3 Ways Customer Intelligence Strengthens Customer Relationships

In the current environment, your customers might just go dark or churn altogether as they deal with their own business-critical issues.

How can you stay ahead of that? With relevant and actionable data on what’s happening with your customers, you can nurture and strengthen relationships in order to avoid losing them.

1. Stay Current on Customers

Customers didn’t forget about their favorite businesses — they just wanted them to deliver in new ways. And as quickly as a Google search.

Businesses now have to quickly figure out how to best allocate resources to different customers. Key questions that the C-suite needs to have top of mind nowadays include:

  • Which customers have the most promising sales growth?
  • Who recently stopped buying?
  • Which customers pay late or are getting riskier?

Customer intelligence tracks these types of behavior changes, identifies overall patterns in customers’ buying habits, and empowers quick and relevant business decisions.

2. Prioritize Key Customers

Customer behavior data helps businesses better up-sell and serve customers with segmentation. By syncing this data into a customer relationship manager (CRM) such as HubSpot and Salesforce, sales leaders can prioritize their customers by grouping them into “Champions,” “Late Payers,” or those they’re at risk of losing.

For example, Marketing can work with Sales to determine upsell/cross-sell strategies to the most profitable customers. Furthermore, marketing teams can leverage these segments to build ideal customer profiles that sales teams can use to target new prospects. In this way marketers can ensure newly sold customers are the best possible fits and are most likely to be successful long-term customers. .

3. Anticipate Future Opportunities

After syncing customer intelligence data to a CRM, businesses can plan outreach based on their current customers’ patterns. Having a smarter CRM allows businesses to seamlessly sell to more customers within the context of their operations.

For example, a customer may stock up for an annual industry trade show every December. Knowing this big order may be on the way, a salesperson may want to get ahead of it and up-sell bulk purchasing discounts or cross-sell any related services that could support their goals. With segmentation businesses can customize messaging to customers and close more up-sell opportunities.

Get more Customer Intelligence in Seconds

While generating customer intelligence may have taken an entire data team in the past, it can now be produced in seconds, and kept up-to-date in real time. Tally Street’s ability to pull data directly from sales invoices gives B2B companies access to previously untapped insights that only enterprise companies could afford in the past. With Tally Street’s insights Sales teams can better retain current customers, spot patterns to reduce churn, and create personalized approaches to up-sell and cross-sell services to lead customers to success.

Learn more about how to boost marketing operations and campaigns  with Tally Street or sign up for a free trial today!

Get to Know Your Customers

Get a free segment report from Tally Street to know your best (and worst) customers.

Why SMBs Need Customer Intelligence In Their Toolboxes

One of your biggest clients just called you with a massive, urgent order. They are one of your best repeat customers, who always pay on time. You are very tempted to postpone another client’s job to tackle it. But which job do you postpone at the last minute?

Sales are up 200% from this same time last year—it’s GREAT news, but that data doesn’t help you figure out how to prioritize the existing billable jobs. It’s a lot of clients to sift through for a quick decision that will really impact your bottom line.

Two words: Customer Intelligence.

It's Not Your Standard Business Intel

Business Intelligence helps you understand your high-level key performance indicators (KPIs), like knowing your sales are up 200% this year compared to last year.

Customer Intelligence tells you exactly which customers drive your business forward. Knowing that can help you create actionable insights. Like postponing projects for a late payer to make room for a more reliable client, and hopefully preventing losses like the above scenario.

Only customer intelligence would show that the client who called contributes 30% to your revenues. Thus making his project much more important to your bottom line than ALL your other current projects combined.

Categorizing your customers based on their transactions and behaviors is an optimum way to implement Customer Intelligence. Although the highest spenders are valuable customers, those who pay on time are important to your cash flow. This analysis can help you break down your best clients, form an action plan to determine their needs, and create more value for them. And your business.

Read on for 4 other key ways you can use Customer Intelligence to keep and grow your customer base.

1. Avoid customer concentration risk

Don’t put all your eggs in one basket. Too many sales from the same few customers, or what we like to call, “Customer Concentration Risk,” means that losing just one single customer might cause a 10-25% drop in overall revenue. If you identify this issue ahead of time, you can diversify your business more upfront, instead of having to deal with downsizing later on.

2. Group Customers So You Can Focus

Boost your efficiency and results by grouping customers based on their past performance and momentum. Segmenting customers (to use the technical marketing term) surfaces new insights from the underlying data to inform better decisions. For example, grouping customers into segments such as “Champions” or “Give Attention” can direct sales and support resources allocation.

