How to Recognize Customer Profitability Movements Using Data Driven Marketing - dummies

How to Recognize Customer Profitability Movements Using Data Driven Marketing

By David Semmelroth

Data driven marketing can help to recognize customer profitability movements. A customer’s profitability is not a static measurement. People’s means and needs change over the course of their lives. As a consequence, their behaviors and buying habits change as well.

People move in and out of your business footprint. Imagine you live in three different states in three years. This means changing everything from doctors to grocery stores. This means going from profitable to unprofitable as you move out of each area.

The companies that don’t recognize these shifts are at a disadvantage. They waste money continuing to market to you once we’ve left their footprint. Or they miss an opportunity to connect with you at your new location.

Your customer base, as a whole, may appear fairly stable when it comes to profitability. Year over year, you may see about the same percentage of your customers in the ranges of high, medium, and low profitability. But upon closer examination, you will see that some customers are moving up and down among those ranges.

By examining these migrations from one profitability range to another, you can begin to identify challenges and opportunities in your customer base. You can build profiles that help you identify customers who may be ready to move up the profitability scale.

Of particular concern to you is understanding customer attrition. That is, understanding how many customers are leaving. The percentage of customers you lose in a given time period is frequently referred to as your churn rate. You need to take a two-pronged approach to dealing with this churn:

  • Reduce your churn rate through customer-retention programs.

  • Replace the lost business through customer-acquisition programs.

You can approach customer acquisition through a combination of advertising and purchased lists. Acquisition also depends on recognizing people who are shopping for your products, particularly online.