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February 17, 2013

Your Most Valuable Customer is Not Who You Think It Is

“If you don’t have a button for your customers to click that gets you the next customer, each customer is just as difficult to get as the last”- David Barrett, CEO of Expensify

There is no activity that is more valuable nor has a higher return on investment than creating evangelists for your product. Evangelists are perpetual beacons of positive referrals for your product or service. They also happen to hang out with other people like them – more customers.

You won’t need a big data scientist to analyze your CRM and you can get it done with only a few hours a day. The following is a proposed system that maximizes your results from your efforts in creating evangelists but minimizes the CRM input.  This methodology is based on two things:

  1. Control over your inputs: volume of touch points and your own efforts.
  2. Word of mouth, based on a popular HBR study, “How Valuable is Word of Mouth” by V. Kumar and Andrew Petersen.

Quantifying Evangelists

Quantifying how valuable an evangelist is has been difficult for some time for what I believe to be one specific anomaly. It can be a difficult concept to control for and improve because companies are looking at the wrong data. Your most profitable customers aren’t your evangelists.

One of the most misunderstood topics in improving word of mouth has to do with the fact that a customer who spends the most money on your product is not actually the most valuable customer you have. In the study by Kumar and Petersen, the research showed that customers who promoted the most were not those that bought the most. In other words, those that are most valuable to your company are not appropriately represented by how much they purchase. It should be represented by the value of potential purchases they can positively influence.

In the article, the authors segment the types of customers into 4 categories:

  • Champions  (which is often referred to as evangelists)- excellent buyers and marketers
  • Affluents – buy alot but do not market well
  • Advocates – who don’t buy alot but are strong marketers
  • Misers who do not buy more nor market well

So how do you optimize your CRM to capitalize on this knowledge?

The process for evangelizing customers must be simple, inexpensive and actionable. Most failed CRM implementations occur because a clear process was not defined or understood across the company before it was implemented.  When executed correctly, this process will yield new customers with less input.

In the HBR study, the authors reveal their calculation for lifetime value of a referral and group the types of customers into 4 categories based on their referral habits.  The most valuable customer is one who talks about your product to others. There are activities that be used in identifying who these customers are, how you can create more, and the steps you can take to evangelize them.

The following proposed system takes advantage of the most basic categories with the focus being on the quickest and most effective way to move each prospect to an evangelist as quickly and as efficiently as possible.

    1. Prospects

These are not just limited to people who can use your product but includes people who can promote your product too.

A prospect must be a qualified audience. Not every person you talk to goes into your CRM. Determine what makes someone qualified. Start by asking yourself these 4 questions:

– Do they have a budget / Can they influence someone with a budget?
– Are they willing to spend?
– Do they have the pain point you are solving? / Are they aware of the pain point you are solving?
– Are they using any solutions similar to your product?

    1. Trial

Once you have prospects in your CRM, you should reach out to offer them a trial of your product.

    1. Customer

Keep note of the users who end up paying you. But also keep track of the reasons for which they don’t. Why are they paying you or why are they not paying you?

    1. Evangelist

Your goal is to turn every customer into an ecstatic supporter of your product and company. If they are paying for your product, they should be a testimonial, refer you or introduce you to other businesses that they work with.  Why are they or why are they not?

Setting up your CRM

You can set up the following CRMs to optimize for the funnel:

Prospects > Trial > Customer > Evangelist

StrideApp

With Stride, set your stages to this:
Screen Shot 2013-02-16 at 9.44.04 PM

 

Highrise

With Highrise, use tags to show which stage a deal is at.

Screen Shot 2013-02-16 at 9.47.01 PM

Salesforce

With Salesforce, set up custom stages for this:

Screen Shot 2013-02-16 at 9.46.53 PM

Google Docs

You can even do this with a Google Doc by creating these parts of the funnel in there.
Screen Shot 2013-02-16 at 9.46.44 PM

Of course, all of these services work with Ecquire to make it easier.

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