CustomerSegmentLTVPurchasesTTM SalesPrev TTM SalesAvg Days to Pay
Langosh and SonsChampion$1,638,417129$698,175$451,24933
Hintz Sauer IncChampion$1,067,922589$183,140$237,1321
Bailey GroupLate Payer$964,48477$196,467$332,32977
Lehner Hyatt CorpDon't Lose Them$84,9384--$84,93810
Herzog GroupGood$82,98227$24,206$28,82953
Schulist and BartonGood$77,76514$756$2,86746
Harber Bros LLCGive Attention$67,1675--$33,59955

3. Drive Repeat Business

A 5% increase in customer retention can boost profits 25% to 95%. The fastest way to drive revenue growth is through repeat businesses with your current customer base.

Help your sales team concentrate on customers who’ve bought before, and haven’t bought for a while, by syncing segment information as well as sales and payment histories into your CRM.

4. Get Paid Faster

Late payments hurt. In fact 57% of payments to SMB’s in 2020 were collected late. Completely writing off customer debt is really painful.

Customer Intelligence can analyze individual customer payment histories and use them to make predictions of which customers will probably pay on time. By better anticipating customer payment problems before they happen, small to mid sized businesses can make cash flow more predictable, improve sales-to-cash, and better manage customer credit risk.

Get Started with Customer Intelligence

Now you can easily get Customer Intelligence to your team with Tally Street.

The first Customer Intelligence tool of its kind, Tally Street uses purchase history and behavior data to build a personalized, 360-view of your customers.

Anticipate problems before they happen. Uncover the customer stories and insights trapped in your accounting software (QuickBooks, Sage Intacct and Xero) using reports auto-created in Tally Street and then pushing them to each team in their favorite format.

Get the ground truth on all your customer analytics so you can keep each team aligned and centered on the customer. Register today for a free trial of Tally Street and get to know your customers a little better each invoice cycle.

Get to Know Your Customers

Get a free segment report from Tally Street to know your best (and worst) customers.

Better Insights with Improved Segmentation

We released our first customer segmentation feature in August 2020. That version borrowed concepts from the RFM model used by marketers. We made some tweaks and we added a metric for how well customers pay, and it was good. The automatic grouping of customers into segments like Champions or Give Attention helps small businesses tailor sales and marketing to fit their best customers and the ones they risked losing. After working with our customer base, we learned a lot and realized there was room for improvement.

What We Learned

Although our segmentation helps businesses better categorize their customers, one of the biggest places for improvement was to increase the importance of momentum. For example, two customers who both bought 15 times and spent $60k over the same 3-year period fell into the same segment. That happened even if Customer A started small and is growing quickly while Customer B started big and trailed off — and a business owner or sales exec would definitely prefer more Customer A’s, and would consider Customer B a churn risk.

Another issue was a tendency to overvalue frequency. For example, a customer paying $120K upfront for a year of service scored lower than a customer who paid $10K per month over the same year, even if both had done that for multiple years. But most businesses would consider the annual commitment to be at least as good if not more valuable.

Our Improvements to RFTM+T

So we went back to our (virtual) whiteboard. We tried to create better customer grouping by applying more clustering using various machine learning models. But each SMB tends to have hundreds of customers, not millions of them, and they can be pretty different from each other. So the models had a hard time generalizing customers into useful clusters.

The best results came from applying more of the experience and knowledge that we’ve accumulated after working with hundreds of small and midsize businesses across all industries — and understanding how SMBs think about their customers and their growth. That led us to make the following improvements to recency, frequency, monetary and timeliness (RFM+T).

Recency: The last time the customer made a purchase is still the key input, but we also consider the typical customer retention period for each business. So if a business has an annual sales cycle, then customers who bought one month ago or 10 months ago are treated more similarly.

Frequency: Instead of looking at just the number of times customers made purchases, we now incorporate whether their purchase frequency is steady, increasing or decreasing.

Monetary: Customer lifetime value (LTV) is a great metric, but it can also overweigh the importance of sales made a long ago. So we now give more weight to the sales momentum of each customer.

Timeliness: The average number of days each customer takes to pay on invoices (aka Tally DSO) remains the key input. The new improvement adjusts for whether their average days to pay is less than or more than their typical payment terms.

A Better Picture of Your Customers

Each business has a unique customer mix and business model, and each one gets their own application of the segmentation mode, so the results will definitely vary! But a few changes are common across most SMBs.

First, it’s harder for customers to be in the Champion segment. Just being “big” no longer tips the scale as much. True Champions are still engaging and growing, and therefore have increasing momentum in LTV and buying frequency, while continuing to make timely payments.

But many businesses will see more customers in the Good and Promising segments. These are customers who are engaged and buying, but don’t show the same high growth rates as Champions. Now you’ll be able to identify these ideal customers and can spend time nurturing them to grow with you.

