checkout, they’re one step further than abandoning their carts.

This metric is useful as it gives you specific data about incomplete transactions after customers are interested in purchasing your products. Analyze the checkout abandonment rate to develop strategies for better user experience. 

How to calculate the checkout abandonment rate? 

Checkout abandonment rate = 1 – (Number of Orders Completed ÷ Number of Checkouts Initiated× 100

10. Revenue on advertising spent 

Revenue on advertising spent (ROAS) is the final metric closing our list. ROAS refers to the total revenue generated by a specific marketing channel. 

Keeping track of ROAS will help you identify how much advertising it takes to engage users to complete a purchase. Also, you can use the results of measurement to identify the most effective advertising channels and make further improvements accordingly. 

How to calculate ROAS? 

ROAS = (Amount Gained From Advertising ÷ Amount Spent on Advertising× 100

Final thoughts 

How often should you measure eCommerce metrics? Some metrics should be checked weekly or bi-weekly. Others require a longer data window and should be measured monthly or quarterly. So, the best answer is that eCommerce metrics should be tracked consistently. The persistent growth of online stores comes as a result of regular performance analysis over time. 

Source: omniconvert.com/blog/10-ecommerce-metrics-increase-user-engagement.html

10 Content Ideas For Your LinkedIn Page

Man Holding Mug at Cafe

There are over 30 million Pages on LinkedIn. If yours isn’t one of them, you’re missing opportunities to get your content in front of the audience that matters most to your business. Plain and simple.

If you’re just getting started with your Page, or are a content powerhouse team of 1, you might not feel like you have enough content to post 3-4 times a day, but the truth is you likely have the content sitting right in front of you – it’s on your company website, your blog, third party articles and more!

Different posts clearly have different objectives. If your goal is lead generation your update may link to a landing page for a gated eBook or whitepaper. If your goal is brand awareness your post might link to your company website or perhaps you’ll share a blog post announcing a new product or feature enhancement. If it’s a thought leadership play you might share an article your CMO published on the LinkedIn platform.

In a TL;DR world where there is actually way too much content and not enough effective content, here are a couple of ideas – from our team to yours – to help inspire you to publish more effective posts on your LinkedIn Page and grow your following.

By the way, did you see that our LinkedIn Marketing Solutions Showcase Page just hit 1 million followers?! Needless to say, if I were you, I’d heed this advice:

10 Types of posts you should share on your LinkedIn Page

1. Video, video, video


  • Video is 5x more likely than other types of content to start a conversation among members.
  • LinkedIn members spend almost 3x more time watching video ads compared to time spent with static Sponsored Content.

If you hadn’t heard, LinkedIn just went all in on video. Here are two (of many) ways our team has incorporated video into our LinkedIn Page content strategy.

Short video series

LinkedIn Marketing Minute is series of videos aimed at providing actionable advice to marketers like us. Including influencers, like Ann Handley below, increases credibility and will likely increase reach as they will likely share it with their networks.

Video case studies

It’s a video. It’s a case study. It’s a 30 second video promoting a case study! Short, sweet and engaging.

2. Images featuring statistics

People love stats and sharing things that make them appear more knowledgeable. We take ‘stand out’ stats from case studies and external research/surveys and showcase them with social tiles as part of larger campaigns.

3. Product launches and feature enhancements

Keep your audience up to date on the latest and greatest of your products or services. Then take the next step and share best practices on how to use them.

4. Celebrating company wins and milestones.

Give an inside look at your company’s mission and vision. Don’t be shy to celebrate company wins and show gratitude to followers and customers for helping you achieve your goals.

5. Highlighting company leaders

People buy from people, not companies. Humanize your brand and give your audience the opportunity to take a peek inside your company culture while simultaneously highlighting your best employees as thought leaders.

6. Drive registration for events your company is hosting or sponsoring.

Our Showcase Page consistently drives high registration numbers for our webcasts and our (award-winning!) Live with Marketers episodes.

