The 5 Types of Customers





In retail industry, it seems as though we are constantly faced with the issue of trying to find new customers. Most of us are obsessed with making sure our advertising, displays, and pricing all “scream out” to attract new customers. This focus on pursuing new customers is certainly prudent and necessary, but, at the same time, it can wind up hurting us. Therefore, our focus really should be on the 20 percent of our clients who currently are our best customers.
In retail, this idea of focusing on the best current customers should be seen as an on-going opportunity. To better understand the rationale behind this theory and to face the challenge of building customer loyalty, we need to break down shoppers into five main types:


Loyal Customers: They represent no more than 20 percent of our customer base, but make up more than 50 percent of our sales.


Discount Customers: They shop our stores frequently, but make their decisions based on the size of our markdowns.


Impulse Customers: They do not have buying a particular item at the top of their “To Do” list, but come into the store on a whim. They will purchase what seems good at the time.

Need-Based Customers: They have a specific intention to buy a particular type of item.


Wandering Customers: They have no specific need or desire in mind when they come into the store. Rather, they want a sense of experience and/or community.
If we are serious about growing our business, we need to focus our effort on the loyal customers, and merchandise our store to leverage the impulse shoppers. The other three types of customers do represent a segment of our business, but they can also cause us to misdirect our resources if we put too much emphasis on them.


Let me further explain the five types of customers and elaborate on what we should be doing with them.


Loyal Customers


Naturally, we need to be communicating with these customers on a regular basis by telephone, mail, email, etc. These people are the ones who can and should influence our buying and merchandising decisions. Nothing will make a Loyal Customer feel better than soliciting their input and showing them how much you value it. In my mind, you can never do enough for them. Many times, the more you do for them, the more they will recommend you to others.


Discount Customers


This category helps ensure your inventory is turning over and, as a result, it is a key contributor to cash flow. This same group, however, can often wind up costing you money because they are more inclined to return product.


Impulse Customers


Clearly, this is the segment of our clientele that we all like to serve. There is nothing more exciting than assisting an Impulse shopper and having them respond favorably to our recommendations. We want to target our displays towards this group because they will provide us with a significant amount of customer insight and knowledge.


Need-Based Customers


People in this category are driven by a specific need. When they enter the store, they will look to see if they can have that need filled quickly. If not, they will leave right away. They buy for a variety of reasons such as a specific occasion, a specific need, or an absolute price point. As difficult as it can be to satisfy these people, they can also become Loyal Customers if they are well taken care of. Salespeople may not find them to be a lot of fun to serve, but, in the end, they can often represent your greatest source of long-term growth.
It is important to remember that Need-Based Customers can easily be lost to Internet sales or a different retailer. To overcome this threat, positive personal interaction is required, usually from one of your top salespeople. If they are treated to a level of service not available from the Web or another retail location, there is a very strong chance of making them Loyal Customers. For this reason, Need-Based Customers offer the greatest long-term potential, surpassing even the Impulse segment.


Wandering Customers


For many stores, this is the largest segment in terms of traffic, while, at the same time, they make up the smallest percentage of sales. There is not a whole lot you can do about this group because the number of Wanderers you have is driven more by your store location than anything else.

Main article: New Product Development Branding

A brand is a name, term, design, symbol, or other feature that distinguishes products and services from competitive offerings. A brand represents the consumers' experience with an organization, product, or service. A brand has also been defined as an identifiable entity that makes a specific value. Branding means creating reference of certain products in mind. Co-branding involves marketing activity involving two or more products.

Marketing communications

Marketing communications breaks down the strategies involved with marketing messages into categories based on the goals of each message. There are distinct stages in converting strangers to customers that govern the communication medium that should be used. Advertising
Paid form of public presentation and expressive promotion of ideas Aimed at masses Manufacturer may determine what goes into advertisement Pervasive and impersonal medium Functions and advantages of successful advertising Task of the salesman made easier Objectives
Maintain demand for well-known goods Introduce new and unknown goods Increase demand for well-known goods/products/services Create Awareness Requirements of a good advertisement
Attract attention (awareness) Stimulate interest Create a desire Bring about action Eight steps in an advertising campaign
Market research Setting out aims Budgeting Choice of media (television, newspaper/magazines, radio, web, outdoor) Choice of actors (New Trend) Design and wording Co-ordination Test results Personal sales
Oral presentation given by a salesperson who approaches individuals or a group of potential customers: Live, interactive relationship Personal interest Attention and response Interesting presentation Sales promotion


