How to Use Data to Identify and Grow Your Store’s VIP Customer Base
It can be easy to spot a VIP backstage at a concert or the red carpet of a big event. If you’re an online store owners, it may take a little digging to find your most important customers. But with the right clues and the data you already have, uncovering gold star buyers may be easier than you think.
By using customer data to group buyers that have shared attributes and levels of value, you can grow your most profitable segment of buyers. This data can also change the way you market to your high value customers and help you find more of them. We’ve compiled the following data points to analyze when looking for your most important customers.
Find Your Best Customers in These Data Categories
1. Multiple Purchases
One of the most important traits that signal a VIP customer is multiple purchases or a high number of total orders over time. You can begin by analyzing repeat versus new customer data. Looking at your repeat customers, hone in on customers who most frequently visit your store and make purchases.
2. Average Order Value
Don’t confuse high volume with high value buyers. Customers who buy a lot of your lowest price or low margin items may not be worthy of VIP status. Instead, look for buyers with the highest Average Order Value or AOV.
You can calculate individual AOV by dividing the total revenue brought in by each customer by the number of their orders. For tips on boosting AOV, check out our 5 Strategies to Increase Average Order Value.
3. Full Price Purchases
Retailers know better than anyone, there are some customers who will only buy during a sale, or with a coupon. Your high value customers, on the other hand, have a history of paying full price for their purchase.
This is important data to identify your best customers but can also be used for more effective marketing. Many store owners unknowingly deflate their margins by offering discounts to regular customers who are willing to pay full price for what they want.
You can also look at this data to determine the products with a high volume of full price purchases. Consider highlighting these items on your home page and keeping them out of discount strategies.
4. Customer Lifetime Value
Using your data to determine the Lifetime Value of each customer is a sure way to find your gold star buyers. As we mentioned in a previous post, customers with higher lifetime values contribute a significantly higher amount to your bottom line.
Customer Lifetime Value is the estimated total of how much each customer will spend over the lifetime of their relationship with your store. The traditional calculation for determining Lifetime Value is:
(Average Value of a Sale) X (Number of Repeat Transactions) X (Average Retention Time in Months or Years for a Typical Customer)
5. Products Often Bought
Do you have products that generate a higher profit margin for your online store? Are there items that require less marketing dollars to sell?
Customers who buy more products in these categories can be flagged as high value buyers. By connecting high margin products data with repeat customer information, you can better quantify the value of each purchase and each customer.
6. Cancellations and Returns
Cancellations and returns can happen with the best of customers. However, if you have frequent buyers with an unusually high rate of returns or cancelled orders, they may not qualify for VIP status.
The time and cost it takes to deal with returns may be offsetting the benefit of repeat buyers. Online boutique Rue La La told the Wall Street Journal that in one year alone, online returns cost the company 5 million dollars.
Analyze your return and frequent customer data to determine if you should filter out regular buyers who are eating away at your profits with a high rate of returns.
Now What? Grow Sales with VIP Customer Data
Now that you’ve identified the data sets shared by your most valuable customers, you can use it to do two things: 1) Develop strategies to retain VIP customers and 2) Predict and identify who has the potential to become a loyal buyer.
To hang on to your most valued buyers you’ll literally want to roll out the red carpet. Use these simple strategies to keep VIPs coming back.
- Exclusive online events and previews
- Loyalty Programs
- Refer-a-Friend Programs
- Subscription Plans and Pricing
- Customer Appreciation Gifts
Next, analyze the common characteristics of customers with the highest ROI in order to find more of them. Data from high valued customers combined with internal data on product categories, acquisition source or social media habits can help you determine who has the potential to become a new VIP.
By establishing a ‘Potential VIP’ segment, you can use personalized marketing campaigns to highlight products and price points commonly found in your high value customer data.
Segmentation Made Easy
Accurately segmenting your buyers requires a unified view of customer information that integrates multiple sources of data. Innovative online stores are using new tools and technologies to identify high-value customer segments, monitor their behavior and make more informed marketing decisions.
These strategies, powered by technology and real-time data, can help you find your hero customers and super power your online brand.
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