The ability to identify churn risks was boosted by increasing the importance of falling momentum and velocity. Now businesses will see more customers move into the Don’t Lose Them and Given Attention segments, giving them more opportunities to reach out before it’s too late!

Customer SegmentCustomersAvg LTV# of PurchasesTotal TTM SalesAvg Days to Pay
Don't Lose Them14$25,1488$44,98012
Give Attention16$16,2996$27,36220
Possible Mismatch45$1,6311$01
Late Payer18$102,22734$435,24986

Use Google Sheets and CRMS to Take Action

A great way to put customer segments to good use is to push them into other platforms. A good place to start is to connect Tally Street to Google Sheets. This creates a “live” version of the Tally Customer Sheet inside Google. Then you can build out your roll ups on other tabs and easily share the results with your team members.

An even better solution is to sync customer segments to CRMs. Making the connection between Tally Street and HubSpot or Salesforce only takes seconds, and your company and account records are enriched with not only their segment, but also their sales and payment histories. Sales, Marketing, Finance and RevOps teams can then add this new information to dashboards, build smarter lists and trigger new workflows.

Accounting Systems are Treasure Troves of Customer Insights

Due to the rising importance of analytics and data science to boost customer intelligence and grow customer value, much derided accounting data are turning out to be some of the most valuable assets owned by small businesses. Large enterprises and SaaS companies led the way and built a sizable advantage. Now SMBs are catching up by combining cloud accounting systems with new tools that don’t require teams of data scientists. 

How Businesses are Valued Changed

Back in the 1890s the adoption of modern accounting practices led to business success being measured by financial ratios and statements. That remained the focus until around the 1970s when shareholder return became the more important indicator of success. Now customer value is the #1 metric and businesses that focus on customer loyalty are growing revenues 250% faster than their peers.

How Small to Midsize Businesses Can Generate Customer Value Insights 

The process of generating customer insights starts with customer data, which are crunched and transformed by data engineers and scientists. Then the results are shared across the company through internal reports and dashboards in the most suitable format for each department. 

SMBs don’t usually have  ready-to-go customer data in data warehouses or data lakes large enterprises do, but they do have accounting systems. Whether using QuickBooks, Xero or NetSuite, the accounting system is the ground truth for customer sales data. And since these systems store invoices and pay taxes, they’re also one of the most valuable data sources at SMBs’ fingertips. 

That makes accounting data a well-structured but untapped treasure trove of customer insights. Start with the simple, underappreciated sales invoice. Each invoice contains a wealth of information that can be aggregated across hundreds of customers and thousands of invoices to answer lots of questions! 

  • Date of the sale
  • Customer name and contact information
  • Line items for every product or service purchased, with quantities and prices and discounts
  • Payment terms

Customer lifetime value (LTV) is a good place to start and easy to compute by summing the invoices for each customer. That single number helps you rank customers and make other decisions, such as how much to spend on acquiring customers. For example, if the average customer has an LTV of $40,000, you might be comfortable spending $10,000 to acquire new ones. 

We know that not all customers are created equally. The average LTV might be $40k, but there will be small, one-time buyers and others who go on to spend much, much more. And how customers are growing or stalling matters. Smart software can analyze those invoices to separate your more promising customers from the mistakes. Grouping or segmenting your customers based on not just LTV but how often and how recently they buy helps identify upsell opportunities and anticipate churn.

That’s just the beginning. The same customer sales data in your accounting software can identify changes in a customer health score such as customer concentration risk, net revenue retention, and payment risk. Even more value comes from how these metrics trend over time and how they’re used to trigger new actions.

Final Thoughts

Finding the treasure hiding in your accounting data is easier than you think. Most SMBs have moved to cloud-based accounting software (eg, QuickBooks, Xero, Sage Intacct, NetSuite), especially after the switch to remote work in 2020. Now solutions such as Tally Street can reliably, safely and inexpensively generate new customer insights from the detailed sales data.

This presents accountants with a golden opportunity. As accounting data plays a larger role in a company’s success the role of accountants also changes. We see this happening in the emergence of the revenue operations (revops) function, which breaks down the silos between traditional accounting, sales and marketing operations to keep everyone better aligned. We also see accounting and bookkeeping firms providing more client advisory services and the AICPA offering a CAS Certificate. These changes are only going to accelerate, don’t miss your opportunity!

Smart Customer Segmentation for Growth

Acquiring new customers is important to success, but retaining customers is critical to profitability and long-term growth. An earlier article explained how to track retention by calculating and tracking customer and revenue retention metrics. That used to require lots of spreadsheet work, now connecting Tally Street to your cloud-based accounting software makes it easy and automatic.

