How many customers do you have? Really.

For many B2B and Information Technology companies the number of customers is a common and often cited measure of success and implied market share. We’ve all heard claims of “we have 50,000 customers” or “we have 300,000 customers” or whatever the number. While this gross number may provide some intuitive measure of market presence and size to the casual outside observer it does raise questions. More astute observers such as Industry Analysts will want further clarification and breakdown of the number. Marketing needs to segment this number to align investment and campaigns with the reality of various segments in the customer base.

Although most B2B companies are generally reticent to disclose these segmentation numbers to outsiders, they are critical internally for targeted and relevant marketing to existing customers. However, many B2B companies struggle to produce accurate and dependable customer segmentation numbers. The data may be in different databases, variable record-keeping over the years, acquisitions, divestitures, product life cycles, time, staff turnover, etc. all contribute to the difficulty for producing more granular customer counts. Here’s a basic segmentation breakout that all B2B marketing groups should know:

Customer Segments
  • Customers who bought – this is the most frequently quoted external number of customers who ever bought a product/service/solution from the company. A mostly irrelevant number as actionable marketing data.
  • Customers don’t exist – the customer company no longer exists for various reasons. Identify and flag these records accordingly in your database. Never delete any customer records, just use appropriate status flags.
  • Customers not using – those customers no longer using the product/service/solution bought from the company. These are ex-customers and should be flagged and counted as such.
  • Customers currently using – those customers actively using the product/service/solution they bought. Although this may seem like an obvious number to know, it requires a continuing customer contact program to keep track of active customers.
  • Customers in continuity relationship – these are customers that send you money on a regular basis for license/maintenance/service/support/hosting/etc. It should be straightforward to identify this subset from billing records.
  • Customers who bought recently – there are two subsets to track in this group; those who recently bought for the first time and those who recently bought again. The qualification of ‘recent’ depends on the cost and scope of the product/service/solution – anything from 12-24 months.
  • Customers who bought multiple times recently – these are customers that have made multiple independent purchases during the ‘recent’ period. Although this group could be a third subset of the previous group of customers who bought recently, the frequency attribute is important and should be of particular interest for marketing.
  • Customers with unknown status – take all the customers who ever bought and subtract all the other subsets leaving a group of customers with unknown status (the remaining yellow area in the diagram). For companies that are large, or have diverse products lines, or done acquisitions, or been around a long time, this could be a sizable group of customers.
Customer records must contain product/service/solution line item data to provide more relevant analysis. For example, a customer may no longer use one product line but they could have purchased another product line within the past year.

The obvious observation from this relatively straightforward list of customer segments is that we should be marketing to each group differently to be most effective.

I’ll continue discussing some ideas for analyzing and using this information in next week’s post. In the meantime, it would be interesting to hear how you approach this customer count challenge or other comments on this topic.
Copyright © 2009 The Marketing Mélange and Ingistics LLC.