The Importance of Understanding the Lifetime Value of Your Customers
Have you ever gone to a store or business and walked out feeling under-valued? Most of us do at one point or another during the course of life. Perhaps a bigger question should be: “Do any of your clients or customers walk away from your business feeling that way?” Let’s hope not.
So how do you avoid having clients feel under-valued? The first thing you need to understand is the definition of “value”.
value (noun) - Dictionary.com
- relative worth, merit, or importance
- monetary or material worth, as in commerce or trade
- the worth of something in terms of the amount of other things for which it can be exchanged or in terms of some medium of exchange.
- equivalent worth or return in money, material, services, etc.
As you can see, value isn’t just a monetary definition. Merit, importance, and service are involved as well. By understanding this dynamic and concentrating on their lifetime value, your customers won’t walk away feeling under-valued or unappreciated.
Customers come in all kinds of sizes. They might be a one-time patron, a repeat customer, or even one of your largest and longest tenured clients. While that long-time client might personally spend more money with you, does that make him the “most valuable” client? It might or it might not, which is why it is important to treat every client with the utmost integrity and respect.
The news and Internet has been full of stories in recent years about word-of-mouth campaigns that have either skyrocketed or bankrupted companies. Many of these campaigns start with just one person. Any customer, whether a first-timer or repeat client, can share their experience with all of the individuals in their circle of influence; and your customer service will be the determining factor as to what they share. Looking at the customer on the other side of the counter or listening and communicating with them over the phone is the key to every transaction.
Remember what that value is worth in terms of some medium of exchange. Sometimes value may not be a sale, but if you’ve given the client value and worth with your attitude, information and enthusiasm they may be your biggest word-of-mouth campaigner!
For example, you might own a service station where a car pulls in and the driver says they keep hearing this click that speeds up and slows down depending on their speed. You do a quick visual inspection and see a rock in the tire that is causing the noise. It took you a couple minutes, you don’t charge them, and you solved their problem. While you didn’t make a “sale” from them, you calmed a worried driver’s nerves and that driver can now influence their friends and family, who may come to your shop knowing you are honest and fair. Those family members may tell their circle of influence and so on. By paying attention to that one-time transaction the driver of that car has passed on a favorable review and so on.
In today’s market you can’t forget about social media and its influence on the lifetime value of your customers. If you’re on Twitter you may have noticed the use of hashtag words (#hashtag) in people’s posts. These words or phrases are often related to a particular name, feeling, or expression. So that one-time customer you just helped may tweet “Pulled into #JoesStation and he found a rock in my tire. No cost, great #service. See Joes on Main Street.” In the social world, those 107 characters could be seen by thousands of people. Furthermore, the #JoesStation and #service hashtags are searchable by more than just that person’s friends and followers.
One last point to remember in regards to the lifetime value of a customer. Depending on the industry you are in, statistics show that it can take anywhere from 3 times to 10 times more energy and money to attract a new client vs. keeping an existing one. You must factor this into the worth and value of each person you’re servicing. If you remember this, won’t it help you to appreciate them even more?!
So next time the door opens or the phone rings, don’t judge the customer needing your service. Treat each person as if they are your only customer because whether they walk away without spending a cent or spend thousands of dollars with you right then, they truly might be the biggest value to the future of your business.
~ Nicole "Indy" Beus is the owner of Indy's Services a Social Media Management, Graphic Design, and Virtual Assistance company since 2006. To learn more about her, follow online on Twitter: @Indys, Facebook: Indy's Services, or Indy's website indyses.net.