Know how to drive growth through smarter customer acquisition and retention!? Part of the answer is to focus your new sales efforts on the right subset of customers who are most similar to your best current customers AND to retain your best current customers. The key to doing this is through customer segmentation.

Automatic Customer Segmentation Using RFM+T

Most small and midsize businesses (SMBs) don’t have the time, resources and tools to do their own customer segmentation. But SMBs do have accounting systems filled with customer sales data that can be processed to automatically segment your best from your worst customers (and everything in between).

We do this using RFM, a tried-and-tested model that sophisticated marketers have used for years. We made a few tweaks to the traditional model, then applied a combination of smart software and human intelligence to automatically group customers into categories that SMBs can quickly start using to make better decisions.

One of those tweaks was to add “T” to the original RFM model. Most business-to-business (B2B) companies make some or all of their sales on credit, eg, net-30 payment terms. Extending credit to customers greases the sales process, but customers who frequently pay late are a drag on cash flow. So we added a fourth component to include timely payments as part of the overall customer value.

  1. Recency: The last time the customer made a purchase. We use the date of the most recent invoice or sales receipt.
  2. Frequency: The number of times the customer made a purchase. We add up the total number of invoices and receipts for each customer.
  3. Monetary value: The amount of money the customer has spent. We use the customer’s known lifetime value (LTV), which is the sum of all their invoices and receipts.
  4. Timely payment: The time it takes customers to pay for their purchases. We use the Tally DSO, a very accurate measure of the average number of days each customer takes to make a payment.

After compiling the sales and payment data for each customer, our software individually evaluates and scores customers on R, F, M and T. We then use the individual scores and the aggregate scores to segment every customer into one of the following categories:

  • Champion: Your very best customers, they buy often, spend a lot, and pay well
  • Good: Solid customers who have been generating reliable sales and payments
  • Promising: Mostly newer customers who will hopefully move up to Good or Champion
  • Don’t Lose Them: Former Champions or Good customers who haven’t purchased recently
  • Give Attention: Previously Good or Promising customers who might be saved
  • Hibernating: Maybe asleep or could be lost (churned)
  • Possible Mismatch: Might not have been a good fit with your business
  • Late Payer: Your worst paying customers, including potential Champions and Good customers
  • New: Customers who made at least one purchase but haven’t made a payment yet.

B2B Customer Segmentation Examples

Once our software does the hard work of analyzing and tagging each customer, it’s easy to start comparing performance across segments. In the following example, the 33 customers tagged as Champions have the highest average lifetime value (LTV), purchased an average 126x each, and pay in an average of 18 days. It’s definitely worth digging into what the Champions have in common (eg, bought the same products, has the same sales rep) so you can find and make more of them!

Late Payers near the bottom of the table look a lot like Champions, except they take an average of 81 days to pay, 350% longer than Champions. An effort to improve collections from those 23 Late Payers looks like a quick way to create more champions and boost cash flow!

Customer SegmentCustomersAvg LTV# of PurchasesTotal TTM SalesAvg Days to Pay
Don't Lose Them14$25,1488$44,98012
Give Attention16$16,2996$27,36220
Possible Mismatch45$1,6311$01
Late Payer18$102,22734$435,24986

To see who those Late Payers (and potential champions) are, you can switch to the customer-level details in the Tally Customer Sheet. In the table below, we quickly see that Bailey Group has the 3rd highest LTV, about 8x the average for Late Payers, but takes an expensive 77 days to pay. Speeding up collections from Bailey Group should be a top priority.

CustomerSegmentLTVPurchasesTTM SalesPrev TTM SalesAvg Days to Pay
Langosh and SonsChampion$1,638,417129$698,175$451,24933
Hintz Sauer IncChampion$1,067,922589$183,140$237,1321
Bailey GroupLate Payer$964,48477$196,467$332,32977
Lehner Hyatt CorpDon't Lose Them$84,9384--$84,93810
Herzog GroupGood$82,98227$24,206$28,82953
Schulist and BartonGood$77,76514$756$2,86746
Harber Bros LLCGive Attention$67,1675--$33,59955

Customers further down the ranks present great retention opportunities. Lehner Hyatt Corp, Feeney – Zemlak, and Harber Bros LLC appear to be Promising or Good customers — except they haven’t made any recent purchases. Identifying these high churn risk customers as early as possible gives sales and support teams the opportunity to save them and grow them into better customers.

Get your Own Customer Segmentation Results

Getting results for your own business customers is easy and free! You can connect Tally Street to QuickBooks, Xero or Sage Intacct and receive results based on your customer sales data in about five minutes. The only requirement is that you keep sales invoices and receipts in the accounting software you use. Start your free trial, you can cancel any time.