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How Much Is A Three Dollar Customer Worth

Written by: John Stewart

Article Overview: Do you really know the value of your existing client base? You can spend a huge amount of money on promoting your business, and still see little result. The best (and cheapest form of advertising for a small business owner is word of mouth. It's reported that if you do the right thing by a client, they'll tell a handful of people. Do the wrong thing, and they'll tell over twenty people. So do you know how much a three dollar customer is really worth?

How Much Is A Three Dollar Customer Worth

One client of ours is so busy ith word of mouth referrals, he still doesn’t recognise the full potential of his website as a marketing tool. Though, unlike many small business operators, he does understand the need to be proactive in his marketing

How come, (you’re asking) is it that he’s so busy? Simply because he does what all small businesses should do! He looks after his clients. He sends them postcards, or just a friendly email every so often. Or he might buy a beautiful gift basket.

Think about this: He was telling me how small business owners complain about the cost of marketing and advertising, and often that’s because they spend their money in the wrong places.

How would you feel if a $115 bunch of flowers generated a $4000 sale? That’s exactly what happened to him: he bought a bunch of flowers and had them sent to a client recently. The client’s response was to place an order with him, that resulted in a sale and an easy $4000 in commission.

Or you could take the approach of one of the local DVD rental stores. The new owner (we’ll call him Dave) is trying to build up his customer base. One of their customers (we’ll call him Bob) have been members of that store for some time, and welcomed the change of ownership.

The store promotes hiring 7 x “weekly” DVDs for $10. Simple enough, you would think. You select seven DVDs that you can hire for a week, for $10. So Bob selects some “weekly” DVDs, only to be told that they are “New Release Weekly” DVDs and Bob has to pay more.

“But how many days are in a week?” Bob asks. “Seven”, was the reply. So why aren’t you charging us the $10 ?

“Well, they aren’t weekly DVDs, they are New Release Weekly DVDs”

“Oh, so weekly DVDs are not the same as New Release Weekly DVDs?”

Okay, so Bob may have had a misunderstanding based on poor advertising by Dave. It’s only a difference of three dollars (for that one sale). However, the attitude of Dave was one of indignation, that Bob was stupid, and because it was Bob’s mistake Bob would certainly be paying for it.

Dave didn’t consider that Bob can choose which store he can rent DVDs from, and why does he need to be insulted at this store, when Bob can go to another store and be treated with respect. The obvious gesture would have been for Dave not to worry about the three dollars, and retain a happy customer.

What Dave achieved was the three dollar sale, and NO MORE ever, from one customer. Dave’s not a bookkeeper, and maybe he doesn’t rely on bookkeeping when running his business week to week.

Because as bookkeepers, we would tell Dave that what he didn’t consider, was the fact that Bob was not a three dollar customer, Bob is a $500 customer (annually). If you’re not sure about this concept contact us for more information.

If the DVD store owner did that with 10 customers, he’s lost $5000 annual turnover - But Dave’s made the extra $30, and been able to make his point.

Well done Dave! Will you still be in business in twelve months time? Or will you realize how much a three dollar customer is worth?

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Article Tags: bunch of flowers, business operators, change of ownership, customer base, dvds, email, gift basket, indignation, marketing tool, misunderstanding, new release, poor advertising, postcards, proactive, referrals, reply, small business owners, small businesses, three dollars, word of mouth



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