Short-term incentives to encourage buying of products: Instant appeal Anxiety to sell An example is coupons or a sale. People are given an incentive to buy, but this does not build customer loyalty or encourage future repeat buys. A major drawback of sales promotion is that it is easily copied by competition. It cannot be used as a sustainable source of differentiation. Marketing Public Relations (MPR)=== Stimulation of demand through press release giving a favourable report to a product Higher degree of credibility Effectively news Boosts enterprise's image Customer focus
Many companies today have a customer focus (or market orientation). This implies that the company focuses its activities and products on consumer demands. Generally there are three ways of doing this: the customer-driven approach, the sense of identifying market changes and the product innovation approach. In the consumer-driven approach, consumer wants are the drivers of all strategic marketing decisions. No strategy is pursued until it passes the test of consumer research. Every aspect of a market offering, including the nature of the product itself, is driven by the needs of potential consumers. The starting point is always the consumer. The rationale for this approach is that there is no point spending R&D funds developing products that people will not buy. History attests to many products that were commercial failures in spite of being technological breakthroughs.[4] A formal approach to this customer-focused marketing is known as SIVA[5] (Solution, Information, Value, Access). This system is basically the four Ps renamed and reworded to provide a customer focus. The SIVA Model provides a demand/customer centric version alternative to the well-known 4Ps supply side model (product, price, place, promotion) of marketing management. Product → Solution Promotion → Information Price → Value Place → Access The four elements of the SIVA model are: Solution: How appropriate is the solution to the customer's problem/need? Information: Does the customer know about the solution? If so, how and from whom do they know enough to let them make a buying decision? Value: Does the customer know the value of the transaction, what it will cost, what are the benefits, what might they have to sacrifice, what will be their reward? Access: Where can the customer find the solution? How easily/locally/remotely can they buy it and take delivery? This model was proposed by Chekitan Dev and Don Schultz in the Marketing Management Journal of the American Marketing Association, and presented by them in Market Leader, the journal of the Marketing Society in the UK. The model focuses heavily on the customer and how they view the transaction. [edit] Product focus In a product innovation approach, the company pursues product innovation, then tries to develop a market for the product. Product innovation drives the process and marketing research is conducted primarily to ensure that profitable market segment(s) exist for the innovation. The rationale is that customers may not know what options will be available to them in the future so we should not expect them to tell us what they will buy in the future. However, marketers can aggressively over-pursue product innovation and try to overcapitalize on a niche. When pursuing a product innovation approach, marketers must ensure that they have a varied and multi-tiered approach to product innovation. It is claimed that if Thomas Edison depended on marketing research he would have produced larger candles rather than inventing light bulbs. Many firms, such as research and development focused companies, successfully focus on product innovation (Such as Nintendo who constantly change the way Video games are played). Many purists doubt whether this is really a form of marketing orientation at all, because of the ex post status of consumer research. Some even question whether it is marketing. An emerging area of study and practice concerns internal marketing, or how employees are trained and managed to deliver the brand in a way that positively impacts the acquisition and retention of customers (employer branding). Diffusion of innovations research explores how and why people adopt new products, services and ideas. A relatively new form of marketing uses the Internet and is called Internet marketing or more generally e-marketing, affiliate marketing, desktop advertising or online marketing. It tries to perfect the segmentation strategy used in traditional marketing. It targets its audience more precisely, and is sometimes called personalized marketing or one-to-one marketing. With consumers' eroding attention span and willingness to give time to advertising messages, marketers are turning to forms of permission marketing such as branded content, custom media and reality marketing. The use of herd behavior in marketing. The Economist reported a recent conference in Rome on the subject of the simulation of adaptive human behavior.[6] Mechanisms to increase impulse buying and get people "to buy more by playing on the herd instinct" were shared. The basic idea is that people will buy more of products that are seen to be popular, and several feedback mechanisms to get product popularity information to consumers are mentioned, including smart-cart technology and the use of Radio Frequency Identification Tag technology. A "swarm-moves" model was introduced by a Princeton researcher, which is appealing to supermarkets because it can "increase sales without the need to give people discounts." Large retailers Wal-Mart in the United States and Tesco in Britain plan to test the technology in spring 2007 . Marketing is also used to promote businesses products and is a great way to promote the business. Other recent studies on the "power of social influence" include an "artificial music market in which some 14,000 people downloaded previously unknown songs" (Columbia University, New York); a Japanese chain of convenience stores which orders its products based on "sales data from department stores and research companies;" a Massachusetts company exploiting knowledge of social networking to improve sales; and online retailers who are increasingly informing consumers about "which products are popular with like-minded consumers" (e.g., Amazon, eBay). [edit] Areas of marketing

MARKETING Marketing: Marketing is defined by the American Marketing Association as the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.The term developed from the original meaning which referred literally to going to market, as in shopping, or going to a market to sell goods or services. Marketing practice tends to be seen as a creative industry, which includes advertising, distribution and selling. It is also concerned with anticipating the customers' future needs and wants, which are often discovered through market research. Marketing is influenced by many of the social sciences, particularly psychology, sociology, and economics. Anthropology is also a small, but growing influence. Market research underpins these activities. Through advertising, it is also related to many of the creative arts. The marketing literature is also infamous for re-inventing itself and its vocabulary according to the times and the culture.

Four P s Main article: Marketing mix
In the early 1960s, Professor Neil Borden at Harvard Business School identified a number of company performance actions that can influence the consumer decision to purchase goods or services. Borden suggested that all those actions of the company represented a “Marketing Mix”. Professor E. Jerome McCarthy, also at the Harvard Business School in the early 1960s, suggested that the Marketing Mix contained 4 elements: product, price, place and promotion. Product: The product aspects of marketing deal with the specifications of the actual goods or services, and how it relates to the end-user's needs and wants. The scope of a product generally includes supporting elements such as warranties, guarantees, and support. Pricing: This refers to the process of setting a price for a product, including discounts. The price need not be monetary; it can simply be what is exchanged for the product or services, e.g. time, energy, or attention. Placement (or distribution): refers to how the product gets to the customer; for example, point-of-sale placement or retailing. This third P has also sometimes been called Place, referring to the channel by which a product or service is sold (e.g. online vs. retail), which geographic region or industry, to which segment (young adults, families, business people), etc. also referring to how the environment in which the product is sold in can affect sales. Promotion: This includes advertising, sales promotion, publicity, and personal selling, branding and refers to the various methods of promoting the product, brand, or company. These four elements are often referred to as the marketing mix, which a marketer can use to craft a marketing plan. Main article: New Product Development Branding A brand is a name, term, design, symbol, or other feature that distinguishes products and services from competitive offerings. A brand represents the consumers' experience with an organization, product, or service. A brand has also been defined as an identifiable entity that makes a specific value. Branding means creating reference of certain products in mind. Co-branding involves marketing activity involving two or more products.