In Tenet 1 – Customer Make the Rules, we identified the different types of customers with which we come in contact. Let’s dig a little deeper and discuss customer demographics.
For this Tenet, you will need to collect quantitative data and relevant facts from Company publications such as the Company’s Annual Report, discussions with Company executives, etc. If there is little or no statistical data available for the questions below, focus on the qualitative information to which you have access.
To begin, how many customers does the Company have? Where are they located? Can you provide a breakdown of customer locations?
How does the Company segment its customers for marketing/ promotional purposes? These segments or groupings allow the Company to customize its messaging for customers with the same or similar attributes. For example, in the mid-2000’s, Best Buy identified its most profitable customer demographic segments and gave them personas. The four initial personas created were:
Buzz – the young tech enthusiast
Barry – the wealthy professional guy
Jill – the suburban soccer mom
Ray – the family man
By identifying each customer type BestBuy was better able to focus its efforts and market its products and services in a meaningful way to each grouping.
Marketing activities are the primary means by which companies acquire customers. To evaluate the efficacy of those efforts, companies track the cost of customer acquisition and the return on that investment. Acquisition cost is determined by calculating sales and marketing expenses for a specific period of time and then dividing that result by the total number of new customers acquired during the same period.
It may not be possible to identify your Company’s actual customer acquisition cost or even an estimate but it is important that you understand that there is a cost associated with recruiting every new customer. Customer growth rate may provide an alternative measure.
Next, how does your Company generate income? Different customer groups may have different or varied approaches to income generation.
Based on the cost associated with acquiring new customers, it may take a considerable amount of time before the Company begins to realize a return on the investment in terms of profitability from that new relationship. There are also additional costs associated with new customers after the initial acquisition.
You may not be in a position to know the Company’s specific profitability timeframe. What is important is to understand that there is a point at which the relationship with the new customer becomes beneficial for the Company, i.e., profitable. For example, in the insurance industry, it can potentially take up to two years before an automobile policy becomes profitable for the Company. Everyone has the potential to impact that timeframe through their interactions with customers and the way in which they respond to customers’ needs. Refer to Tenet 2 – Service Comes from the Inside Out and Tenet 3 – Provide Solutions and Show That You Care
Given the acquisition costs, it is easier and less expensive to retain or reactivate existing customers than it is to acquire new ones. Customer retention can be more effective and successful by incorporating the previous Tenets of Better Engaged Employees into each customer interaction.
Considering the cost of obtaining/attracting new customers and the amount of time needed for customers to become profitable, it is important to retain those clients we already have. When a customer leaves prior to the Company’s relationship becoming profitable, the Company loses its investment in recruiting that customer and the potential income that customer may have generated in the future.
It is important to understand the Company’s customer recruitment and retention practices and expectations because they have a direct impact on your role. When the Company grows and prospers, the shareholders benefit and employees gain from potential growth and promotional opportunities. Customer demographic data can provide valuable insights to better understand the Company’s customers. New customer recruitment, retention of existing clients, and reactivating past clients are financial investments made by companies as part of a long-term strategy that ultimately benefits both the shareholders and employees.
Over the next week, see how well you can answer the questions posed in this post. After reviewing the 6 Tenets we’ve discussed, what can you do to better incorporate them into your daily activities?
P.S. First time here? Welcome to the Agent In Engagement site. Thanks for taking the time to stop by! I hope you’ll explore the rest of the site. Let me know what employee engagement topics interest you.
Other recent Agent in Engagement articles by Gregory F Simpson:
- Employee Engagement Briefing for Week of November 17 – 21, 2014
- The 5th Tenet of Better Engaged Employees – Feedback from Customers is a Gift
- The 4th Tenet of Better Engaged Employees – Customers Define Quality and Service
- The 3rd Tenet of Better Engaged Employees – Provide Solutions and Show that You Care
- The 2nd Tenet of Better Engaged Employees – Service Comes from the Inside Out
- The 1st Tenet of Better Engaged Employees – Customers Make the Rules
Let’s Engage!
I’m Agent in Engagement Simpson…Gregory F Simpson.
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