7. Promote eBooks

When we launch an eBook, we typically create 4-5 images and videos featuring the eBook cover, stats, quotes and tips taken from the content to extend the campaign shelflife.

8. Third party content

No one likes hang with the person at the party who’s talking about themselves the whole time.

Insider tip: Don’t forget to add hashtags to your content to be found with other relevant trending topics.

9. Thought leadership blog posts

Not every post has to be about your business or product. You can build thought leadership and authority in your space by taking a spicy point of view on a timely or controversial topic.

10. Original research

Original research and insights tend to knock it out of the park.

Source: https://business.linkedin.com/marketing-solutions/blog/linkedin-company-pages/2018/10-content-ideas-for-your-linkedin-page?mcid=6605872282973900800&li_fat_id=edf01f46-1fb6-4bc2-8072-6abd7c5dcbd7

5 Whys getting to the Root of a Problem Quickly

Have you ever had a problem that refused to go away? No matter what you did, sooner or later it would return, perhaps in another form.

Stubborn or recurrent problems are often symptoms of deeper issues. “Quick fixes” may seem convenient, but they often solve only the surface issues and waste resources that could otherwise be used to tackle the real cause.

In this article and in the video, below, we look at the 5 Whys technique (sometimes known as 5Y). This is a simple but powerful tool for cutting quickly through the outward symptoms of a problem to reveal its underlying causes, so that you can deal with it once and for all.

Origins of the 5 Whys Technique

Sakichi Toyoda, the Japanese industrialist, inventor, and founder of Toyota Industries, developed the 5 Whys technique in the 1930s. It became popular in the 1970s, and Toyota still uses it to solve problems today.

Toyota has a “go and see” philosophy. This means that its decision making is based on an in-depth understanding of what’s actually happening on the shop floor, rather than on what someone in a boardroom thinks might be happening.

The 5 Whys technique is true to this tradition, and it is most effective when the answers come from people who have hands-on experience of the process or problem in question.

The method is remarkably simple: when a problem occurs, you drill down to its root cause by asking “Why?” five times. Then, when a counter-measure becomes apparent, you follow it through to prevent the issue from recurring.


The 5 Whys uses “counter-measures,” rather than “solutions.” A counter-measure is an action or set of actions that seeks to prevent the problem from arising again, while a solution may just seek to deal with the symptom. As such, counter-measures are more robust, and will more likely prevent the problem from recurring.

When to Use a 5 Whys Analysis

You can use 5 Whys for troubleshooting, quality improvement, and problem solving, but it is most effective when used to resolve simple or moderately difficult problems.

It may not be suitable if you need to tackle a complex or critical problem. This is because 5 Whys can lead you to pursue a single track, or a limited number of tracks, of inquiry when, in fact, there could be multiple causes. In cases like these, a wider-ranging method such as  Cause and Effect Analysis or Failure Mode and Effects Analysis may be more effective.

This simple technique, however, can often direct you quickly to the root cause of a problem. So, whenever a system or process isn’t working properly, give it a try before you embark on a more in-depth approach – and certainly before you attempt to develop a solution.

The tool’s simplicity gives it great flexibility, too, and 5 Whys combines well with other methods and techniques, such as  Root Cause Analysis. It is often associated with  Lean Manufacturing, where it is used to identify and eliminate wasteful practices. It is also used in the analysis phase of the Six Sigma quality improvement methodology.

How to Use the 5 Whys

The model follows a very simple seven-step process:

1. Assemble a Team

Gather together people who are familiar with the specifics of the problem, and with the process that you’re trying to fix. Include someone to act as a facilitator, who can keep the team focused on identifying effective counter-measures.

2. Define the Problem

If you can, observe the problem in action. Discuss it with your team and write a brief, clear problem statement that you all agree on. For example, “Team A isn’t meeting its response time targets” or “Software release B resulted in too many rollback failures.”

Then, write your statement on a whiteboard or sticky note, leaving enough space around it to add your answers to the repeated question, “Why?”

3. Ask the First “Why?”

Ask your team why the problem is occurring. (For example, “Why isn’t Team A meeting its response time targets?”)

