How to get started with Open Marketing
Step 2. Believe in yourself - Part 1

Hello everyone. I am Hayashi, the representative of Monosus.

In the previous four articles, we have talked about Step 1 of Open Marketing, which is to "believe in your customers."

In Step 1, we systematized our company's values from the customer's perspective.
At the same time, we do not aim to provide temporary promotions or one-off services.
We realized that there was a customer base that was attracted to our company's values and continued to buy our products and services.
And it is your customers who keep you running your business.
You now know that your company already has valuable customers to believe in.

Step 2 is to "believe in yourself."

Capture your core customers through numbers.

In Step 2, the first thing you should do is
Based on the customers extracted in Step 1, you need to concretely define the type of customers you want to increase in the future so that they can be measured numerically.
Also, from now on, we will refer to the customers we would like to increase in the future as core customers .

First, observe the transaction history of the customer extracted in Step 1.
Understand how they are doing business with your company.

So then,

• What and how much (number of items purchased x purchase price = transaction price)
• How often (purchase frequency)

You can see if they are trading with you.

If we were to quantify it, we can't say it's 100%, but these customers should be those who trade relatively frequently and have a high annual transaction amount.

It is also a good idea to quantify not only purchasing-related actions, but other actions as well.
Otherwise, we will revert to the old way of judging customers solely based on their purchasing frequency and amount.

for example,

• Visit the store at least three times a month, regardless of whether they make a purchase or not
• The purchase rate for the expected purchase frequency is 90% or more

And things like that.

The image of your core customer that you had vaguely thought of as "the kind of customer I would like to do business with" will probably become more concrete.

Also, don't forget to calculate the LTV (Life Time Value) of your core customers.
Regular core customers will bring you significant profits from the following year onwards, except for the first year, when promotional costs are incurred to get them to become customers.
When calculating LTV, it is very important to calculate based on profits excluding cost and promotion costs, rather than on sales.

If you actually do the calculations, you'll see that
Core customers spend a surprising amount of money and time on your company.

Let's look at a concrete example to give you a clear picture.

• [BC: Cosmetics manufacturing and sales] A customer who always buys the same brand of cosmetics once every two months

If you purchase for 8,000 yen each time and purchase six times a year, that comes to 48,000 yen in purchases per year.
Assuming a gross profit margin of 70% and promotional costs of around 3,000 yen, this will bring in 30,600 yen in cash per year to the company.

• [BC: Restaurant] A regular customer at a small restaurant who comes for drinks at least twice a month

If an average customer comes in groups of two, spends 5,000 yen, and visits 24 times a year, the total spending will be 240,000 yen per year.
Assuming a gross profit margin of 60%, this will bring in 144,000 yen in cash per year.
(Restaurants generally do not incur promotional costs.)

• [BB: IT company] Clients who order more than five projects per year

If the unit price per project is 2 million yen and the number of orders per year is 5,
An order of 10 million yen per year. If we produce 100% in-house, all of it will be gross profit.

If these customers continue to buy products and services from your company for five or ten years,
The LTV will be very large.

Know how many core customers you need to sustain your business.

It is very important to know the annual transaction volume of your core customers and the gross profit you can generate from them.
Think about the fixed costs (selling and administrative expenses) that your company must earn in a year.
Then divide that amount by the annual gross profit each core customer brings in.
This tells you how many core customers you need to cover your company's annual fixed costs.

Actually, when you calculate it, most people
They are surprised that such a small number is enough .

Your core customers will likely be the business you want to run.
(If it's not what you want it to be, you need to fundamentally rethink how you do business.)
Even if you only do business with core customers ,
If we collect the numbers we just calculated, we will at least be able to keep the company afloat.

For example, if the small restaurant mentioned earlier wants to earn 8 million yen in fixed costs per year, the number of core customers it needs is about 56.
If it's 10 million yen, that would be 70 people.

In the case of the IT company mentioned above, if they want to earn fixed costs of 200 million yen per year,
All you need is 20 core customers.

In reality, it is difficult to create a situation where you only do business with core customers.

From "I want as many customers as possible" to
This change in mindset to "we need this many core customers" will be the driving force behind major changes not only in marketing activities but also in management itself.

The number of customers your company needs to survive and make a profit is
It's a lot less than you might expect.

Thank you for reading to the end this month as well.
Next time, I would like to tell you what you need to do to interact with your core customers.