Research shows that 20 percent of your customers generate 80 percent revenue for your company.
How could only 20 percent customers generate a large amount of revenue?
Companies are now working on CRM (Customer Relationship Management).
The core objective of CRM is built a long-term relationship with customers.
Now a day there is no concept of production and selling product.
Now companies are trying to identifying the niche and then serve them profitably.
Severing niche profitably needs some long-term relations because of less cost.
20-80 rule follows some directions for its efficiency.
For example, building long-term relations with 20% customers contain less cost of retaining them, zero cost of acquiring new customers, cost to serve is very low, the promotional expense is very less, above all value analysis can be done.
All above benefits, company enjoy when company position its brand in the customer’s mind effectively and force them to purchase the product happily.
Loyal customers are who are valuable to the company and company design some CRM strategy for those customers.
There are seven stages of customer loyalty.
One customer may fall at any stage during his purchase life:
Suspect - In this initial stage company identify the segment and could think that this custom fits our target market profile.
All potential customers are before purchasing, fall in this category.
Prospect - The next stage is prospect where company salesperson studies the customer and try to fit that customer according to product and is being approached for the first time.
First-time customer - When the customer agrees with the product, company’s culture and policies then he purchases Company’s product for the first time.
Repeat customer - After satisfying with first purchase and company’s sales force behavior customer makes more purchases.
Majority customer - In this stage customer think that is the product is best for me and satisfying my need then customer selects your product/company as a supplier of choice.
Loyal customer - With the purchase of products more frequently, a customer is resistant to switching suppliers; strong attitude.
Advocate - Last stage of customer loyalty program, where a customer is now the brand ambassador for the company and defends the product in front of other people and customer generates an additional referral.
Numbers of other concepts are attached to this concept.
For example customer lifetime value- where the company can estimate future expected customer’s purchase for the specific time period.
Brand equity- where the company finds how a brand worth in the marketing.
Customer’s pocket share- where company estimate how much brand enjoy share from the customer’s pocket.