Asking “Why?” sounds simple, but answering it requires serious thought. Search for answers that are grounded in fact: they must be accounts of things that have actually happened, not guesses at what might have happened.

This prevents 5 Whys from becoming just a process of deductive reasoning, which can generate a large number of possible causes and, sometimes, create more confusion as you chase down hypothetical problems.

Your team members may come up with one obvious reason why, or several plausible ones. Record their answers as succinct phrases, rather than as single words or lengthy statements, and write them below (or beside) your problem statement. For example, saying “volume of calls is too high” is better than a vague “overloaded.”

4. Ask “Why?” Four More Times

For each of the answers that you generated in Step 3, ask four further “whys” in succession. Each time, frame the question in response to the answer you’ve just recorded.


Try to move quickly from one question to the next, so that you have the full picture before you jump to any conclusions.

The diagram, below, shows an example of 5 Whys in action, following a single lane of inquiry.

Figure 1: 5 Whys Example (Single Lane)

5 Whys

The 5 Whys method also allows you to follow multiple lanes of inquiry. An example of this is shown in Figure 2, below.

In our example, asking “Why was the delivery late?” produces a second answer (Reason 2). Asking “Why?” for that answer reveals a single reason (Reason 1), which you can address with a counter-measure.

Similarly, asking “Why did the job take longer than expected?” has a second answer (Reason 2), and asking “Why?” at this point reveals a single reason (Reason 1). Another “Why?” here identifies two possibilities (Reasons 1 and 2) before a possible counter-measure becomes evident.

There is also a second reason for “Why we ran out of printer ink” (Reason 2), and a single answer for the next “Why?” (Reason 1), which can then be addressed with a counter-measure.

Figure 2: 5 Whys Example (Multiple Lanes)

5 Whys

Step 5. Know When to Stop

You’ll know that you’ve revealed the root cause of the problem when asking “why” produces no more useful responses, and you can go no further. An appropriate counter-measure or process change should then become evident. (As we said earlier, if you’re not sure that you’ve uncovered the real root cause, consider using a more in-depth problem-solving technique like  Cause and Effect Analysis,  Root Cause Analysis, or FMEA .)

If you identified more than one reason in Step 3, repeat this process for each of the different branches of your analysis until you reach a root cause for each one.

Tip 1:

The “5” in 5 Whys is really just a “rule of thumb”. In some cases, you may need to ask “Why?” a few more times before you get to the root of the problem.

In other cases, you may reach this point before you ask your fifth “Why?” If you do, make sure that you haven’t stopped too soon, and that you’re not simply accepting “knee-jerk” responses.

The important point is to stop asking “Why?” when you stop producing useful responses.

Tip 2:

As you work through your chain of questions, you may find that someone has failed to take a necessary action. The great thing about 5 Whys is that it prompts you to go further than just assigning blame, and to ask why that happened. This often points to organizational issues or areas where processes need to be improved.

6. Address the Root Cause(s)

Now that you’ve identified at least one root cause, you need to discuss and agree on the counter-measures that will prevent the problem from recurring.

7. Monitor Your Measures

Keep a close watch on how effectively your counter-measures eliminate or minimize the initial problem. You may need to amend them, or replace them entirely. If this happens, it’s a good idea to repeat the 5 Whys process to ensure that you’ve identified the correct root cause.

Key Points

The 5 Whys strategy is a simple, effective tool for uncovering the root of a problem. You can use it in troubleshooting, problem-solving, and quality-improvement initiatives.

Start with a problem and ask why it is occurring. Make sure that your answer is grounded in fact, and then ask the question again. Continue the process until you reach the root cause of the problem, and you can identify a counter-measure that will prevent it from recurring.

Bear in mind that this questioning process is best suited to simple or moderately difficult problems. Complex problems may benefit from a more detailed approach, although using 5 Whys will still give you useful insights.

