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developing a customer cultivation strategy


customer base cultivation

by Kenneth Rudich

All new businesses start up with the hope of cultivating a customer base to generate revenue and churn out profits.   But before or until that happens you must concentrate on the more immediate need to establish a footing. 

If you make it past this early critical stage, from no customers to at least breaking even, then you’re likely to shift toward longer term plans for growth and sustainability.  This brings you to a new era of possibilities, one in which you can look to better leverage the knowledge and resources already gained. 

In either case, the market characteristics analysis can be a powerful tool for helping achieve what you seek.  With a focus on building, managing and maintaining the customer base across time, it supports the quest to consistently deliver value.

structuring the market characteristics analysis

The market characteristics analysis involves three critical dimensions of customer cultivation.  They are: customer acquisition, customer base composition management, and customer lifecycle management. 

customer acquisition

Customer acquisition is concerned with finding a market for whatever you offer.  Whether you start with a product in search of a market, or spot a market need and then fill it, customer acquisition is about creating appeal. 

With that in mind, let’s look at a few important questions to consider when it comes to creating appeal:

  • What need does your product or service fill?  Or alternatively, what solution does it offer?
  • Who might be interested in having that need filled or having that solution in hand?  How important is it to them?
  • What other customer motives might go along with buying it or using it?
  • What might prompt someone to give your product a try?

customer base composition

The composition of the customer base refers to the key characteristics of the customers in it.  This is tied to the notion of dividing the overall market into smaller groups or segments, whereby the members within a group share common traits that present either a unique challenge or opportunity.  The idea is to tailor the value chain according to the needs and desires of each group.

Segments may vary based on demographic attributes like gender, age, ethnicity, geographic location and distribution, income and so forth.  They also may be unique due to psychographic (or behavioral) characteristics relating to personality, values, attitudes, price sensitivity, loyalties, interests, opinions and lifestyles.  Not all of these traits will necessarily be relevant.  But if some are, and you can pinpoint them, you’ll have something to leverage for strengthening the connection between you and your customers.

You’ll want to analyze the composition of the customer base from two standpoints in particular: the targeted customer base and the actual customer base.

The targeted customer base is comprised of the potential customer segments you’ve identified for your product or service.   There are a number of resources you can tap for gathering relevant information about these target segments.  Depending on the type of product or industry you’re in, they can include government sources (such as the U.S. Census Bureau), Chambers of Commerce, trade associations, experts in a field, research groups, clients, surveys, commercially available data and internet research.

The actual customer base refers to the composition of the customers you’ve managed to acquire.

Comparing the actual customers with the targeted potential on a regular basis – that is, identifying the differences and similarities – will inform the strategic learning cycle for managing the value chain. 

 customer lifecycle management

The customer lifecycle coincides with the ability to track and measure customer behavior patterns across time as they relate to your product or service offering. 

At its most basic level, it can be divided into prospective or potential customers, actual customers, and former customers. 

Each of these, however, can be further sub-divided to develop a deeper understanding of the interactions occurring between you and your customers.  Here are some examples.

With potential customers, you can attempt to isolate the untapped potential that still exists by experimenting with different marketing initiatives across the value chain.  Or you can use the key characteristics of actual customers to seek out new sources of potential customers.  Or you can monitor conversion rates to evaluate your business growth rate in general or by market segment in particular. 

With actual customers, you can monitor additional factors like the frequency of use or purchase, how much revenue each customer generates for your business, and whether any of these factors are trending in one direction or another.  Such information gives you a chance to focus more on your best customers, which can boost sales and operational efficiency at the same time.

With former customers, you can formulate strategies for trying to get them to come back – especially if you know why they’ve become former customers.

In virtually all cases, you can probe the potential for adding or offering additional products and services to strengthen the appeal of your product portfolio.

market characteristics analysis

In truth, the market characteristics analysis is part art and part science.

The science rests with developing a system for obtaining the information you want to collect.

The art aspect is less easy to pin down.  It stems from knowing what to collect, what to measure, and how to interpret the results not only from within each dimension but across them as well.

Many market opportunities spring from the ability to discover what others have missed or overlooked.  The role of the market characteristics analysis is to aid the discovery process.  You can find a vivid illustration of this concept in the post titled “University of Phoenix a Brilliantly Executed Market Opportunity Scan Part 2.”   


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