How To Fire Bad Customers And Find The Good Ones
The digital marketing realm has become an obstacle course, with new challenges being presented at every corner. With the recent iOS changes, marketers are now dealing with a post-IDFA, cookieless world where they can no longer rely on third-party data to successfully reach customers.
How To Fire Bad Customers And Find The Good Ones. Consequently, the cost of acquisition has gone up significantly; in just the last few months, I’ve heard from our customers and prospects that their customer acquisition costs have almost doubled. At the same time, there is pent-up demand from venture capital and private money flowing into consumer companies. This is creating a supply-and-demand imbalance that is also driving up the auction prices of digital advertising.
Given this challenging landscape, it is understandable that many businesses are worried about finding new customers while keeping costs down. However, this does not mean that marketers need to get desperate. Bad customers or low-value customers can become a massive weight holding your business back. In a world where there is a dearth of third-party data, the focus needs to remain squarely on quickly and accurately measuring customer lifetime value (CLV) so that your advertising and marketing budget can go toward acquiring and converting customers who can boost the long-term value of your business.
How Do You End Up With Bad Customers?
Bad customers are those who are defined as having a low lifetime value, meaning that over the span of time they remain a customer, they will not spend very much money with your business. Sometimes, the spend may not even cover the cost of acquiring them. They come through to a business typically with discounts and promotional offers and make one purchase, only to never return again. In a similar fashion, free trials can also attract customers who subscribe to the freebie and cancel immediately when the trial ends. Finally, certain products may attract buyers who make a single purchase rather than repeat buys. Understanding these negative triggers is critical for businesses that want to build a strategy for acquiring and retaining the highest value customers.
Parting Ways With Bad Customers
Parting ways with bad customers is about breaking with the suboptimal strategies that led to your acquiring them in the first place. Instead of offering blanket discounts, personalize your approach so that only good customers are rewarded. You can also leverage marketing analytics to predict churn and time your discounts accordingly to encourage customers to stay and make repeat purchases. Reconsider your product strategy and stop making the products that only attract bad customers altogether and, instead, double down on promoting the items that attract the highest-value customers. Finally, it is critical for businesses to take a hard look at their customer acquisition channels. Are the bad customers coming from one particular channel or a few? It may then be time to reassess your acquisition channels and shift advertising budgets so you are able to meet your best customers where they are.
Beginning The Journey Toward A Predictive Customer Intelligence Strategy
The ability of businesses to identify customers with high lifetime values as early as possible is essential. The less time and ad-spend you waste on acquiring bad customers, the better. With iOS privacy changes that limit marketers’ access to third-party data, it is even more critical now to take a holistic approach and look at the entire customer journey beyond just measuring email opens, ad clicks or page views.
It is essential that businesses invest the time and effort into acquiring and tracking first-party data such as birthdays, past purchases and other such information that comes from their interaction with your brand. It can take some time, but the more first-party data that you acquire, the better you will be able to identify and define what your most valuable customers look like. Once you have enough of these data points in conjunction with outside sources such as external focus groups, surveys and census data, you will have the necessary data points to feed into a data modeling solution and begin predicting a potential customer’s lifetime value even before they make their first purchase.
The iOS privacy updates will no doubt continue to create roadblocks and challenges for the foreseeable future. However, no matter how difficult it becomes to acquire new leads, businesses need to resist the urge to focus on customer acquisition in a silo without considering the long-term value of each customer. In this case, quality should always take precedence over quantity. Marketers should continue focusing on attracting and converting good customers only and leveraging data intelligence to help you get there as quickly as possible.
Forbes Technology Council is an invitation-only community for world-class CIOs, CTOs and technology executives. Do I qualify?
