The value of a customer cannot be overrated, and you shall soon understand why. The following story proves that the true value of a customer can barely ever be measured; it is always potentially huge.
A woman bought some milk at a large grocery store. When she got home she realized that it was sour and had passed its "best before" date. She went to customer service later that day to return it, and one of the representatives gave her a hard time, saying: "How do I know this is the milk you bought today! You could have switched it!" He then made her wait twenty minutes while he consulted with co-workers about what to do. Naturally, the woman was furious, and she has refused to shop at that grocery ever since.
How much money do you think the store will lose because of the defection of this one customer? Well, she spent fifty dollars per week at that grocery store. No big deal, right? Wrong. Over the course of a year - 52 weeks - that store will lose $2,600 in business, which is substantial, but it gets worse. Over ten years the store stands to lose well in excess of $26,000 in direct sales from this single dissatisfied customer.
It doesn't end there, either. If the woman is really mad (as she was in this case) she'll tell, on average, 11 other people about what happened. Once those 11 people each tell approximately five other people on average about the incident, 67 people will have heard something negative about the grocery store. That's really bad for business. Even if only 10 of those sixty-seven people don't do business with that store again (and they had the same spending level of $50 per week), over 10 years that one incident will have cost the store a quarter of a million dollars. $250,000.00 over a $.99 carton of milk and one employee's bad attitude. It makes you stop and think - doesn't it?!
Try this exercise for yourself:
To estimate the value of one of your customers, multiply their average annual expenditure by how long you would hope they'd remain your client. After that, attempt to account for the dollar value of referrals this client would provide you with over the same time period and beyond. Soon you'll be swimming in astronomical figures, and it should be clear to you that the value of a customer is always infinite and inestimable. This exercise does prove the following point though: Take every customer seriously!
1. Average annual expenditure per client $_______________
2. Average number of years a client stays x _______
3. Individual client value $_______________ (line 1 x Line 2)
4. Potential number of referrals over client's lifetime _______________
5. Total referral value $_______________ (line 3 x Line 4)
6. Actual Lifetime Value of One Client $_____________ (line 3 + Line 5)
Obviously, you can see for yourself that it pays to take every single one of your customers seriously; each of them is a potentially infinite resource. The one person you don't treat with a proper amount of respect could cost your business a lot more than you imagined. An unhappy client is like a rock hitting water: the stone hits, and a wave of unrest spreads. Invest time NOW to ensure that your clients feel well cared for and valued. They're worth it, and so is your bottom line.
Calculate the True Value of Your Customers - To learn more about this author, visit Kevin Lawrence's Website.
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