Source: https://www.mindtools.com/pages/article/newTMC_5W.htm

How to improve your Customer Lifetime Value

It’s cheaper to retain existing customers than to acquire new ones, especially in industries where the customer lifetime value is more important than the profit of an individual sale. Globally, the average cost of a lost customer is $243 (KISSmetrics).

64% of companies rate customer experience as the best tactic for improving customer lifetime value, followed by better use of data and personalization. There are many methods you can use to optimize your customer lifetime value, but here I will detail a few:

1. Treat your best customers differently

How would you call a world where everyone gets the same reward. No matter how impactful they are? Where everyone gets the same bonus, no matter how hard they work?

Unfair, right?

Well, if your eCommerce is sending the same special offers and discounts to all their customers, that’s what’s happening.

A good idea would be to incentivize customers to like you more by giving them special treatments, ultimately, increasing your chances of turning them into advocates.

That’s exactly what Booking.com is doing with their best customers through their Genius program.

2. Offer a personalized experience

 94% of businesses believe that personalization is critical to current and future success.
Let’s take a look at a case study we’ve made for Avon. Based on online surveys, the data showed that the most important barrier women had in order to buy from Avon was their distrust that the make-up will match their eyes color. 

So, an actual beauty expert showed up on a triggered overlay to help them out:

The website displayed only relevant products for their eyes color, remaining consistent on the checkout:

The results for personalization experiments speak for themselves.

3. Offer free returns

Free returns mean additional costs for you. But these costs need to be considered together with the extra conversions they bring and the potential to boost the retention rate. 
However, to identify to whom you should offer free returns and to optimize the kind of products you are selling, you need to do deep diving into data. 

 Zappos found out that people who regularly return items are their best customers. Those Zappon clients who buy the most expensive products are also the ones with an orders return rate of 50%.

“Our best customers have the highest returns rates, but they are also the ones that spend the most money with us and are our most profitable customers.  – Craig Adkins of Zappos.

4. Address the reasons why orders are returned

For fashion e-commerce stores, one of the most frequent reasons items get returned is the size. So many stores have implemented fitting tools and virtual wardrobes that make up for the fact that customers cannot try on the clothes before buying.

Shoefitr, an app that helps online shoe shoppers find proper fitting footwear, managed to reduce the fit-related returns of an online footwear retailer by 23%.
Another example is  GlassesUSA who lets its customers upload a picture of them and try on glasses before purchasing. And this strategy can be implemented for non-fashion related online shops as well. MyDeco 3D room planner is another tool that helps online shoppers try out room looks before buying furniture.

5. Provide multi-channel returns

The fit is not the only reason items are returned. Since customers will return products anyway, you should make their experience as easy as possible. If you are an omnichannel retailer, allowing customers to return items bought online to brick and mortar stores is a must.

Customers really appreciate the flexibility and convenience of multi-channel returns and are more likely to become loyal customers. And think about it this way: when you allow your customers to return items in store you also take advantage of the opportunity to upsell or cross-sell;  a well-thought multi-channel return strategy rarely lets customers leave the store empty-handed.

6. Reward your most loyal customers

Offering your most loyal customers some kind of reward is a powerful way to strengthen brand affinity. Your loyal customers are your brand ambassadors. Your influencers. Some retailers offer special discounts or private sales, but it can be much simpler than that (like responding to your customers’ tweets).

ASOS has another strategy worth copying: creating an exclusive community for people who love the brand. The retailer launched #AccessAllASOS, a community that provides members exclusive access to news and events.

7. Focus on your ideal customers

The best in class retailers pay special attention to their VIPs by running RFM segmentation. RFM is a way to segment your customers according to their buying behaviors:

– Recency – How recent is the last order?
– Frequency – How often that customer bought?
– Monetary value – What is the total revenue you got from each customer?

Loyal customers are valuable, but loyal customers who also spend a lot of money with you are even more valuable.

