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A guide to identifying your profitable customers and improving your sales (PART 2)

Being in a position to focus on your most valuable customers might sound like a luxury. After all, many small businesses are grateful for customers of any kind.

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A guide to identifying your profitable customers and improving your sales (PART 2)

Being in a position to focus on your most valuable customers might sound like a luxury. After all, many small businesses are grateful for customers of any kind. But every business finds that some customers are more valuable than others. This can be for a range of reasons—from the size of their purchases to the relative ease of managing their accounts. Successful businesses are generally those that identify these customers, build relationships with them and work to bring in new customers with a similar profile.

We have previously established that today’s retail climate is extremely competitive, with customers increasingly switching between brands, favouring discounts and conducting extensive online researches. In a consumer-driven market with less brand loyalty, how do businesses ensure that they are engaging with customers that are most likely to deliver maximum profitability?

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The best way to increase profitability is to drive sales with customers who already spend the most. The question to then ask is how can businesses utilize their data to gain marketing insight to help target, attract and engage with their most profitable customers?

Some important tips for companies in view of customer Service Week 2019, Polarization: How to attract the right customers, while keeping the ‘’wrong’’ ones out

Customer segmentation

To gain an understanding of who your most profitable customers are, you first need to profile your customer base—who they are and what they look like. Customer segmentation is a means of grouping your customers into shared characteristics or traits. This could be by socio-demographic factors, or sales behaviour, but ideally a hybrid of the two.

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Once you have a picture of your different customers, you can analyze who (type of customer) is buying what (products, value, frequency) and which segments of your customer base are spending the most. Utilizing this insight, customer segmentation provides the means of driving more targeting and informed marketing communications that will build customer loyalty and therefore customer lifetime value.

[READ MORE: A guide to identifying your profitable customers and improving your sales (1)]

Align spend and resource to potential value

Understanding the profile of your highest spenders enables businesses to align resource and spend in proportion to the opportunity each segment has to offer. Businesses that can prioritize resources are more likely to be able to provide better returns on investments by concentrating on pulling in the right type of customers. This could be setting your marketing spend proportionally to the opportunity or profitability which each group offers or reducing the follow-up or sales pipeline on those prospects/customers that do not spend as much or take longer to convert.

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Increase the volume of your ‘best’ profitable customers

A profile of your best customers provides insight into who they are, how they live and what motivates or interests them. Utilizing this insight, businesses can implement highly targeted and personalized campaigns to attract, engage and ultimately sell to prospects matching their ideal customer. The more customers you have that match your most valuable customers, the more profitable you will be. Businesses that are able to target and acquire more valuable customers can then concentrate on quality not quantity. Align your advertising, placement and positioning to target your most profitable customers. 

Market Penetration Analysis

A profile of your most valuable customers (and different types of customers) by socio-demographics enables you to map these customers against the population. This is extremely important if you want to find more customers that look like them. Once you can match the profile of your profitable customers against the population, you can then size the potential market opportunity.

If your customer numbers are low in an area with a high density of your ideal customer, you can increase spend to drive sales. Similarly, if you map your existing customers (best customers) on a map and overlay density of your ideal customer, you can see which areas you have low or little penetration. For store locations, this is a necessity to see where you have room for growth. Even online businesses can use this method to understand where they need to build awareness and exposure of their brand.

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Customer/product analysis

Understanding which customers buy which products or services is also valuable. If there are specific patterns in types of customers that purchase or use different products and services, you can tailor the messages to resonate with specific audiences. If customers always pay full price or are brand-led, then you do not want to devalue your brand or price point by offering them a discount. These promotions should be saved for the customers that only tend to purchase when they receive offers. Look for patterns and interests in purchasing behaviour, so that you can offer the next item, product or service that you think they’d be interested in — even before they start looking.

Customer, business, Polarization: How, attract, right, customers, ‘’wrong’,’ ones, out, A guide to identifying your profitable customers and improving your sales (1)

The benefits of understanding your customers

To conclude, there are many reasons to identify your most profitable customers. Fairly obviously, understanding your customers will help you to sell more. The more you know about them and their needs, the easier it is to identify opportunities to sell them new products and target them with appropriate offers. Profiling existing customers also makes it easier to find new ones. You can look for similar prospects, and sell to them in a similar way.

[READ ALSO: Why investors should understand the basics of financial statements]

You can use the information you have on customers to improve efficiency. Keeping a central record of customer details and sales reduces errors and speeds up transactions. You can also improve customer service. Better access to information helps you deal with customers more quickly. You can tailor product offerings and provide personalized treatment to your customers. The right information makes it easier to identify and resolve any problems.

