Valuable Customers

Most valuable customers is a marketing term referring to the customers who are the most profitable for a company. These customers buy more or higher-value products than the average customer. The companies can provide these customers with advice and guidance to make them loyal.

Usually most valuable customers are rewarded with discount or membership cards that give them specific privileges. These rewards help the business to generate more revenue as the customers will purchase more of products/services due to given benefits. .Different companies have different ways to reward their loyal customers, for example Vodafone are rewarding their loyal customers with extra data on their plans; or Barclays are lowering the interest rate on loans for customers that have been with them for more than 6 month.

Every business has a list of customers who are buying more products from them, comparing to an average buyer (usually referred as Loyal Customers).

In order to identify most valuable customers, the business will have to evaluate customer’s value in seven areas:

1. Sales minus cost: Generally companies rank their customers by judging from the number of sales that the customer does with the company, however this does not always have a positive outcome for the company. Sometimes when a customer purchases a lot of company’s products/services, the cost of doing those sales may exceed its value because that cost of sales has to be added to the overall equation.

2. Revenue Timing: not all revenue is created equal. Companies make different revenues at different times. For example, customers are shopping more in the fourth quarter for the holidays due to the bigger sales in shops. Sales that are made in off-peak seasons may be more profitable because they fill unused production capacity or may be done at a slightly higher price.

3. Referrals and buzz: nowadays consumers tend to trust peer reviews, posts in social networks and tweets more than corporate advertising. If a customer is willing to buzz about company’s products/services it can be a powerful endorsement.