Here are a few benefits you can offer them after you will find out who they are:

  • Priority Support
  • Free returns
  • Free delivery
  • Tailor-made offers
  • Packing and dispatching their orders first;
  • Notifying them about new or limited products first;
  • Sending them personalized lookbooks, exclusive previews, and presentations;
  • Assigning them personal shopping assistants who can help them plan their wardrobes.
  • Thank-you notes or gifts

8. Provide outstanding customer service

I don’t think there’s a brand out there that purposely provides bad service to its customers. Nonetheless, there aren’t many retailers that provide excellent customer service either. But they should. A study by Zendesk revealed that consumers rank quality (88%) and customer service (72%) as the two biggest drivers of loyalty.

The same study also revealed that providing exceptional customer service 24/7 is the best way a company can build customer loyalty.

However, few companies are making efforts to understand how their customers are feeling after the purchase using customer surveys. 

Measuring NPS or customer satisfaction or customer effort is an effortless way to stop broadcasting, but establishing a two-way communication model between you and your customers. 

Moreover, if you mix RFM with NPS, you can reveal some hidden reasons why your CLV is being affected. Putting your customers first will not be an option in the near future. It will be a vital thing to do if you want your company to survive and thrive.

Most businesses try to reduce costs associated with customer support so they make it difficult for customers to actually speak to someone on the phone (marketers who have tried at least once to contact Facebook Ads support can surely understand how frustrating this feels).  

So improving your customer service will also boost your customer retention rate and customer lifetime value. Also, social media is an increasingly popular support channel and many brands have a Twitter feed dedicated to resolving customer queries.

9. Acquire sticky customers 

After you identify your ideal customer profile through RFM segmentation, you can improve customer acquisition by targeting the customers that are more likely to buy again from you. 

You may think that you can find this kind of demographics data in your Google Analytics or Facebook Insights. But, the truth is that what you are seeing there is the data regarding your visitors, not your customers. And the customers are what matters to you. Moreover, your best customers (true lovers) are the ones you should really focus your customer acquisition efforts. 

In this example, it looks like the ideal visitors to target are between 26 and 55 years old

The most  company should focus more on other cities than London 

10. Build a subscription model

You may not have control over the delivery process, but you can still improve how the package looks like.  Birchbox, a company that offers monthly subscription boxes of cosmetic samples, delivers a personalized selection with a beautifully written letter in a branded box made out of Birch trees.

Another well-known retailer who invests in his packaging is Net-a-Porter. Many customers are so in love with their beautiful boxes that they can’t help posting their orders everywhere on social media (which, by the way, is a great method to increase customer loyalty and advocacy).

11. Diversify your product offering

As you can see, optimizing your customer lifetime value goes hand in hand with optimizing your retention rate. And the retention rate is improved when you make your customers’ lives easier.

If you identify the buying patterns of your most important customers, you can free them from the need to use other websites or channels to acquire the goods they are in need.

Uber is one of the companies that have diversified beautifully.

From the need to get a ride to the need to get food delivered at your door.

Customer lifetime value is more important than you think. It impacts customer retention rates, it helps boost brand loyalty, and, overall, ensures your business remains profitable and increases the overall business valuation.  So, if you’re not actively monitoring and trying to improve your CLV, now is the time to start!

Source: https://www.omniconvert.com/blog/customer-lifetime-value-clv-how-to-calculate-measure-and-improve-it

Customer Lifetime Value (CLV) – how to calculate and measure

Calculating Customer Lifetime Value is a widespread practice among both e-commerce business owners and marketers. However, not everyone approaches this metric with the same mindset.

The value of the CLV doesn’t lie in finding ways to acquire customers, cheaper. It lies in optimizing customer acquisition costs.

If you’re in the eCommerce game, you can’t afford to go on without understanding the impact of your Customer Lifetime Value.

What is the Customer Lifetime Value

The CLV is defined as the prediction of the net profit attributed to the entire future relationship with a customer.

CLV is one of the key metrics which needs to be monitored as part of the customer experience program as it reveals how valuable a customer is to a business for an unlimited period of time as opposed to referring to their first purchase solely.

