Customer Relationship Management for IM Dummies
Posted on 09. May, 2011 by Daniel Levis in Articles, Blog, customer, intelligence, logic, pareto, relationship, resource, Small Business Internet Marketing, Small Business Marketing, spending, spreadsheet, system, tracking
The Pareto Principle says 20% of your customers produce 80% of your sales and profits. This has profound implications to the wealth and wellbeing of ANY business…
Resources are finite. There is only so much time, money, and energy to invest.
One of the keys to increased conversion, customer value, and retention — and the increased profits they bring you — is the strategic application of your resources.
If you can deploy them with surgical precision… obtaining the highest possible return on resources invested… while avoiding their squander in places where they have negligible or negative contribution to your bottom line, you have a decided competitive advantage.
So why do so many online marketers pursue the quick fix, churn and burn school of marketing that treats all customers alike? Chalk it up to ignorance… temporarily too easy pickings… shoddy products that are anathema to repeat business… laziness… stupidity… pick your poison…
Despite the obvious logic and benefit of the surgical, systematic strike, few entrepreneurs have even considered it… still fewer pursue it. And as a result, billions of dollars are left on the table. Worse, businesses that flourished in cushier times are now floundering on the rocks of extinction.
The first step to avoiding this fate is to start tracking the behavior of your customers… and using that intelligence to take specific actions that encourage continued and increased spending…
Doesn’t it make sense to spend more money marketing to people with a proven propensity to buy from you?
What do you think might happen on your next product launch or promotion if you were to separate your best buyers from the great unwashed? What if instead of just sending them a series of emails you send these VIPs a series of print pieces as well?
What do you think might happen if you were to send your very best buyers a surprise gift in the mail once a year? Or your bread and butter buyers a free printed catalog once a quarter?
Do you think that might increase sales far and above your mailing costs?
Do you think it might also make these customers more responsive to your regular email promotions?
Does the Pope wear a beanie?
But here’s the real million-dollar question:
How do you know which customers are likely to respond enthusiastically to this special attention?
Here’s what I told one of my brightest coaching students who asked this question just the other day…
Your first step is to create an RFM value for each record in your customer file.
R stands for RECENCY (customer purchased within the last x days). F stands for FREQUENCY (customer purchases on average every x days). M stands for MONETARY VALUE (customer’s total purchase volume).
So let’s say Jill Customer made her first purchase a year ago. Her most recent purchase occurred 7 months ago. In between she made 2 additional purchases. And her total spend with your company is $2,780.
How do you compute Jill’s value in order to make a resource-leveraged decision about how much you should be willing to spend to convert her into a customer for your latest offering?
First, you need to create a few simple rules that make sense for your particular business. DISCLAIMER: Every business operates around different purchasing patterns and customer lifecycles so this is a purely an illustrative example…
Recency Rules:
- Customers who last purchased within the last 30 days get an R value of 5.
- Customers who last purchased within the last 30 to 60 days get an R value of 3.
- Customers who last purchased within the last 60 to180 days get an R value of 1.
- Customers who have not purchased within the last 180 days get an R value of 0.
Frequency Rules:
- Customers who purchase every 60 days or less on average get an F value of 5.
- Customers who purchase every 60 to 180 days on average get an F value of 3.
- Customers who purchase every 180 to 360 days on average get an F value of 1.
- Customers yet to make their second purchase get an F value of 0.
Monetary Value Rules:
- Customers who have spent $2,500 or more with your get an M value of 5.
- Customers who have spent between $1,500 and $2,500 get an M value of 3.
- Customers who have spent between $500 and $1,500 get an M value of 1.
- Customers who have spent less than $500 with you get an M value of 0.
You now have a system for ranking the relative value of your customers on a scale of 0 to 15. So what kind of customer is Jill?
Well she hasn’t purchased for 7 months. That pegs her R value at 0.
During her 1-year history as a customer she made 4 purchases. That gives her an F value of 3.
And her total spend with your company is $2,780. That gives Jill an M value of 5.
You now add these figures together to determine Jill’s RFM value — 8. This is Jill’s relative value as a customer.
Your next step is to decide what action you will take in order to maximize that value. Maybe you sub-divide your buyer’s list into three groups — 0-5, 5-10, 10-15. And on your next product launch you send all three groups a couple of postcards inviting them to consume your pre-launch content online.
The 5-10 and the 10-15 group have proven by their past buying behavior that they are quite responsive to your offers. So in addition to the postcards, you send them a sales letter and a couple of follow up reminders by mail counting down to the deadline.
And the 10-15 group — your most responsive and therefore highest value customers — also receives an amazing shock and awe package that includes all of the launch content on DVD, an audio CD they can listen to in their car, and beautifully printed transcripts.
Result: More sales, more profits, more loyalty and retention!
Parting comment. This is not rocket science to pull off. You don’t need high priced consultants or fancy pants CRM software to do this.
Anybody with elementary school math can download a .csv file from their shopping cart and perform the above calculations in a simple spreadsheet.
Will you give it a try?
Until next time, Good Selling!
Customer Relationship Management for IM Dummies originally appeared on The Michel Fortin Blog. Please visit to subscribe to it, or Tweet This.
Going Undercover is Quite Revealing
Posted on 05. May, 2011 by Michel Fortin in answer, attitude, Blog, consulting, customer, helpdesk, Influence, interview, Opinions, people, problem, respect, Small Business Internet Marketing, Small Business Marketing, success, support, workaholics4hire
Sometimes, I answer helpdesks to help in special cases or on more technical issues. But when I do, I do it anonymously as our support staff works as a team.
(It’s the way my wife’s company works. It allows us to work interchangeably, such as replacing each other on vacations or providing collaborative input, without any interruptions.)
However, when I do, something interesting happens.
Some clients treat me like crap. They patronize me and show contempt towards me. They are terrible to deal with, not because of their request but because of their attitude.
They range from the miserable, “the-world-owes-me,” insatiable ingrate who sends tickets in rapidfire succession for every little itch they need to scratch, to the uppity, snarky snob who expects others to bow in the mere presence of their support ticket.
Now, don’t get me wrong.
I’m not talking about someone who’s genuinely pissed off because of some frustrating problem they need help on, but later becomes appreciative when their problem is solved. (I do sympathize with them when stuff like this happens. I’ve been there!)
No, I’m talking about people who lambaste subordinates just because… they can.
It is utterly amazing to me to see how clients treat me when they don’t know it’s me — the same person they revere, are friends with, and pay $500-$1,000 an hour for consulting.
Worse still, it’s terrible to see how people are downright condescending toward others in seemingly menial positions. It’s also surprising because I would have never expected it from some of them. They’re the kindest people I’ve met.
To quote Lynette Chandler who shared a similar story with me on Facebook:
“I was floored… I’ll never view her the same way again.”
Indeed.
The sad part is, many of these clients were people I’ve met at seminars, were friends of mine, and were supposedly some of my biggest fans. Needless to say, it also made me realize what my wife and her staff had to put up with for 15 years.
(Hats off to you, and you know who you are! 
)
Here’s the interesting thing about this.
How many do you think are like that?
10% (i.e., 90% are good and 10% are bad)?
20% (or 20-80)?
How about 30-70?
Nope. This happens in about 50% of cases. Yes, 50%! Close to half of all tickets come from clients who treat me horribly and browbeat me just because of the position I’m in.
Maybe it’s because they think I’m a woman? Or an Indian? Or a teenager? Or someone who just started in an entry-level position? In all of these cases, it doesn’t matter. It shouldn’t matter! And it would be downright insulting if any of these were true.
(I’m confident I’d embarrass the daylights out of them if they ever found out it was me!)
In addition to the show Undercover Boss, this also reminds me of an article I read once about a CEO who typically conducts job interviews at restaurants, just to see how the job candidate treats the wait staff — which greatly influences their decision to hire them.
It’s a great social experiment, that’s for sure. It’s also going to make me think twice when I’m the customer, on the other side, dealing with a cashier, nurse, order taker, wait person, counterperson, clerk, or whomever is serving me at that time.
Sure, I still expect them to do their jobs. After all, I’m the customer and I’m paying for it.
But they deserve to be treated the same way I expect to be treated…
… With respect.
Going Undercover is Quite Revealing originally appeared on The Michel Fortin Blog. Please visit to subscribe to it, or Tweet This.
The Facebook Fake Friend Fallout
Posted on 24. Mar, 2010 by Michel Fortin in Blog, customer, facebook, fan, follower, friend, helpdesk, Opinions, philosophy, profile, relationship, service, Seth Godin, Small Business Internet Marketing, Small Business Marketing, spam, spammer, tweet, Twitter
He was so incensed, he wrote me a personal message accusing me of being rude and insulting. He even remarked that I’m arrogant, and snarkily added that some of his “friends” seem to feel the same way.
