Guest Author - Deborah Crawford
Do you know the lifetime value of one customer to your business? Have you eve calulated the worth of a customer? Once you do, giving great customer service becomes one of the most important things you do.
Here's how to determine what one customer or client is worth to you. Imagine you own a hotel and one of your regular customers is unhappy with your service and wants his entire stay for free. You walk up as your front desk associate is telling him that she cannot comp the entire stay because he should have asked for his television to be repaired when he arrived. They could have brought another TV to his room then, but she cannot refund his $400. What do you do?
Before you answer, take a look at the numbers. This customer stays with your hotel almost every week of the year. His stays range from one night to five nights, with an average of two nights per week. Two nights per week for a year (with a couple weeks off for vacations) is 100 nights per year. 100 nights per year for the last five years which is how long you've owned the hotel is 500 nights. This customer has paid about $100 per night for each of those stays. That is $50,000. For the next five years, you will increase your rates, and he will pay you closer to $60,000 for the same number of nights. Does your answer change? What is it worth to you now to keep this customer and keep him happy?
This exercise is very valuable for any business. One key to success in almost any endeavor is repeat customers. Perhaps your customers buy your products only once a year. If you plan on being in business for 20 years, multiply what they now spend times 20. The math works the same way, whether you are a consultant or a sales rep or a business owner. Once you understand the concept of lifetime value of a customer, your customer service policy and procedures improve as does your word-of-mouth advertising.
For example, in college (well over 20 years ago), a friend told me about Clinique makeup when I complained about being allergic to cleansers and cosmetics. I started using Clinique. I have never stopped. I probably spend over $100 a year there. Now, my mother and my daughter use Clinique, as do countless friends and associates that I have referred over the years. My lifetime value to them is personally a few thousand dollars, and via my referrals, several thousand dollars. Well worth the free samples and makeovers they give me and the occasional no-hassle return I might make.
Once you know the value of your customers, post it on your desk or around your office. Share that number with everyone who works for you. If a customer is unhappy about one transaction or event, make it better as soon as you can. Do whatever it takes to keep that customer and keep her happy. It's not the $100 sale you might lose today, it's the $60,000 you might not make in the future.
A classic customer service primer is Customers For Life: How To Turn That One-Time Buyer Into a Lifetime Customer. This book should be in every business-owner's library.
A fantastic, quick-to-read book on making your business more vibrant, fun and profitable is Fish! A Remarkable Way to Boost Morale and Improve Results. This book focuses on how your business vibe, you and your employees can help you create lifetime customers.