How to calculate the customer lifetime value

The simplest formula would be:

CLV = customer revenue – the cost of acquiring and serving that customer

Let’s say every year, for Mother’s Day, you send your mother the same $70 flower bouquet. If you’ve been doing this for the past 5 years, your lifetime value for your florist is $350. However, this simple formula does not always apply as most businesses are more complicated than that. So two other methods have been proposed: historical and predictive CLV.

Historical CLV

The historical CLV is the sum of the gross profit from all historical purchases for an individual customer. Determining the customer lifetime value based on profit shows you the actual profit a customer is bringing to your store. To determine the historical CLV, first you need to:

  1. Identify the touchpoints where your customer creates value;
  2. Integrate records and create a customer journey;
  3. Measure your revenue at each touchpoint;
  4. Add everything over the lifetime of that customer.

Then, you can use the formula below:

Historical CLV = (Transaction 1 + Transaction 2 + … + Last transaction) * Average gross margin

The historical CLV takes into account customer service costs (cost of returns, acquisition costs, cost of marketing tools, etc.). The problem with this method is that it can be complicated to calculate on an individual basis, especially if you want the figures to constantly be up to date.

Predictive CLV

A more efficient way to determine the customer lifetime value is through predictive CLV. The predictive CLV is built based on predictive analysis and takes into account previous transactions plus various behavioral indicators that forecast the lifetime value of an individual. This value becomes more accurate with every purchase and interaction, so this is a better method to calculate customer lifetime value.

To calculate the predictive CLV you need to:

  1. Identify the touchpoints where your customer creates value;
  2. Find out what determines that value and if it differs from customer to segment;
  3. Identify why a customer has moved from one moment to the next.

Then, you can determine the predictive CLV in two ways:

Simple predictive CLV:

CLV = ((Average monthly transactions * Average order value) * Average gross margin) * Average customer lifespan

*where the average customer lifespan is calculated in months. This formula is also used to determine the detailed predictive CLV.

Detailed predictive CLV:

CLV = CLVs * Monthly retention rate1 + Monthly discount rate – Monthly retention rate

One thing to keep in mind when calculating the predictive CLV is that it will never be 100% accurate as this is just a forecast. However, if you personalize the formula for your business, you can determine a highly-accurate customer lifetime value.

Also, note that the equations above don’t take into account the cost associated with retaining a customer. To get a net value for your CLV, you will also need to calculate this. And if you really want to be accurate, you may also want to consider interaction and transactional information for each customer, as every individual is unique.

Lifetime value to Customer Acquisition Cost Ratio

The ratio between CLV and CoCA (customer acquisition cost) is one of the most important aspects that a VC will look at before investing in your company.

You simply can’t acquire customers forever. So finding the right customer acquisition and retention mix is the key for a sustainable for eCommerce growth.

A good ratio would be 2, a bad one would be below 2 and the best ratio is 3.

If it is below 2, that means your either doing this consciously in order to gain market share, either your business is bleeding money.

If it’s above 3, it usually means you’re either harvesting cash because your business can’t grow anymore as you are the market leader and don’t want to diversify. Another possible explanation for this value could be the fact you’re too prudent and don’t want to grow faster, or you’re not aware of this and you don’t want to go faster.

Customer lifetime value benchmarks

After all the effort you put in to determine your CLV you might also want to know where you stand compared to your competitors. Although each e-commerce business is different and their customer lifetime value varies, there are some benchmarks you can use to roughly estimate your position.

Customer lifetime value analysis (Case Studies)

1. Starbucks

Starbucks is always opening new stores around the world, its acquisition strategy being frequently copied. For this case study, I am going to use data from 2004. The numbers do not reflect the company’s current status, but they can be used to exemplify how you should determine your customer lifetime value.

Step 1: Find out your average

To simplify calculations, let’s say you only have three customers. Customer 1 spends $4 per visit. Customer 2 spends $6 per visit. And customer 3 spends $9 per visit. The average will be $6.33 (I’ll call this value ‘s’, the average spend per customer).

