Becoming Chief Profitability Officer (Part 7)

The Best Customers make up the head of the CLV curve. The bottom 50% or so of customers in most circumstances make a negative contribution to profitability. These ‘Test Customers’ make up the long tail. While the easy solution could be to think that a brand may be better off without these customers, it is not as simple as that. This is where Long Tail Marketing comes in.

We can think of the long tail of customers as comprising of one or all of the following:

• The bottom 50% of customers
• Leads who have not yet matured into customers
• Offline customers who are unknown to the brand

Each requires a different strategy.

Here are some ideas for the bottom 50% of customers:

• Generate more transactions and reduce service costs via ‘multiple and wide nets’
• Possible segmentation: value customers (coupon/discount) or niche buyers
• Capture additional data at time of (first) transaction
• Use martech to ensure tech-led engagement to reduce service costs
• Capture engagement data and work towards replica of BCG

For better conversion of leads (relevant for brands which are freemium, subscription-based or driven by 1-time purchases), Long Tail Marketing can be thought of as Conversion Rate Optimisation (CRO). Here are some ideas for leads:

• Analyse past data to build Ideal Customer Profile (ICP) – which will be similar to BCG
• Same BCG and VRM ideas are applicable by tweaking model
  • Customers 🡪 Leads
  • Transactions 🡪 Engagement
  • CLV 🡪 Lead Conversion Score
  • Best Customers 🡪 Ideal Leads

For the offline customers who are unknown to the brand, there needs to be an activation process by which these customers can identify themselves to the brand. This process necessarily is via an opt-in. It is even more important in the post-Covid world when brands will need to shrink their marketing budgets. An idea I had thought about many years ago is that of “invertising” – where customers invite advertising from brands into their lives. It is an idea worth revisiting in today’s context.

Tomorrow: Becoming Chief Profitability Officer (Part 8)