Customer Dynamics

Customers change. Even if you segment your customers based on certain demographics, it is more likely than not that their preferences might change overtime. Let us delve into the sources of customer dynamics to get a better understanding, and to manage them effectively:

1.     Aging effect

Young and single consumers often focus on products and services that promise to make them attractive to potential mates (cologne, salon and exercise services, designer clothing); as they age, they start to focus more on financial safety and security. In the final stages of people’s lives, they tend to become fixed in their brand purchases, fairly conservative in their decision making and more focused on their relationships with sellers. Thus, as people age, they go through several psychological and sociological changes, which is often reflected on their purchase behaviour.

2.     Life events 

Life events such as marriage, retirement, parenthood etc., play a substantial role on consumers’ purchase behaviour. 

3.     Customer learning effect

Customers rank the importance of a product and / or its attributes based on their knowledge and experience of using it. Customers become familiar with the product by using it.

4.     Environmental effects 

Governments, industry trade groups, non-profit organisations and marketers always are working to change perceptions and regulations, using various communication media.

5.     Product lifecycle 

Customers’ purchase criteria and marketers’ actions tend to change as the product category matures. If a new product is introduced, it is likely that the brand will offer free trials / samples to establish brand awareness and boost initial sales. Tactics like loyalty programs will come into effect once the product becomes more recognisable. 

Now that we have explored how and why customers change, as a small business marketing consultancy firm, we would like to recommend three ways to manage customer dynamics for your small business:

Customer Dynamic Segmentation Approach 

As a small business owner, you can segment your customers based on three different stages – Acquisition, Expansion, Retention (AER) model. In each segment the customers tend to be relatively similar to each other. In the acquisition stage, for example, all the prospects are grouped in this segment as they all are looking for a particular product / service.

Once you have onboarded your prospects by introducing them to your brand, you can upsell or cross-sell them to drive engagement with existing customers, driving sales. The expansion stage will help you retain your customers, preventing them from switching to competitors. 

The retention stage further elaborates on this. It involves strategies such as high switching costs, enhancing brand loyalty etc. 

Lifecycle Approach 

-       Customer lifecycle: This method focuses on how customers’ preferences change as they age, and go through discrete life events, such as new job, marriage etc. Our dedicated Senior Marketing Consultants will help you cater to the average customer in each stage. 

-       Product lifecycle: This involves, introduction, growth, maturity, and decline. As mentioned earlier, marketing strategies shall be formulated based on the stage your product / service is currently functioning.

Customer Lifetime Value Approach (CLV)

It all comes down to whether your customers are contributing your small business’s financial growth. The CLV approach aims to provide insights on exactly that. It discounts cash flows (sales and costs) in the acquisition and expansion stages while integrating cross-selling and retention expectations for a customer or the segment’s predicted migration trajectory. One of the key benefits of this approach is that you can analyse your customers on an individual level. 

Whether you are small business owner who is looking to take your first steps in marketing your business or someone who has already done some marketing, and know what you want. Our dedicated Senior Marketing Consultants can help you in every way possible.  

Take your first steps towards driving growth, and achieving your business objectives through our Sydney and Brisbane based marketing consultants for small businesses.


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