Do you have the right customer base to grow your business?

4 minute read time.

If you’re looking to grow your business, then you need the right customers - now and in the future. So how can you tell which customers will stay with you for the long-term and how can you find the right prospects who can help you to grow? We offer some advice.

Where are you now?

The key thing to evaluate is how engaged your customer base is. Some businesses will have a lot of one-off customers due to the nature of their business, others will thrive on repeat business and long-term relationships. Regardless of which applies to you, there will be some common factors that it pays to measure.

Customer satisfaction

Happy customers will either return to your business or will recommend you to friends, family or to their wider network, so it pays to know whether people are happy with the products and services you’re providing.

A recent survey by Gallop showed that only 29% of B2B customers were fully engaged - the remainder were ready and willing to switch provider. Those figures were seen across board, for verticals as diverse as manufacturing, legal and pharmaceutical industries.

So it’s clear that you can’t rely on your customers to stay - so you need to measure their happiness so you can predict their behaviour. One way to do this is to work out your Net Promoter Score (NPS).

This shows how many customers are detractors (those who are likely to leave and may pass on negative word of mouth about your business), passives (people who are satisfied but unenthusiastic) and promoters (those who are loyal to your business and likely to recommend you to friends).

Conduct a survey with your customers and ask them how likely they are to recommend you to friends, on a scale of 0-10. The results should be split as follows:

  • Those who rank you 0-6 are detractors
  • Those who rank you 7 or 8 are passives
  • Those who rank you 9 or 10 are promoters.

You can then calculate your NPS by working out  your percentage of promoters – your percentage of detractors. There are benchmarks for each industry, so you can see how you compare with your competitors.

Churn rate

Knowing how long your customers stay with you can also help your business. Calculating your churn rate is simple. Just calculate the number of customers who left and divide that number by the total number of customers.

You can also split this by segments (type of customer or buying behaviour) to see if certain customers have a lower churn rate.

The lower the churn rate, the better. However, bear in mind that some businesses (such as kitchen fitters) may not have as much scope for return business and may therefore be more focused on recommendations and NPS.

Customer lifetime value

Once you know your churn rate, you can also work out who your most profitable customers are. This calculation depends on the nature of your business but is often worked out by multiplying the average monthly revenue per customer by the gross margin per customer, and then divide that figure by the monthly churn rate.

This figure not only shows how much each customer is worth but can also help you work out how much you should spend on acquiring a new customer.

Growing in the future

Once you know where you are, you can take steps to improve your retention and also find new customers who match the profile of those who are worth the most to your business.

Use lookalike marketing to target the most profitable prospects

The first step is to understand who are your best customers now. Which groups had the highest NPS and lowest churn rates? What do you know about their demographics, buying behaviours, location, interests, motivations? All of this information can help you adapt your marketing to target similar customers in the future.

You can apply this to buying email lists, use it on social media (Facebook and Twitter both have this functionality) and in your advertising.

Evaluate where you could improve

Of course, it’s not only about targeting new customers; you should also look at ways that you can improve your service to convert your passive customers into promoters. Conduct a follow-up survey with all your customers, split by their responses to your NPS questions.

  • Ask detractors and passives what they would like from your business and what could be improved. Also ask them what is the most important aspect for them - price, customer service, availability, convenience, etc.
  • Ask promoters what they love about your products and services.

This information should help you to improve what you offer and help make more of your existing customers into promoters. You could implement changes in your business to address their concerns - this might take the form of product development, staff training, product positioning, availability, customer service or other factors.

Encourage promoters to spread the word

Word of mouth is still a powerful tool for businesses to win new customers. Make it easy for promoters to spread the word by ensuring you offer incentives for people who do that. This might be through an opportunity to raise the profile of their own business through case studies or guest blog posts, through incentive schemes such as discounts, or by sharing background information and exclusives so people have a reason to share. Make sure you include a “send to a friend” options on your website, email and marketing materials.

You can also incentivise people to share information on social media by running prize draws and asking people to share information about why they love your business or products.

Think about options that would work for your business - and don’t be afraid to ask promoters what they would like as well.