Have you heard of the 80/20 rule, better known as the Pareto Principle? When applied to your business, it means 20 percent of your customers are more than likely to buy 80 percent of your products or services. So, how do you target that 20 percent of your business’ best customers? Follow the 10 steps below to observe your best customer’s behavior and develop a target market for your business.
THE AVERAGE SALE: Start tracking your average sale in a day, a week and month to find out how much the average person spends when purchasing a product or service from your business. Once you have a figure for the average sale, track how many of your customers purchase over that amount, by how much (dollar amount), and how often. For example, if the average person spends $35 in your boutique, your top customers may spend $75, come back weekly, and may be more likely to refer a customer.
COMMON CHARACTERISTICS: Once you have your average figure and track every time someone spends over the average $35 from our previous example, begin assessing similarities in the customer’s characteristics. For example, the age, location, gender, marital or family status, income level, ethnic background, and needs (particularly for services.)
WHY AND WHAT: Engage your customers with a simple survey after purchasing or at the counter through friendly conversation. Find out why your customers buy from you, what they care about, and what they’re willing to pay. You can ask if they buy from you because you’re local, for a social cause, quality or for convenience.
WHERE: Where do your customers buy your product or service, online or in-store? In our previous example, your customers may enjoy a personal shopper to help with their purchases or enjoy in-store only discounts or promotions. For service-based businesses, where is the sale coming from? Are your customers answering cold calls, online ads, referred by friends, looking at your website? These are things you can assess and track.
WHEN: When do your customers buy? Is it seasonally, in the morning, evening, once a week, twice a month? In our example, maybe you find that many of your best customers come in after work from 5pm-7pm, maybe you can stay open another hour or have an invite-only promotion for your best customers where from 7pm-8pm the store exclusively stays open to your best customers once a month and perhaps offer a special promotion during that time.
RETURNING: Why will your customers come back? Did your customers receive great service, do they celebrate a special occasion with a purchase at your business, is it need-based, did the experience give your customer something to talk about? If all else fails, ask your returning customers why they come back. If Saturday is your best sales day, ask your customers to come back on Tuesdays for special promotions or exclusive deals. Get your customers in the habit of coming back.
YOUR PORTFOLIO: Do your customers know all of the products and services you offer? It doesn’t hurt to train your staff to say for example, “Don’t forget we cater” or your insurance agent who primarily sells commercial insurance to say “We also sell home and auto insurance” or simply display signage or reminders on your website.
REACHING THE 20%: What marketing channels work best to communicate with that group? Let’s say your best customers at your convenience store are mostly retired individuals or senior citizens. The best channels to communicate with this audience may be through local newspapers, direct mail, and radio. Pay attention to the group’s behaviors and interests and use corresponding channels.
ASK FOR REFERRALS: Now that you may know the faces or names of your best customers, track them in a CRM system, and market directly to them. Ask them in person or through the appropriate channels to refer you to their friends or family.
CROSS PROMOTE: Cross-promote through partnerships with other businesses. Sometimes aligning your business with a larger company may give your business added credibility or alternatively selling complementary products may offer your customers convenience. When you search for partners, make sure you both have the same target customers, but complementary products.
For more information on defining your target market, contact the Economic Development Collaborative-Ventura County. Conveniently located in Camarillo, California, we’re here to help.