It used to be that when your company received the first order from a new customer, it was a test. You were being tested on quality, responsiveness, and delivery. Every thing was new to the person making the purchase and the handling of the order determined whether or not there was a second order.
Things have changed. You are still being tested, but the first order doesn't always mean the start of a new relationship. Sometimes you can do everything right and order number two will never come. Or, there will be a rapid series of orders from an individual before he or she disappears. The Internet has changed the way companies and customers connect. If marketing remains the same, profits will decline with the revenue per customer.
Before the World Wide Web, customers were pre-qualified because companies had to find them.
Direct mail campaigns, advertising, and public relations focused on getting sales information to the right people. They still do, but now people can search for specific products or services and find businesses all over the world.
Some people in this untargeted group are looking for a one time buy. The quality of your service has nothing to do with their failure to make a second purchase. It was a one shot deal. Your challenge is to identify these customers as quickly as possible so you don't invest marketing dollars in a lost cause. To do this, you have to have an intimate knowledge of how buyers move through their life cycle so you recognize the differences between hit-&-run customers and those with sustainable activity.
When newbie customers make their first purchase, there are three paths they may take: Hit-&-run; Discount; and Active.
The hit-&-run customers are the hardest to identity. They place one to five orders imitating an active buyer before leaving. The discount customers only order when there is a sale. And, the active customers build lifetime value.
It is possible to convert hit-&-run and discount customers into active ones, but you have to catch them early in the process. To do this, you have to know how to identify them and what motivates the shift. You also have to minimize the marketing investment. This is where an integrated marketing strategy pays for itself. When you have a program that uses email, direct, mobile, and social together, you can selectively choose the best contact for each stage in a customer's life cycle. It allows you to simultaneously improve relationships, increase revenue, and reduce costs.
The next post looks at the identifying characteristics of hit-&-runners.
Related posts:
- Customer Life Cycle Part 1: Your Customers are Changing - Does Your Marketing Still Fit?
- Customer Life Cycle Part 6: How to Inspire Loyalty from Your Most Active Customers
- Customer Life Cycle Part 4: How to Identify Hit & Run Customers Before They Kill Your Business