Now, for the purchase cycle, customer 1 visits you 5 times a week, customer 2 visits you 3 times a week, and customer 3 does it 6 times a week. The average number of visits is 4.66 (I’ll call this ‘c’).

Last but not least, your average customer value per week (expenditures * visits) is $20 for customer 1, $18 for customer 2, and $54 for customer 3. The average across the three customers is $30.66 (I’ll call this value ‘a’).

Step 2: Calculate the CLV

To determine the customer lifetime value, I will also use some constants:

Average customer lifespan (t) =  how long an individual remains a customer. For Starbucks, that’s 20 years.

Customer retention rate (r) = the percentage of customers who repurchase over a given period of time when compared to an equal preceding period. Starbucks’ retention rate is 75%.

Profit margin per customer (p) =  For Starbucks that’s 21.3%.

Rate of discount (i) = the interest rate used in discounted cash flow analysis to determine the present value of future cash flows. Usually, the rate of discount is between 8% and 15%. For Starbucks, it’s 10%.

Average gross margin per customer lifetime (m) = Starbucks has a profit margin of 21.3% (p). If the average customer spends $31.886 (52 * a * t) during their life as a customer (t), Starbucks has a gross margin per customer lifespan of $6.791 (profit margin * expected customer lifetime expenditure).

A large corporation like Starbucks will use several methods to determine the customer lifetime value, as well as marketing budgets and acquisition costs.

2. Netflix

Determining your customer lifetime value is just the beginning. What you do with that information is what will determine your business’ success. Because now you know how much you should be spending to acquire a customer, from overhead to marketing.

Maximizing profit

Let’s look at Netflix. An average Netflix subscriber stays on board for 25 months and has a lifetime value of $291.25.

If you’d subscribe to Netflix right now, you would pay around $8.97 per month (that’s the cheapest price plan), which means $107.64 per year. If you were Netflix, would you spend $150 to acquire a customer?

It seems counterintuitive to spend more to acquire a customer and still be profitable, but that’s why determining your customer lifetime value is important. Yes, Netflix would lose $42.36 in the first year, but as I mentioned earlier, the average Netflix user stays a customer for 25 months. So even if the company doesn’t make an immediate profit, it doesn’t mean it remains unprofitable.

You shouldn’t be afraid to lose money in the short run if that can boost your revenue in the long run. In order to determine how much you can afford to lose in the short run, you need to know the lifetime value of your customers. Without that number, it’s impossible to optimize your revenue.

Maximizing the customer lifetime value

Each customer is unique. Some will not pay for Netflix; not even for a month. Some might remain customers for several years, while some might never want to cancel their subscription. Not to mention that Netflix offers three different price plans – a premium user who remains a customer for three years is more valuable than a customer who has the cheapest price plan for four years.

By tracking each customer individually, Netflix can optimize their lifetime value. For example, if you stop watching movies, they know you might cancel your subscription sooner or later. So, they can start persuading you into remaining a customer long before you even think of canceling your subscription. By tracking stats and behavior of users, Netflix is reducing its churn rate.

To maximize your revenue per customer you need to track each individual. By monitoring the specific events and actions your customers are taking on your website, you can determine the steps or features that will influence people to engage more. Users that engage more are happy customers, and happy customers will remain with your company for longer.

Maximizing customer acquisition

Netflix knows their customer lifetime value and has fine-tuned their product to reduce churn so they can afford to spend more on marketing. For example, they pay affiliates $16 for every customer they bring in. It might not seem that much, but take into consideration the fact that Netflix offers the first month for free and many users don’t turn into paying customers after that. So, affiliates are paid $16 for each user no matter if those users become profitable or not.

However, a percentage of those users actually do turn into paying customers. Otherwise, Netflix wouldn’t be able to keep paying affiliates $16 or spend $2 for every click from their Google AdWords campaign. The point I want to make is you can’t keep dumping money into marketing if you don’t know your lifetime value metrics well.

Source: https://www.omniconvert.com/blog/customer-lifetime-value-clv-how-to-calculate-measure-and-improve-it