Your business could be worth much more than you think!
What is the true value of a customer? How would you ascertain this? If you know the true value of your customer, you get a better sense of how much money you can afford to invest in customer acquisition activities.
The true value of the customer is the total lifetime purchase of that customer and more! The "total lifetime" value of a customer is the average purchase value of that customer, multiplied by the average number of times that customer buys in a year multiplied by the average number of years they remain a customer PLUS the value of referral business that customer generates for your business.
Let's revisit my weekend Café where my cycling buddies and I stop for a coffee every Saturday and Sunday (actually a different one each day due to the location we ride to!). The Café owner may consider the $3 I spend on a cup of coffee as "small-fry". But that is actually far from the truth!
Let's say for arguments sake that his profit margin on that cup of coffee is $2. Now, I try to cycle each week, even in bad weather (yes I know I'm an obsessed cyclist!). So, that makes roughly 50 cups of coffee per year or $100 in profit. If I keep this up and visit the same Café (if they keep me happy, I will!) for say 5 years, then my business is now worth $500 in profit to the Café owner. Still "small-fry" in the overall scheme of things, maybe?
Now, I don't cycle alone! In fact, our group varies from 6 (on the rainy days) to 25 - let's take an average of 15 over the year. Now "my" business is worth $500 x 15, or $7500 in profit to the Café owner - not to be laughed at now. And that doesn't take into account our "Cyclist's Christmas in July" dinner that we had there with partners (some 40 people all up with an average spend of about $100 - say $50 per head profit to be conservative). So, now "my" business is worth $7500 plus $2000 x 5 years, or $17,500 in profit to the Café owner! Hey, I'm starting to feel mighty important!
But wait.........
There's more! Because I really like this Café, and they always treat me well, I love to tell other people about it and suggest they try it out. If only two other people, directly as a result of my telling them about this wonderful Café, visit, then that is additional business that I have brought to the Café and increases my value as a customer.
Now, the BIG question - would it hurt the business owner to occasionally provide a cup of coffee for "free" (even to the whole group), or a few bottles of wine complements of the house at our dinner? On a cost basis, that might be an investment of $15 occasionally (coffee) or $30 (wine). Isn't that investment well spent, to secure a customer worth at least $17,500?
So, what is the true value of your customers?
Making Sense of Customer Value - To learn more about this author, visit Dr Jürgen Strauss's Website.
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Are your sales where you want them to be? Will you be one of the few who achieves sales success or one of the many who have failed to change? So what are you doing to change those results? Let’s be honest, with companies moving globally and at lightening speeds, the traditional business solutions are outdated and dead. My approach moves your business out of its comfort zone and secures your competitive advantage now. If you are seeking to increase sales, build customer loyalty, create a culture of great attitudes or just achieve some sleep filled nights, then we should talk because my clients have experienced exactly those types of results. Learn more about customer loyalty at http://www.processspecialist.com/customer-loyalty.htm Give me a call at 219.759.5601 for a free strategy session. P.S. If you are seeking a motivational speaker, sales trainer or small business expert that will leave your audience smiling and remembering, please feel free to contact me at 219.759.5601. - Visit Leanne Hoagland-Smith's Website |
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Dr Jürgen Strauss
(Visit Dr Jürgen's Website)
Director of !nnovaBiz:
We work with businesses to provide cost
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We make extensive use of Mindmapping in
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I am passionate about helping people in
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During my 25 year career in the corporate
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