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The 5 Levels of Buyers
It’s well known that it’s easier to sell to previous buyers than it is to generate new customers. Within your buyer pool, there are at least 5 different types of buyers, and the more you cultivate the higher level of buyers, the more profitable your business will be.
This model of buyers is based on levels of loyalty. The higher levels of buyers are more loyal and thus more valuable to your business. Let’s look at each in turn.
Level 1: First-Time Buyers
These buyers are the hardest to get and tend to be the least profitable of the bunch, but they are also the largest pool of actual and potential buyers. The biggest challenge with first-time buyers is getting them to trust your promises and understand the benefits of purchasing from or working with you. They haven’t yet experienced those benefits and are the ones who require the most education - self-directed or provided by your company - to get the most benefits out of your offers.
First-time buyers are also the customers who are the most prone to switch to another company, especially if they’re still in the integration and implementation phase. They’re the ones who decide your apps are too hard to use, your process is taking too long, your prices are too high based on competitor’s prices, or are the most demanding on your customer service resources.
Be careful that your marketing offers aren’t too heavily focused solely on first-time buyers, as you’re pursuing the hardest-to-convert customer and missing a lot of opportunities to develop loyalty-based relationships with satisfied customers. The first-time buyer pool is large in both potential revenue and opportunity costs.
Discounts, loyalty programs, well-executed upsells, and superior service are all effective ways to turn a first-time buyer into a repeat buyer.
Level 2: Repeat Buyers
Repeat buyers are the satisfied or continuing-to-explore customers who get your brand and unique selling proposition. They’ve crossed the hurdles to implementation and integration, so the costs for them to use or benefit from your offers are lower at the same time that the switching costs to go to another business are higher.
As you cultivate more repeat buyers, the sensitivity to your prices will drop, too. They’re already predisposed from buying from you and may not be paying attention to your competitors anymore.
The downside is that whatever level of service or quality you’ve set in the first purchase and fulfillment interaction must be maintained or improved in future purchases and fulfillment. While a single instance of a bad interaction with your business or offers might be overlooked, repeated bad experiences at this stage tend to convert repeat buyers into people who abandon your business completely.
Moving repeat buyers into forecasting buyers depends on your business providing relevant offers that supports what your customers are trying to do. Many businesses spend so much time focusing on first-time and repeat buyers that they don’t consider products or services that convert repeat buyers into forecasting buyers.
Level 3: Forecasting Buyers
Forecasting buyers are the repeat buyers who forecast buying your product or service in the future. While they’re not quite a bird in hand, they’re no longer waiting in the bushes to be flushed, either.
Forecasting buyers can be split into two types: cost-of-activity forecasters and supplemental forecasters. Cost-of-activity forecasters bake the cost of doing business with you into their costs of doing whatever they’re trying to do. For instance, every business has utility and infrastructure costs that are included in their overheads. If your business serves in a utility or infrastructure capacity, your primary job is to win that first sale and make sure that your services don’t fail.
Cost-of-activity forecasters aren’t limited to the business-to-business realm, either. Gym memberships, music instruction, lawn care, dry cleaning, and house-cleaning are all business models that lend themselves well for cost-of-activity offers.
Supplemental forecasters are different in that they don’t have a continual and planned purchase in mind. Your business supplements what they may do, but they may or may not use your business depending on what else they’re up to. For instance, we may rent skis when we go skiing or we might buy our own skis next winter. We haven’t baked the cost of ski rental into the cost of the activity, so the resort couldn’t count us as a cost-of-activity forecaster there. They can count us as cost-of-activity forecasters on the lift tickets, though, since there’s no way we can ski on their range without having one.
The way to convert supplemental forecasters into cost-of-activity forecasters is to present the benefit of using your supplemental offers instead of going with other alternatives. To use the ski resort example, skis are both expensive and a hassle to deal with. At a certain point, it makes more sense to rent skis for $35 a day than to pay $400 at once to buy skis I’ll use twice a year. If the ski resort makes it easy for me to get skis and provides quality skis comparable to what I might buy, then they have a compelling selling proposition that beats the alternative of buying and messing with skis on my own.
Of the two, cost-of-activity forecasters tend to be the most profitable for any business, though the costs of marketing may shift to the costs of customer service and fulfillment. Be aware, though, that the demands of cost-of-activity forecasters tend to grow the longer they’ve been working with your business, and perhaps rightly so - they’ve sent a lot of money your way. Make sure you take care of them.
Quality products, outstanding service, and a focus on positive results and experiences converts forecasting buyers into reactive recommenders.
Level 4: Reactive Recommenders
Reactive recommenders are the buyers who recommend your business when the opportunity presents itself. It’s possible that a buyer will jump from any lower level to this one if your product, service, or brand is remarkable, but every recommendation puts the trust and credibility of the recommender on the line, so you’ll need an alternative method for engaging and cultivating reactive recommenders who aren’t buyers.
Reactive recommenders present a unique opportunity for companies because they increase the brand awareness of your company in places you’d never think to go. In other words, they’re unpaid marketing representatives, and people are more likely to trust the promises of their friends, associates, and colleagues who aren’t a part of the company being promoted.
Of all the reasons to have a social media marketing and engagement plan in place, the ease with which you can leverage reactive recommenders is near the top. I might not call a friend and tell them about the awesome headset I just bought, but, were I to see someone in my social media network ask about it, I’m happy to make a recommendation. That recommendation, on a social media channel, is seen by hundreds or thousands of people. If you’re not playing in social media, you make it that much harder for others to recommend you when they get a chance or to hear what they’re saying about your business.
Reactive recommenders are the second-most loyal customers you have. Treating them well, making it easier for them to share your business with their friends, and personally acknowledging their efforts are all ways to convert reactive recommenders into the ultimate buyer: the proactive promoter.
Level 5: Proactive Promoters
Proactive promoters go out of their way to talk about your business and its offers. They stand in the lines before the product release, write the first reviews, call their friends, put bumper stickers on their car, take your surveys, and actively find ways to let people know about how great your business is. They’re the thunderlizards, evangelists, fanboys, gearheads, and groupies that are the early adopters of almost everything you put out.
In short, they are one of the most valuable assets your company has.
The trick with proactive promoters is that they generally can’t be bought, with affiliate marketing being an exception to the rule. Providing monetary compensation to them may backfire, as well, as it erodes the trust people have in their promotion and may set up a promoting-for-money versus a promoting-for-love situation. Personal, one-to-one engagement, appreciation, support, and bonuses can be much more effective than direct monetary compensation.
A spurned proactive promoter can become one of the most vocal opponents to your business. If you’ve ever had a bad breakup, you’ve had an analogous experience with what happens to the relationship between a company and its dissatisfied proactive promoters.
How Are You Building Better Buyers?
Building a better buyer base depends on you developing and cultivating relationships with the different kinds of buyers on their terms. You can’t engage with a proactive promoter the way you engage with a first-time buyer or vice versa. One (interactive) size doesn’t fit all here. (Click to tweet - thanks!)
Above all, “love the ones you’re with,” to paraphrase Steven Stills. Those buyers will make your business-building endeavor that much easier.
Suggestions for Further Reading:
The Thank You Economy, Gary Vaynerchuck
Enchantment, Guy Kawasaki
Flip The Funnel, Joseph Jaffe
Referral Engine, John Jantsch
Purple Cow, Seth Godin
Disclaimer: The links to the books in the suggestions for further reading list are referral links, and, as such, I will receive a commission if you choose to buy it. I only recommend products and people I use or trust, and if I wouldn’t recommend it without a commission, I wouldn’t recommend it just because it has a commission. I hope this list has helped you make an informed purchase decision.