Your best customer might not be on your VIP list

In most customer bases, a list of top spenders over the last (say) 2 years or even over all time is the first place a CRM team looks for growth. It is the easiest number to produce. It is also the one most likely to confuse recent spend with actual commercial potential.

"Brands often get most excited about ranking top spending customers over all time, declaring these as brand VIPs" says Adam Simms, co-founder of SIVV. 

While this is a reasonable starting point. It is also, in commercial terms, a lagging one. A customer who spent heavily two years ago and has since gone quiet does not present the same future opportunity value as one acquired more recently, but demonstrating steady repeat purchase behaviours. A customer who has spent intensively over the last few weeks, even if their total over a year is smaller, may be the more valuable brief to run next.

Three customers the VIP report does not surface

Simms points to three segments that tend to sit outside the lifetime ranked top-spender view and produce more commercial opportunity than their ranking suggests.

The first is the lapsed high-spender. A customer who used to be a VIP and has stalled. SIVV calls this group At-Risk Heroes. "For some reason, these customers have disappeared, maybe they have started shopping with a competitor," says Simms. "Whatever the case, reactivating these customers can deliver incremental revenue, immediately." The commercial case is clean. The acquisition was already paid for. The product fit has been demonstrated. The brand relationship is not cold, only quiet.

The second is the enthusiastic short-term spender. Not the biggest name on the VIP leaderboard, but a customer whose behaviour in the last few weeks suggests a developing relationship with the brand. "At SIVV we would call this the 'Accelerate' audience," says Simms. The commercial opportunity with Accelerate customers is forward-looking. The question is not based on what they spent over the last 3 years. It is whether recent purchase intensity gets turned into a longer pattern, or fades.

The third is the first-time purchaser who has not come back. The segment is usually larger than a retention team wants to admit. "Many retail brands may have in excess of 70% of customers only ever purchasing once, but lack specific mechanics to help change this," says Simms. "The second purchase helps build a deeper relationship with the brand and payback faster on the cost of acquisition." Getting a customer to a second purchase is where acquisition cost can really start to be yielded. The mechanics that do that work are rarely built into the same program that serves the top-spender list.

Segmentation is the retention strategy

Identifying the three segments is the work. What to do with them, how, and through which channel, is the rest of it.

"Different audiences require different types of interactions, whether that is content, engagement or campaign-focused," says Simms. "Different audiences may also respond better or worse to different communication channels.”

The mismatch between segment and channel is a quiet source of waste. "Sending an email to a previously high-spending customer that has not recently opened an email is unlikely to achieve much of a response, therefore an outbound call may be more appropriate," says Simms. "For new customers, where brand education is of particular importance, email marketing likely remains king."

The pattern repeats across most retention programs. A single default channel, usually email, is asked to do work that a segment-specific channel would do more cheaply and more effectively. The discipline is not in sending more email. It is in knowing when not to.

Pan for gold, or get handed the gold

Simms's framing of the current state of affairs is clear. "Marketers will often try and 'pan for gold' in a customer base using trial and error," he says. "For example, they might say 'Let's see what happens if we target people who purchased something specific in X timeframe and then send them an offer for Y.'"

Trial and error works, eventually. It is also slow, tends to underweight smaller-but-more-valuable segments, and rarely produces a commercial figure attached to the next action.

SIVV runs segmentation models against all of a customer base all of the time and calculates the opportunity inside each segment against the brand's own product range, product mix, repeat purchase rate, and average order value. The marketer is not handed uncoordinated pieces of opportunity, they are handed a view of opportunity across the entire customer base with defined actions against each customer segment

Acquisition was not going to stay cheap forever

The broader reason this matters now is the direction of acquisition cost. Paid channels have been getting more expensive for years, and the quiet assumption that acquisition can compensate for weak retention no longer holds. Brands that acquired well historically and did little to convert those buyers into repeat customers have been absorbing that gap on the cost line ever since.

The brands that have weathered the squeeze best are the ones that built repeatable retention programs capable of recovering acquisition cost faster. The second-purchase mechanic, the At-Risk Hero reactivation, the early recognition of an accelerating customer pattern, are not adjacent tactics. They are the places where the unit economics is either rescued or lost.

SIVV works with brands across retail, gaming, telecommunications, entertainment and travel. The product categories differ. The commercial question is the same, which is who in the base is worth the next dollar of marketing spend, and which channel carries that spend furthest.

The best customer is not necessarily the one who spent the most last quarter. It is the one most likely to spend the most in the next four. Most marketing teams already have the data to tell the difference. Fewer have the segmentation running continuously enough to act on it while it still matters.

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About SIVV

SIVV is the customer intelligence and decisioning platform built for marketers who want to know what's actually working.

We sit above your marketing platforms, combining:

• Sophisticated customer intelligence (churn prediction, lifecycle segmentation, propensity modelling)
• Scientific campaign measurement (randomised control groups for every campaign)
• True incremental revenue reporting (revenue that reconciles to your actual business performance)

Clients across telecommunications, retail, gaming, entertainment, and travel use SIVV to:

• Measure true incremental revenue for every campaign
• Identify which audiences and offers drive real lift
• Make budget allocation decisions based on incremental ROI
• Optimise marketing performance based on what actually moves the needle

Stop optimising against attribution. Start measuring incrementality.

Learn more at sivv.net or contact us to discuss how incremental measurement can transform your marketing performance.