Short video/transcript from Sarah at the Boutique Hub explaining the importance of customer loyalty and retention for retail/boutique owners. Describes customer segmentation into A/B/C tiers (20/60/20), invokes the 80/20 revenue rule (top 20% of customers produce ~80% of sales), and gives practical advice to serve customers and move them up the loyalty ladder to increase lifetime value.
Hey guys, it's Sarah with the Boutique Hub. I am back today to answer one of our frequently asked questions. And it's about customer loyalty. And just how important is it to retain your customers? Well, it's extremely important. Now, I will say every once in a while it's okay to fire a customer, but we don't want to get in the habit of that. It is very important. Every time somebody lands on your site or walks through your door, you are serving them so they become lifetime customers. But let me put some numbers behind this that really may help you open your eyes and your mind to why it's so important to keep these customers loyal. So there's a couple rules out there. The first one we're going to talk about is the 206020 rule, right? That means 120 plus 60 plus another 20 equals 100. So say 100% of your customers. Well, we're going to say the top 20% of those are your A customers. 60% of those are going to be your B customers. And the bottom 20%, we're going to call your C customers. So A, B and C customers, right? Well, 20% of all your customers typically bring in 80% of your sales. So therefore, another rule, the 8020 rule, what does that mean? So that top 20% of all of your customers are bringing in 80% of the sales, 80% of the revenue into your store. All right, let me give you an example. If you are a $500,000 a year store, 80% of that is $400,000. So just 20% of your total customer list is bringing in $400,000 into your store. That's a lot of money, right? Thus very important to keep that top 20% extremely satisfied. Well then what happens? So we've already talked about the full hundred percent of your market, your customer market, right? That's only 20%. So then the next tier, the B customers usually make up about 60% of your overall total customer base. Well, we've already attributed to 80% of your sales. Goes back to your A customer. Get this, that B customer typically brings in about 15% of your sales. Nothing close, right? But that's okay because in hope that we move some of these B customers to A customers if we really serve them right. And let's be honest, we will lose some A customers, lifestyle changes, whatever might be, they may drop off. So we have to recirculate, right? We're hoping we're moving those B customers up into the A category. So never stop serving them. Now let's go to the C customers. I think these are very important and should never be forgotten about. Because every boutique owner, every retailer is going to end up with some leftover inventory. Whether we call these our inventory buying mistakes or not, it is inventory that needs to move. And often that C customer, that lower customer, they are only bringing in that 5% of your sales. But many times they're driven by price, they're driven by sale, they're driven by promotion. And we need those type of customers as well. And that's great. So make sure your marketing effort directs to those customers. Bottom line, every customer serves a purpose, and it is very important that you continue to serve them. We all know that the squeaky wheel gets the grease, right? So if we choose to let a customer come in and not acknowledge them and not serve them and not sell them, it will trickle down a lot more than it is that one customer that we really serve well. Right? But bottom line, every customer has a purpose, and we want them all to be loyal. And we hope that we're moving those C customers to B customers. B customers to A customers. All right, guys, that's my tip of the week for you. Understand your customers, the lifetime value they bring to your business and how they directly affect your bottom line. Next time somebody walks into your store or lands on your site, please don't let them leave without you serving them. And if they happen to leave without you serving them the first time, jump back in, send them an email, give them a phone call, drop them a card. Customer service goes a long way. Lifetime value, guys. It's not something to mess around with. So, yes, it is very important to retain your customers. All right, guys, if this was helpful, let us know. If you have other questions, please don't hesitate to ask. We're always here to help at the Boutique Hub. Talk to you later. Bye.
