Customer Portfolios' Blog

Best Customers vs Loyal Customers: What’s the Difference?

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As you set marketing goals and resolutions for 2018, it’s important to think about your customers and how you treat them. Studies show that a focus on retaining current customers generates more money than acquisition, so a good place to start could be the ones that are already generating the most money: your Best Customers and your loyal customers.

The first step is defining who your Best Customers are, and who your loyal customers are. We often see marketers use these interchangeably – but they are not the same. Your best customers are typically the top 10% of your customers, speaking in terms of frequency and monetary value. A Best Customer is a high-end spender, and generally buys the newest line and the top products. Best Customers generate most of a brand’s revenue, but they may not be engaged in any other way.

A loyal customer, on the other hand, is very engaged with the brand cross-channel. They may not be able to afford the same amount as the Best Customer, but they are engaged with emails, social media, and spreading the brand through word-of-mouth. They are an advocate of the brand, whether they spend a lot of money or not.

Treating Customers Differently

Both types of customers are equally important to the brand: Best Customers drive revenue, and many times, loyal customers drive acquisition. In some cases, Best Customers and loyal customers can look similar -  a Best Customer is a loyal customer, but a loyal customer is not necessarily a best customer. The major difference in their treatment stems from the goals for each segment.

An example that illustrates this difference is a Surprise and Delight campaign, where you reward your loyal and best customers with a surprise incentive that encourages them to continue interacting with the brand.

The goal for loyal customers is to encourage them to move farther along their customer journey and eventually become best customers. Loyal customers may receive smaller items, such as a tote bag, t-shirt, or even priority calling for customer service. They receive these items multiple times a year, such as on their birthday or a busy shopping weekend. Smaller, more frequent gifts will encourage and reward these customers for their loyal behavior.

The goal for Best Customers is to retain them long term and continue to grow their future value. Best Customers are also receiving surprise and delight rewards, but at a much higher monetary value, for example, a $50 gift card. At this point in the lifecycle, Best Customers will continue to shop with you, no matter how many rewards they get, so their rewards are much less frequent. You want to simply thank them for their continued loyalty with the brand.

Conduct an Audit

To treat your customers more appropriately for their lifecycle stage, you must first determine what lifecycle stage they are in. A deep dive into your customer data will help you determine who your customers are and the best way to market to them across all channels. Many brands think they know who their Best Customers are, but with our Portfolio Pathing analytical project, we can help hone those numbers a little more and back it up with the actual data. For example, we had a client who told us who their Best Customers were, based solely on the top frequency spenders of the last 12 months. With an analytical project like Portfolio Pathing, you can see more than just RFM metrics. You can determine your Best Customers through metrics like price, number of transactions, size of orders, and more. And a deep dive into your customer data can help you uncover that insight.

Recognizing Your Customers

In 2018, marketers should strive to recognize all the customers that support you. These may be best customers, loyal customers, repeat buyers, or prospects, but no matter where they are in the lifecycle, they should be treated differently and uniquely while still being supported by your brand. By conducting a deep dive of your customer data early in the year, you will be able to clearly see the makeup of your customer database and use those insights to determine a 2018 strategy that moves customers along the lifecycle and generates incremental revenue throughout the year.

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