The Critical Value of Knowing Your Best Customers: The Parable of “$5.35 Guy”

July 14, 2016

How well do you know your best customers?  And how critical are they to your success? Most businesses answer the first question by describing a broad “persona” of their ideal customer. As for the second question, most entrepreneurs know the 80-20 Rule: typically, 80% of your sales are driven by 20% of your customers.

But guesswork like this wastes a tremendous opportunity. Knowing your best customers well can be THE linchpin of your company’s success or failure. There may hardly be a more critical variable for business owners to maximize.

Consider a real-life parable from a Portland, Oregon coffee shop and early Clover Rewards merchant. All the staff members recognized one customer who placed the same order every day: a large half-caf latte with a vanilla-syrup shot, and a toasted sesame-seed bagel with cream cheese. His purchase totaled $5.35, which is how he earned the nickname “$5.35 Guy”.

If you’ve ever manned a service counter, chances are you fondly recall your “regulars,” just like $5.35 Guy. What most of us fail to observe, though, is how valuable regulars like $5.35 Guy are. Consider these numbers:

  • If this regular visits the shop every workday, he’s spending $26.75 per week, $1,337.50 annually. 
  • If $5.35 Guy started frequenting the shop at least once per weekend, he’d spend an additional $5.35 per week, $267.50 annually – a 20% lift. If he came 7 days per week, he’d be spending 40% more.
  • What if $5.35 Guy stopped visiting daily? To replace his revenue contribution, you’d have to recruit more than 10 occasional customers. (We define that group as placing the same order as $5.35 Guy twice monthly.)

That’s just for starters. $5.35 Guy is obviously loyal. How many referrals has he made for your shop, and how much business does each of those customers account for? Is he eating out for lunch too? $5.35 Guy is more than just a recognizable face; he’s a veritable gold mine. Here are a few ways Clover Rewards helps you maximize the value of your “$5.35 Guys”:

  • Greet him warmly by name. Clover Rewards identifies every customer by name and status, so your cashier can knock his socks off with: “Hi, Mike. We’ve already prepared your regular order. Anything else you’d like today—a sandwich for lunch, maybe?” (By the way, if Mike starts buying a $7 sandwich from you at least once weekly, that ups his total annual revenues by $350, a 26% increase.)
  • Reach out with special offers. What if Mike disappears for a week? Is he on vacation, or has he—egads!—bought a coffeemaker or switched loyalties? Clover Rewards specials let you reach out directly to your customer’s phone with an offer targeted directly at the type of customer he is. Specials can encourage repeat business or stimulate new buying habits. For instance, does Mike ever supply team-meeting doughnuts, working committee lunches, or happy hour for his department? Becoming his go-to vendor can lift your revenues further.
  • Identify potential “$5.35 Gals.” The Clover Rewards Merchant Dashboard gives you valuable customer insights. If you could identify customers with “$5.35 Guy potential” by buying habits, you could tailor marketing offers specifically for that group. Converting even one into a $5.35 Gal is worth an additional $1500 in revenue per year—equivalent to selling 750 cups-o-joe at $2 each.

The bottom line? Getting to know your “$5.35 Guys” is crucial to protecting your core revenues and growing your sales and customer base further.

[image: Coffee Shop near Times Square by Neo_II on flickr]

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