Customers are not all created equal in the ecommerce world. You will have some customers who typically spend more and some who typically spend less on products from your online store, and it’s important to identify which group customers belong to.
You may have heard of the Pareto Principle, or 80/20 rule, which says that 80 percent of a company’s revenue comes from 20 percent of its customers. That means that identifying and paying close attention to your biggest spenders can help you make the best decisions about marketing, customer acquisition, and product lines, which will increase revenue and grow your business.
If the majority of your sales revenue is coming from a relatively small number of your customers, it’s exceedingly important that you know who those customers are, and that you take special care in retaining their business. Identifying your biggest spenders are can help you answer the following important questions:
✓ How much should I be spending to acquire new customers?
✓ How can I tailor products and services to best suit my big spenders?
✓ How much should I spend on customer retention?
✓ What types of customers should I focus marketing on and invest the most time trying to acquire?
Knowing who your big spenders are will also allow you to consistently optimize their shopping experiences so that you don’t run the risk of losing their business. It’s widely known, even to retail novices, that retaining existing customers is much less expensive than acquiring new ones, so it follows that holding onto your biggest spenders is even more crucial. There are lots of ways that you can look after the customers that account for the disproportionately huge chunk of sales in order to show them just how special they are. Here are a few examples:
Your top customers are different than your average buyers, so it only makes sense that communications and marketing should be different for them. Personalizing their marketing is essential to showing them that you value their business.
Ensure that your top customers are getting the attention they deserve. Pick, pack, and ship their orders first, answer their customer service inquiries first, and offer them access to new products first.
They may be big spenders, but they will still appreciate saving money. Offer your top customers special deals like free shipping or limited-time discounts to keep them feeling satisfied and appreciated.
Paying special attention to your business’ best customers will help you retain them. If you know who they are, you will know you need to take action if you notice a decline in their buying habits. Whether you make them an exclusive offer, send them a personalized email or note making sure everything is okay, or reach out in another way, special attention is often all that is needed to return a big spender to shopping as usual.
Manually calculating who your biggest spenders are isn’t as easy as scanning sales receipts. You have to make sure that you are maintaining accurate and up-to-date customer and sales data in order to be able to analyze each customer’s spending.
For each customer, you will need to determine the total amount they spent for a specific time period (use weekly, monthly, or annual figures, whatever makes the most sense for your business). Once you have determined the amount they have spent, you can compare it to your store’s average order value to see which customers are spending more than average amounts.
It is important to keep in mind that just because a customer is spending higher dollar amounts on your products, it doesn’t necessarily mean that they are most profitable to you. You also have to consider the following to have a true picture of profitability:
This is the actual cost you paid for the items your customers have purchased. Learn how to calculate Cost of Goods Sold here.
This is the additional costs it takes to service your customers (for example, time spent on customer service issues, returns, etc.).
Now you’re ready to do the math. Subtract the cost of goods and the cost of additional services from the customer’s purchased gross revenue. That will give you the profit margin for that specific customer. Keep in mind though, that for the number to be the most accurate, you would also have to consider the percentage of overhead (rent, utilities, storage, etc.) that is attributed to each customer as well. It’s easy to see how complicated it can be to get an accurate picture of which of your customers are the most valuable. You have to perform those calculations for every customer to see where they rank in spending and profitability.
As you can see, knowing which of your customers are spending the most on your products is important to your company’s success and profitability. Determining just who those customers are doesn’t have to be a complicated endeavor. With Glew, you are easily able to access reporting and analytics that will tell you everything you need to know about your customers – including how much they spend – so you can make the best decisions for them and for you. Let Glew help you identify and appreciate your top customers quickly and easily. Try us for free for 7 days.
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