Your customer base is made of customers who consistently and repeatedly buy your products or use your services. These customers provide the most financial value to your company: Repeat customers spend 33% more than first-time customers. The long-term performance of your business depends on learning everything you can about your customer base and continuously catering to their needs.
Who is your customer base?
Many companies invest in conducting market research and creating marketing personas, which are two key activities for customer acquisition. Learning about your existing customer base is a different process.
The Wharton business school recommends performing a customer base audit. This audit is a systematic review of your customers using transaction data.
"The objective is to provide an understanding of how customers differ in their buying behavior and how their buying behavior evolves over time," wrote Wharton experts Peter Fader, Bruce Hardie, and Michael Ross. "We are not interested in the demographic profile of our customers. We are not interested in their attitudes. We are interested in understanding their actual buying behavior."
A customer base audit can help you understand who is generating revenue, how customer purchasing habits differ, and how customer buying behavior changes over time. This information provides a good starting point for cash flow, operations, and marketing decision-making.
Improving your customer base is all about increasing the number of loyal and connected customers you have and finding ways to make their experiences with your brand worthwhile.
Rock Content
What can a customer base audit tell you?
Your sales data and historic revenue may reveal that certain customers are worth more to your business than others.
"When you look at a distribution of customer value, you will often see that a high-value customer—what we'd call a top-decile customer—can be worth 40 or 50 times a low-value customer," Michael Ross told McKinsey.
"That’s a very, very powerful analysis because it motivates a business to think about the decisions and actions that they're currently taking based on the idea of an average customer, whether those are marketing decisions, operational decisions, service decisions, etcetera. How do you reorient decisions that are better aligned with customer value?"
A customer base audit can also reveal granular data, such as the average time between a customer's first and second purchase. Track this information to learn what prevents some from coming back a second time. Based on your findings, you can encourage them to return and motivate them to come back faster.
[Read more: B2B Sales Techniques for Building a Loyal Customer Base]
How to learn about your customer base
Your sales data is the best starting point for learning about your customer base. Choose a time period to analyze metrics like new versus returning customers, purchase frequency, average cart size, average cart abandonment rate, and total sales. Break down the data into distinct groups and compare different periods to see how these groups change.
These analyses should form the foundation for identifying your customer base. When you have a clear picture of your best customers — those who repeatedly buy from you consistently or frequently — you can formulate a strategy about how to target these groups with better marketing, customer service, and product or service offerings.
"Improving your customer base is all about increasing the number of loyal and connected customers you have and finding ways to make their experiences with your brand worthwhile," wrote Rock Content.
Consider pairing your quantitative data with qualitative info pulled from customer surveys, reviews, and focus groups. This information can help you better understand why some people are more loyal than others: What is it about your business that keeps your customer base coming back? Are there any commonalities in the reasons why their buying behavior has changed over time?
Ultimately, getting to know your customer base is all about identifying your most high-value customers and catering to them directly. This base is the bread and butter of your business: It's imperative to keep them coming back year after year.
[Read more: 6 Effective Tips for Getting to Know Your Customers]
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