The Lifetime Value of One Customer

Word count: 588

What

Is One

ustomer

eally

orth

our

mall

usiness?

Every small business owner and manager needs to know this number. You

need

to place an “annual” or a “lifetime” value on each customer who buys your

product or

service.

Here’s an example of what I am talking about:

Some years ago a burger restaurant placed a $100 coupon ad in a newspaper for

whom I worked. One ad: two offers. “Cents off” on a hamburger and/or “cents off”

on a milk shake.

A few days after the coupon ad ran, the sales rep stopped by the restaurant to

check “results.” The burgermeister was not happy! Only 17 hamburgers and 18

milk

shakes were sold off the coupon, a total of 35 returns.

The burgermeister often worked his own counter so we knew that he had a

good

handle on the daily flow of his business. We asked how many

NEW

customers

came in

from the 35 returns. His guesstimate was 20.

In our ensuing discussion, the burgermeister shared that his “average”

customer

spent $6 per visit and returned to his burger haven approximately once a

month.

Using his numbers, that meant that if the meister’s food and service meet each

customer’s expectations, he could expect 240 visits from these 20 new customers in

the

coming 12 months. 240 visits x $6 average ticket = $1,140 incremental revenue in

play.

$1,140 is a very decent return on a $100 investment!

And that’s assuming that each of these new customers comes in alone and that

they do not tell anyone else how great the burgers and milkshakes at the meisters are!

Over-simplified? Perhaps, but this true-life example deals with two of the keys

making a small business grow and thrive: knowing what your customer is really

worth and making sure you

DELIVER

on your value promise each and every time

that customer crosses your threshold.

“Lifetime” customer values are better suited for larger tickets. . . vehicles as an

example.

Let’s surmise that the average vehicle owner buys a different vehicle every 4

years

from age 35 to 59. In 24 years that equates to 6 vehicles . . . a conservative

number for

sure! Use your own numbers and assumptions.

Let’s further assume that this “average” customer buys both new and used

vehicles which equates to an average ticket of $20,000. Another conservative number!

The “lifetime” value of the customer in this example is $120,000. That’s what

the

real sales pros see when a prospect walks through the front door of the

dealership:

“$120,000” in 2 foot high red letters blinking off and on above the

prospect’s head!

Too often small business owners measure only the immediate sale from a given

or promotion. That’s short sighted. It’s the “real” value of each customer that’s

important.

The “real value” is important because it underscores the crucial importance of

over-

the-top

service and consistency in your customer dealings.

These are the two key elements that will allow you to leave your competition in

the dust, even the Zillion Dollar Goliaths!

ob Schumacher writes to and for the small independent business from the perspective of

someone who has actually walked in their moccasins. His books and articles give entrepreneurs

clear coffee-shop English perspective on how to steer their business or profession into the top

20%

who achieve 80% of the business and profits. Visit

http://www.20do80.com

for a complete