Typology of Customers Based on Their Profitability
It goes without saying that any business owner aims to attract loyal customers who pay a lot, making a profit for a company. However, as resources are traditionally limited, it is essential to know customers’ types to undertake efforts as efficiently as possible. Reinartz and Kumar (2000) conducted research to evaluate the potential relationship between profitability and the duration of a consumer lifecycle. On the basis of their findings, the typology of customers includes four types – butterflies, true friends, strangers, and barnacles (Baran & Galka, 2017).
Butterflies are high-profit but short-term customers – although they may spend considerable sums of money, their loyalty to a company is insignificant. In turn, strangers are low-profit and short-term consumers, while barnacles are low-profit but long-term ones. The company’s focus is on true friends who are long-term and high-profit clients.
Classifying My Consumer Relationships
At the same time, customer types are frequently determined not by a person’s individual features but by their interactions with a particular company. In other words, one person may be classified as a true friend, butterfly, barnacle, or stranger by different companies.
True Friend
For instance, I am a true friend of Amazon as I constantly use its services for a considerably long period of time, regularly buy products depending on my wishes and opportunities, and pay attention to the company’s individual offers and special prices.
Butterfly
Meanwhile, for Metro, Inc., I am a butterfly. Metro, Inc. is a Canadian food retailer, and I visit it only when I go to Canada with my friends to meet other friends. As we travel in a group, we spend several days in the country, and our activities may include going to remote places for hiking or fishing; we may spend a lot of money there at one time. However, I do not have loyalty to this company due to another place of living and purchasing determined only by convenience. In other words, if Metro, Inc. is unavailable, I will buy in another shop as well.
Barnacle
There are multiple companies that may classify me as a barnacle. However, I will provide Nike here. I have visited the brand’s shop from time to time for several years and bought things I like, such as socks or a water bottle. For the company, I am a low-profit customer who purchases inexpensive things for a substantial period of time, and the situation does not change.
Stranger
Finally, I am a stranger to Pei Wei, an Asian diner with a chain of restaurants across the country – I visited it only one time and ordered one dish.
Converting Butterflies, Barnacles, and Strangers into True Friends
As previously mentioned, a large number of companies would like to have as many true friends as possible, as these customers are characterized by loyalty and profitability. However, investing in the attraction of butterflies, barnacles, and strangers may result in losses as there are multiple factors that may limit people’s interest in a brand or purchasing power, and my case supports this notion.
From Butterfly to True Friend
Indeed, Metro, Inc. cannot do anything to attract me more, turning me into its true friend as my visits are considerably limited by distance and a substantial number of substitutes.
From Barnacle to True Friend
In addition, I would not recommend Nike take action in order to attract me. In general, I am aware of a brand’s good quality, price policies, and assortment. My low profitability for the company may be explained by my individual circumstances – for instance, I am not strongly involved in sports activities. At the same time, if I decide to change my routine and be more active, it is my personal desire to buy sports apparel that will stimulate my purchasing in Nike’s store.
From Stranger to True Friend
At the same time, I believe that Pei Wei’s actions may turn me into its true friend. I love Asian food, and I was satisfied with the prices and other aspects of this company’s performance. An organization’s strangers are frequently its new customers who would like to evaluate products and services, and a company’s activities may impact these people’s choices. Thus, in my case, I believe that if Pei Wei sends me personalized offers and provides information related to their traditional and new dishes raising my awareness, it will stimulate my desire to visit one of its restaurants again.
References
Baran, R. J., & Galka, R. J. (2017). Customer relationship management: The foundation of contemporary marketing strategy (2nd ed.). Routledge.
Reinartz, W. J., & Kumar, V. (2000). On the profitability of long-life customers in a noncontractual setting: An empirical investigation and implications for marketing. Journal of Marketing, 64(4), 17-35.