Return on Information: Knowing Your Best Customers Pays
If you want to grow your business in 2023 and beyond, figure out who your best customers are.
Simply by concentrating your attention (and investment) on the segment of customers that is most valuable to your business’ growth, you can more than double the return on investment of your annual marketing budget.
To demonstrate this, let’s look at a comparison between a generalized marketing strategy and a marketing strategy targeting your best customer segment.
In this example, we’ll consider a midsize Canadian Enterprise with $10M in annual revenue and a marketing budget of $155K.
In Scenario 1, a generalized customer acquisition strategy is executed by the Canadian Enterprise which (as studies have shown) yields around a 400% ROI (not bad!)
Marketing Spend | $155K
Gross Revenue | $775K
Net Revenue | $620K
ROI | 400%
In Scenario 2, the Canadian Enterprise deploys a customer acquisition strategy specifically to attract and nurture targets within its most valuable customer segment. This highly targeted marketing would, on average, yield an ROI of 1000% (2.5X better!)
Marketing Spend | $155K
Gross Revenue | $1,705K
Net Revenue | $1,550K
ROI | 1000%
The difference in Net Revenue for the Canadian Enterprise is almost $1M!
By identifying and strategically targeting their best customers, this Canadian Enterprise stands to increase their revenue by almost 10% year-over-year from newly acquired customers alone.
Positioning your brand and marketing activities towards the needs, preferences and patterns of your best customer segment can be a remarkably successful strategy for growth.
Do you know which of your customers are most valuable to your business?
Customer Research and Strategy for Canadian Enterprises is what we do at New Territory.
Our modular program allows small and midsize businesses to gradually uncover and capture new opportunities to grow profitably beginning with an analysis of your current active customer base.
Module 1: Audit Performance is a multi-dimensional deep dive into the value of your customers to your business over time. Relative Revenue is one thing we look at, of course but we also consider Product Adoption, Net Return Revenue and Tenure.
We then analyze this data for the purpose of clustering customers into high, mid and low value “segments”. Each segment is then evaluated independently to identify characteristics that are common within it such as the customer’s industry, geographic location, or maturity.
It’s this integrated information about the true long-term value of your customers that supports the execution of a stand-out customer acquisition strategy as described in Scenario 2 above.
We provide our clients with this incredibly insightful information at a cost less than 1% of the Net Revenue calculated in Scenario 2 above.
Would you like to know more?
Book an introductory meeting with me today. I’d like to meet you, get to know your business and share more about what we do for Canadian Enterprises at New Territory.
- Canadian businesses with annual sales between 2-10M will typically spend 76K-234K on marketing each year (BDC Canada)
- Midpoint is around 155K annually
- A reasonable ROI for a typical marketing strategy is 5:1 (~400% ROI; Marketing Revolution)
- In email campaigns, 77% of marketing return-on-investment (ROI) comes from segmented, targeted, and triggered campaigns (LinkedIn Pulse)
- Retargeting ads that target customers very likely to buy product/services lead to impressive ROIs
- Case study: Manscaped had a 350% ROI and achieved 137% growth month over month through retargeting ads to their best customers
- Case study: Toronto based fixed gear bike company, Myfix, had an impressive ROI of 1400% and earned ~$15 dollars for every $1 spent on their marketing efforts through targeted marketing efforts to their best customers
- Case study: Online watch retailer, Watchfinder, had an ROI of ~1300% by targeting their best customers
- Average ROI from these three cases studies suggests that targeted marketing is estimated to your best customers will bring an ROI of ~1000%