Now, before I give you the reason, I’d like to share with you my philosophy on Facebook friendships in general.
To me, and I think it’s simply common sense, a friend is a friend. It’s someone you know, someone you have a relationship with, someone you want to stay connected with, and someone you consider a real friend — not a fan, follower, or worse yet, a spammer.
And the latter of the three is the one I can’t stand.
But there’s a difference between a “profile” and “page.” Between a “friend” and a “fan.” Those differences are not mine. They are Facebook’s. Their policies are pretty clear.
Personal profiles are not to be used for commercial purposes.
I know. It’s not only listed in their terms, but Facebook have also told me personally.
Befriending someone on Facebook can be just as problematic as following someone on Twitter. Just
“It is unlikely that anyone can actually read tweets from thousands of accounts which makes this activity disingenuous.”
Even Seth Godin calls mass-friending as “fake networking.” This applies to Facebook as much as it does to Twitter — or to any other social media application, for that matter.
I wanted to keep my friends list clean. I could have, like some marketers out there, dumped my profile entirely, or deleted my entire friends list, and started from scratch.
But I didn’t want to do that. Starting from scratch can seem just as disingenuous.
So in order to whittle my list down to the people I really do want to stay friends with, including family members, old school friends, and several marketers I have an actual relationship with, I’ve decided to remove friends based on the following five criteria.
If the people are not known to me (i.e., people I don’t really know, have never met, or haven’t some kind of personal relationship with), I remove the following:
Above all, I’m not on Facebook to provide customer support or free advice, or to do any networking. (Sure, I do network. But it’s not my primary focus.) So I also remove friends who send me a direct message in some obvious attempt to extract free advice from me.
Yes, I’m very selective with who I hang around with. But I don’t spend endless hours scouring my friend list searching for anyone who meets any of the above criteria. I only apply it to friends who happen to spam me and to those who try to add me as a friend.
Incidentally, when adding friends I prefer and particularly approve those who add a small message with their friend request. They’re making an effort in introducing themselves to me, and in sharing some commonality or reason why we should be friends.
Bottom line, I’m very protective of my time, my reputation, and my integrity.
Back to the “friend” who rebuked me for unfriending him. He added me as a friend, and spammed me with a request of some kind literally the next day. Now, spamming me is one thing. But spamming me within hours of adding me as a friend is another.
When people do this, it makes their friend request suspect.
Not only do I de-friend people who spam me, but I hesitate even less when the request comes in shortly after adding me as a friend. Facebook is filled with people who add “friends” for the sole purpose of pushing their offers, businesses, or opportunities.
(Sorry, but I’m not interested in your “opportunity.”)
I replied to this fellow and expressed that he should have given me a chance to explain before jumping the gun. His reply was just as perplexing when he counter-accused me of jumping to conclusions by unfriending him so quickly. (Uh, merry-go-round, anyone?)
With this situation, Seth Godin’s “permission marketing” comes to mind. Specifically, don’t ask me to marry you when we’re still on the first date. Get to know me first.
Nevertheless, I don’t have time to vet each friend request, much less every friend on my list. So following this “whittling” process seems to work for me.
It’s the lesser of two evils — removing undesirables one by one is a lot less daunting than deleting my entire friends list and starting over from scratch. Plus, in the end by cleaning out my friends list allows me to stay in touch with only the people I want.
If not adding everyone who asks as a friend, if being selective when choosing my friends, and if unfriending undesirables make me arrogant, then I guess I am.
Come to think of it, this argument is very reminiscent of the whole “auto-follow fiasco” on Twitter
Not following you back (or in this case, not befriending you) doesn’t make me rude, arrogant, or discourteous. This is a blatant myth propagated by some social media gurus who are using peer pressure to justify their attempt to grow their own lists.
Ditto with people befriending others in an attempt to usurp free advice or support. I do offer support. I have staff and a helpdesk for that purpose. And I do try to help whenever I can. But there’s a difference between customer service and customer support.
So if you want to become my friend, I only ask three simple things.
Ultimately, ask yourself, and be honest: would you treat a Facebook friend the same way you’d treat a real friend in the real world? If so, and if you want friends only to promote yourself, then your Facebook profile is not the place. There are better places for that.
They’re called tradeshows.
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