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Finally, understanding your customers helps your strategic business planning. It helps you predict what your customers will buy, and estimate how much stock you need. Linking customer management to purchasing can dramatically improve profitability and some more!

Patricia
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Business

China more willing to restructure Africa’s debt than private creditors

Agreements have been easier to reach with Chinese lenders than with private creditors.

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A recent study by John Hopkins University reveals it may be easier for African Nations to raise debt and also get debt relief from China than private creditors.

The report of the study comes a day after China promised to cancel interests from loans to African nations and restructure debt to Africa. The study also revealed that China has restructured $15 billion of African debt and written off $3.4 billion in the past ten years.

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After 1,000 Chinese loans, including restructured Mozambican and Republic of Congo debt, were analysed, the researchers concluded that “the agreements have been easier to reach with Chinese lenders than with private creditors”.

The Paris Club recently agreed to pause debt payment valued at $11 billion for the poorest 73 nations freeing up capital to tackle the coronavirus pandemic. However, not all eligible nations signed up citing fears of default ratings if debt obligations are not met.

The study discovers difficulties in renegotiating terms on International Bonds for African countries due to the disparate ownership structure making private creditors unwilling to grant complete debt relief, citing warnings on rating downgrades.

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China accounts for about 20% of Africa’s external debt and lent over $150 billion to the continent between 2000-2018 the study reveals. Chinese President, Xi Jinping has urged global leaders to be more pragmatic with debt suspension for Africa.

The study says much of the terms of Chinese debt to Africa has not been transparent and the relief negotiations may follow the same path.

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Business

Orange, France’s largest telco operator, may come to Nigeria in months

Orange would also be looking at bolstering partnerships with health companies or institutions.

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Orange, France's largest telco operator, may come to Nigeria in months

France’s largest telecom operator, Orange, is set to extend its tentacles to Nigeria and South Africa.

Chief Executive Officer, Orange, Stephane Richard, who disclosed the news, said that the firm would make the move in a few months.

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He said, “It could make sense to be in economies such as Nigeria and South Africa. If one considers there are things to do, the time frame I am considering is rather a few months than a few years.”

READ ALSO: French telco inks investment partnership with MainOne

The Middle East and Africa, where Orange has a presence in 18 countries, is the company’s fastest-growing market.

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What you need to know: There are chances that the company may eye payment transfers (mobile) in Nigeria.

That is because it makes the largest chunk of its revenue from payment transfers (Middle East), a key part of the group’s diversification into financial services, and Nigeria, which is the most populous black nation, is always an attraction.

READ MORE: Multichoice to integrate Netflix, Amazon contents into decoder

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Meanwhile, earlier in 2020, Orange had stated that it was bringing its operations in the Middle East and Africa into a single entity, paving the way for a potential listing of the operations that could raise cash to invest in overseas expansion.

“Orange would also be looking at bolstering partnerships with health companies or institutions,” he added.

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Business

LIRS further extends deadline for filing annual tax returns by one month

“We constantly debated what other measures could be taken as an organization to support individuals and businesses at this time, hence, the additional one-month extension from June 1, to June 30, 2020.” – Ayodele Subair

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LIRS further extends deadline for filing annual return by one month

The Lagos State Internal Revenue Service (LIRS) has again extended the deadline for filing of Annual Tax Returns from May 31 2020 to June 30, 2020.

This is part of the state government’s effort to provide relief to taxpayers in light of the economic impact of the Covid-19 pandemic. With this development, annual returns for individuals, both employees and self-employed persons, can be filed anytime before June 30, 2020.

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In a press release signed by Monsurat Amasa, the head of LIRS’ Corporate Communications Department, the agency urged taxpayers to take advantage of the magnanimity of the government and file their returns. The LIRS’ Executive Chairman, Mr. Ayodele Subair, explained the extension thus:

“As the Lagos State Government keeps abreast of global best practices in containing the Covid-19 pandemic and eases the effects of an economic downturn on taxpayers and residents of the State, LIRS had initially extended the deadline for filing annual tax returns for two months, from the statutory March 31st of every fiscal year to May 31, 2020.  

“We constantly debated what other measures could be taken as an organization to support individuals and businesses at this time, hence, the additional one-month extension from June 1, to June 30, 2020.”

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(READ MORE: COVID-19: Lagos issues new guidelines, considers full reopening of economy)

He further explained that taxpayers can file the annual returns from the comfort of their homes and offices using the LIRS eTax platforms. They can also generate assessment and payment schedule, and other tax administration matters on the same platform. Updates on business operations and alternative payment platforms are to be found on the verified handles, and the LIRS website.

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