Discover who your truly most valuable customers are through Extended Customer Revenue
Read time: 3 mins
The challenge: Identifying your best customers
The biggest untapped asset any business has at their disposal is their existing customer base. Research by Gartner shows that 80% of your future profits will come from just 20% of your existing customers. This stat sharply brings into focus the importance of understanding which of your customers are bringing the most value to your business.
To define their best customers, businesses often use Recency, Frequency and Monetary (RFM) models, which focus on those with the highest individual spend. But by doing this, you’re missing a critical consideration: how many new customers is that shopper introducing to my brand?
This is especially relevant as we enter a recession where customer value will need to be measured in other ways, given that 59% of UK shoppers now plan to cut down on their spending (according to Forrester).
In fact, a recent study by Criteo suggests only 24% of marketers feel their company monitors customer value effectively, with 69% knowing that improvements could be made.
When you consider just how much of your future profits will come from your best customers, it’s crucial you know who they are — and how to engage them.
The Solution: Adding the lens of referral data to discover the true value of your customers
What you don’t know really can hurt you. Without seeing the complete picture of the value your customers are driving, you could be prioritising the wrong ones.
Let’s look at an example. Cate spends £200 a year with your brand, putting her in the lower quartile of your customer value calculation. This means she wouldn’t qualify to get your typical VIP treatment, such as early access to sales or free samples.
But what your existing data doesn’t tell you is that Cate LOVES your brand.
She loves it so much that she’s referred 10 friends, who in turn referred six more friends themselves. In total, those referrals spent a whopping £3,000, meaning the value Cate brought to your business is actually more than 15 times what you’d originally thought. Safe to say, it’s time to roll out the red carpet for Cate.
A referral chain in action
Introducing Extended Customer Revenue
Extended Customer Revenue (ECR), a capability unique to Mention Me, allows you to identify your company's truly most valuable customers: your brand advocates.
By adding the lens of referral data, you can measure a customer’s individual spend plus the spend of the friends and family they bring along.
What makes ECR really pack a punch is that referred customers on average:
- Spend 11x more on their first order (and 8% more on subsequent orders)
- Are 5x more likely to refer others
- Have a 2% higher LTV than non-referred customers
All of this means you can segment your customer base with a 3D view of the value they’re bringing to your business. By knowing who your most valuable customers are and delivering them the best experience, you’ll nurture further advocacy that keeps them coming back and bringing their friends.
That's your winning formula to drive sustainable, organic growth through these uncertain economic times — and beyond.
Keen to learn more about Extended Customer Revenue? Catch up on our webinar.
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