Find the right customers, connect the right way and leave the rest alone
Stop the whirlwind of communication with business customers. Customers simply won't put up with it – and opt out if they feel harassed and hassled. However, the good news is that customers are becoming more and more loyal to the companies that know the right way to contact them.
Over the past decade, there have been significant developments in the number of sales channels and customers’ digital presence. Customers will, to a much greater extent, explore and choose the companies that can meet their needs. Therefore, sales must now more than ever take place on the customer's terms. Phone sales, for example, today result in low hit rates, as the potential customers sees it as an annoyance when they are contacted by the same company for the third time.
However, several companies still make the mistake of thinking that sales volumes are crucial to success. Even though they can see from their own figures that 80 per cent of the profit comes from 20 per cent of customers – also known as the "Pareto principle".
Each company must therefore carefully review their sales efforts and make sure that this effort goes on the most profitable customers. For example, by focusing on a customer’s lifetime value. Customer lifetime value measures how profitable a customer is over time and also focuses on customer loyalty – i.e. how long you can expect the customer to stay. Amazon Prime is a good example of a company that manages to retain their customers. According to Statista, 93% of 1-year customers and 98% of 2-year customers extended their subscription with Amazon Prime in 2021. This testifies to the fact that customers become more loyal over time.
Our experience tells us that there are three very specific opportunities to strengthen your sales efforts and increase customer lifetime value:
- Focus sharply on the target audience. Find out who your target audience is and to whom your business can offer a special service. That also means opting out of companies or specific industries. To prioritise, you need to know exactly which customer segments drive the bottom line.
- Create valuable partnerships. With partnerships, you get higher conversion rates and customer loyalty. Channels such as telephone sales are difficult due to their high monthly cost, lower sales, and lower profits. Most companies no longer answer the phone when the call is from an unknown number.
- Focus on your existing customers. You should find opportunities to increase loyalty from each customer. A crucial factor in the financial services sector is the hassle of having to switch to another company. This typically occurs around important events in our lives, for example, the purchase of a new home. The more of your company's products that your customers have, the more difficult it is to switch to a competitor.
Acting on these three initiatives means a company will be in a stronger position in the battle for the 800,000 business customers in Denmark – and the same applies to the market for private customers.
In short: To prioritise tomorrow’s efforts, you need to measure customer lifetime value today.