The Value Of Each Customer
By Scott Hollingsworth
Just what is the value to you of each customer over his or her lifetime? This is a
crucial number for you to know because it helps to determine how much you might be
willing to spend to acquire a new customer. Equally important, it makes you realize
how much it costs to lose a customer once you've got him.
Federal Express is one of many companies that focus on the value of a customer. If a
mid-sized company sells 30 packages a week at $25 each, that's $750 a week, or
$18,750 a year. If a customer gets angry over a $25 shipment and switches his
business to a competitor, Federal Express loses thousands of dollars. That's why every federal Express supervisor is authorized to grant a $100 refund on the spot, no questions asked, for any delayed shipments. $100 is a very small price to pay to keep an $18,750 a year customer. That's why you must become aware of the lifetime value of each of your customers.
To compute to value of a customer, answer these simple questions:
If you continue to provide acceptable service and quality, how long will the customer patronize your business?
How much will the customer spend in the average year? Make certain to include the
sales increases that are sure to take place.
What's the total value of this customer?
This number should be engraved in your mind, and you should share it with all of your employees. It will help you focus on the critical elements of building your business. It will also remind you to treat each customer as if he or she is the only customer you have. If you don't do this, you may not have many at all.
The more you use the net, the more you'll be able to nurture long term relationships
because when customers move, they can still buy from you.
About the author:
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