Using data to unlock the power of your brand’s advocates

Back in January, we published an article, The overlooked role of first visit conversion in lifetime value, where we explored the prevailing theory on sustaining healthy customer LTV and Monocle's data on the importance of a first purchase across brands.

What we didn’t cover is the customer side, so we’re back to deep dive on how to identify high-value customers and which segments have the potential to grow their LTV.

Understanding the data: Who drives revenue?

Our analysis of revenue distribution reveals a striking pattern: for the majority of brands, a small fraction of customers contribute disproportionately to revenue.

If the average customer LTV for a brand is indexed to $100:

• A customer who spends $35 and never returns falls into the <$100 LTV bucket
• A customer who spends $160 over multiple purchases lands in the $100-$200 LTV bucket

The breakdown shows that for an average brand:

• 68% of customers spend less than the brand’s average LTV
• A quarter of the customers will spend less than 50% of the brand’s average LTV
• <10% of customers will be a brand advocate, spending more than twice the brand’s average LTV
• Brand advocates will drive around 28% of the brand’s total revenue

The takeaway: a small group of customers who are brand advocates carry an out-proportional importance for a brand’s total revenue.

For certain business models, finding and nurturing brand advocates carries even more importance:

• Subscription models rely on minimizing churn to sustain long-term customer value
• Niche products can build entire businesses around their most dedicated brand advocates
• Membership models, similar to Costco, thrive on recurring customers who come back to purchase over the lifetime of their membership

Above is a look at three specific segments with the highest % of users categorized as brand advocates. For these brands, nurturing brand advocates isn’t just a strategy, it’s the single biggest factor affecting retention. When 9-12% of customers are responsible for close to half your revenue, your entire retention marketing plan should focus on this segment.

Nurturing your brand advocates

The importance of developing brand advocates leads to two critical questions: can your brand clearly articulate (1) who are the customers that will likely become brand advocates and (2) what is it about the brand that resonates with them? Answering these questions can inform:

• An efficient acquisition strategy that focuses on the right channels
• Clear messaging that highlights the right value proposition
• Effective retention strategy that nurtures customers into brand advocates

Once you’ve articulated the target aspects of future brand advocates, nurturing them requires an intentional and deliberate strategy. The key to unlocking brand advocates is to create personalized experiences that account for the specific attributes and motivations of your brand advocates.

In this respect, advanced segmentation can be an effective tool that helps brands uncover who has the potential to move up the value ladder.

This data reinforces a key truth in commerce: not all customers are created equal. The brands that win are the ones that recognize where the value lies and build retention strategies to maximize it.

If you’re interested in finding the segment of brand advocates for your store, let’s chat today.