March 15, 2011 1 Comment
For many of us, this word brings to mind images of crazy madmen in the Middle Ages in dingy basements trying to turn base metals into gold. While this may not be too far from the truth, marketers can learn a lesson from the alchemists of old.
In marketing, there is a common rule that says 20% of a company’s customers contribute 80% of the company’s revenue. Marketers often refer to these individuals as “platinum customers.” Platinum customers have a high lifetime value for a company and are relatively cheap to retain. Not only do these customers contribute a significant sum of money to a company, but they also tend to serve as brand advocates. In other words, they are the type of customers that a company wants to attract and multiply. The most profitable 20% of customers can contribute anywhere between 150-300% of a company’s profits! Alas, not everyone can be platinum, despite what their mothers tell them. Marketers also categorize consumers into “gold,” “iron,” and “lead” groups. Customers in the least profitable 10-20% (primarily lead and some iron) can actually reduce profits somewhere between 50-200%! One of the primary jobs of marketers is to convert as many customers as possible into gold and platinum while “firing” the majority of lead customers. So, how can a marketer do this? Below are just a few ways: