Knowing your customers - their wants, needs and behaviours - is a sure way to strengthen any business. How can you do this? There are many pieces of customer information businesses can choose from that may be beneficial.

These metrics can be looked at on an individual level, by customer segment, and overall. Additionally, they can be trended over time to gain insight into the direction your business is taking.

In future posts, we'll delve into how to calculate these metrics and talk about some examples to help you understand their use.

As businesspeople, we know the importance of customers, and we aim to make them as happy as we can. Many of us have been conditioned with a "customer is always right" mentality.

However, it's a truth that bears repeating: not all customers are created equal. It's not enough to know who your customers are and what they want. It's also key to know which are generating the most value for your business.

There are many benefits to understanding who your most profitable customers are:

• You can enhance your targeting.


• You can reward those customers that drive the most value for your business.


• Most fundamentally - you can increase profits.

Think of it this way:

If you want to maximize your return on marketing investment, you look at which promotions are working the best, and then you shift your marketing investment dollars from the poorer performing programs to the high-performing ones.

It's the same with customers: if you want to maximize your return on customer investment, you need to understand which customers are adding the most value, and invest in those customers rather than the ones which are not delivering benefit to your business.

Looking at both sides in combination can give you a clearer view of what's happening in the business. For example, you might have a very successful marketing program, but if it's targeted at low-value customers, it might not drive profitability. Like two pieces of a puzzle, you need to understand both the marketing return AND the customer profitability to see the whole picture.

Once you know who your most profitable customers are, you can confidently use rewards, incentives and other marketing initiatives to target those customers who truly help you grow your business.

For tips and tools to determine your most profitable customers, visit my previous post, Finding Your Highest Value Customers.

Happy New Year from the Tingley Advantage!

Do you have any New Year's resolutions? What about for your business? Here are six resolutions to consider making for 2012:

1. Get to know your customers better.
2. Make the most of your business' social media strategy.
3. Implement a Balanced Scorecard to ensure every level of your organization supports your strategic goals.
4. Get a handle on your business processes, so you can make them better.
5. Find new ways to tell your company's success stories.
6. Measure, measure, measure!

Whatever your resolutions may be, wishing you and your business all the best for a successful 2012!

There are many different ways to segment your customers. You can group them based on the value they bring to your business, how long they've been with your firm, or what they buy.

Let's look at segmenting customers based on the categories they buy. The term "category" can be used in the traditional sense - a grouping of similar products - or, it can be used to describe a specific service offering. How you choose to define it depends on your business. What is important is that your categories are used consistently to define specific service or products groups within your business, and that no product or service fits into more than one category.

Now that your categories are defined, determine how important each is to your business. Some categories may be more important than others for various reasons; for example, some may be more profitable, contain products or services you would like to expand, etc. Assign each category a score based on its relative importance to your overall business. A range of 1 - 5, with 1 being less important and 5 being most important, should do the trick.

By creating a table like the one below, you can begin to track the categories purchased by each customer and see which purchasing segment your customers fall into. You can use the attached template to get started: Customer Segmentation - Categories Shopped.xls

Once you have determined the categories shopped by each customer, simply add up the scores to obtain a total score. The total score will help you understand how important the customer is to your business in terms of their product/service category involvement. You can create segments by breaking down the potential total score - in this case, 12 points for a customer who purchases in every category - into ranges, each of which is assigned a segment. In this example, we have assigned customers with a score of 9 - 12 to Segment A, a score of 5 - 8 to Segment B, and a score of 1 - 4 to Segment C.

The table can also be adapted and used in other ways, a few of which I'll look at in future posts.