First off, I’m extremely grateful when a business owner reaches out to me via telephone, e-mail, Facebook group and even via Facebook chat. It’s obviously important to you, business owners, and I’m more than willing to take a few moments out of my day to answer questions or share a little information if it helps you, so if you ever have a question, I encourage you to reach out.
Recently I’ve had some phones calls and e-mails from cleaners who wanted to talk about customers. These conversations have lead me to revisiting some of the early days when I too was a dry cleaner working my shop, and began to look through my point-of-sale system’s data and take a good long look at the customers I had, the customers I wanted and the customers who had left me.
What exactly IS a customer?
Well, some define a customer as a person who has done business with you at least once, and has made at least one purchase from you. Others define a customer as a person who wears clothes, may have a need of dry cleaning or laundry services at some point in their life, and MAY do business with you or another cleaner.
Both the above are valid definitions, even if perhaps extremely broad. I’m going to throw some ideas out to you to perhaps set some more concrete parameters and give us all some common ground upon which perhaps we can have some discussions later on.
A prospective customer:
A prospective customer is a customer who COULD possibly do business with you, but currently is not nor done business with you. Simply put, the prospective customer is a customer who may or may not be conducting business with one or more of your competitors, or perhaps has not even entered into a commercial relationship with another cleaner, and is basically a free agent that HAS NOT EVER made a purchase from you. In the simplest terms, a prospective customer is someone who COULD do business with you, but has not done so, for whatever reason.
There are many, many, many kinds of customers. Some customers come in once or twice a week, while other customers come in every other week. And then there are those customers who come in once a month, and others that come in once a season, or only in spring and fall. And then there is the wedding and funeral customers who only come in when they have a wedding or a funeral to go to. Plus, there is the once and done customer who comes in once and is never seen again. All of these folks who have made a purchase from you, ARE, a customer.
As you may have noticed, not all customers are created equal. We need to develop additional classes and types of customers.
A current customer:
We can begin separating customers based on TIME that has elapsed since a customer has purchased from us. A current customer is someone who HAS made at least one purchase from you in the past year. Time is truly of the essence. A customer that has not come in for some time could begin to be construed as a lapsed customer, and eventually a lost customer. At what point do you pull the pin on a customer and move them from a current customer, to a lost or inactive customer? Of course, much depends on their shopping cycle. A customer who drops off an order then picks up an order when dropping off another order a few days later has a three or four-day shopping/purchase cycle. Yet, the customer who comes in every couple of weeks, has a completely different shopping pattern of 14 days between purchases. Some may debate, with various degrees of validity, that a wedding and funeral type customer who makes a purchase every two to three years could be included in the current customer classification because this type of customer is current within their purchase pattern. So, a weekly customer could be considered lapsed when they skip a week with you, or they could simply be on vacation for a week. A monthly customer could be considered lapsed when they have not been in for 60 days, and a lost customer after no action for 120 days. And a very marginal customer who comes in once a year, could be considered lost if they have not been in for three years, if you really care to track that type of customer.
An active customer is a customer who is presently engaged in purchasing from you within their shopping habits. And of course, as you now have learned, there are many different types of customer shopping habits. As long as a customer is sending you all their orders and not splitting orders with another cleaner, or even if they are, an active customer is someone who keeps on spending with you.
We can add even more qualifiers to further segregate, define and identify customers.
Adding the ‘annual expenditure’ qualifier to further define and evaluate customers and you can quickly see that customers that come in weekly have a vastly different monetary value to your business than the wedding and funeral customer who comes in once a year or once every few years. And then we have all the customers in between, every other week, monthly, seasonal, etc. Those monetary values become extremely telling as we can quickly see that the majority of business comes from a very small portion of your customer list.
Every customer not only has a purchase pattern, but they also have a lifetime value. The normal customer lifetime starts out with the customer being a free agent, free to do business with any cleaner they choose to as they have no loyalty or relationship with any one cleaner. This free agent customer is a prospect customer to every cleaner offering services around him. Once the free agent cleaner leaves one order with one cleaner, he becomes an active current customer of that cleaner chosen, while that same customer remains as prospect customer to the other cleaners who did not get an order. The cleaner that successfully served the customer can now consider that customer a current but past customer once the order is picked up. Of course, this customer, once they have picked up their clothes, can once again choose any cleaner they want when they next have a need, but the cleaner who completed a successful transaction now has a former customer to win over for a second order, and a third, perhaps a fourth, and maybe even do business with this customer for a few years. But, sad to say, every customer has a definite lifetime with any business they frequent. This lifetime might literally be a lifetime from cradle-to-grave, or it might be for a few years until the customer gets promoted or transferred to a new town. This period where you do business with a customer is known as a customer lifetime value. And these customer lifetime values do vary depending on the age of the customer, where you acquired them in their careers and lives with some long, some not so long, and some short. Still, all the money a customer spends with you for as long as they are with you, is the customer lifetime value.
As you can now see, there are many, many, types of customers out there, prospect customers, active customers, inactive customers, lost customers, customers you can re-activate and bring back into the fold, new customers that just entered into a relationship with your business, customers that are moving up the sales and loyalty ladder, customers that may be moving to the exit getting ready to leave your business and customers who simply love you and your cleaning and keep on coming week after week after week. Now that you have met all these types of customers, it’s time to learn what we can do to use what we now know about all these customers and their shopping habits and how we can use marketing to influence and modify all these customer’s behaviors.
Unfortunately, I’m out of room with this month’s article, so we will have to pick this up another time, on another issue…