Customer Servces
What Are Your Customers Worth?by Debra Schmidt
When we lose a single customer, we do not lose a single order but a lifetime opportunity of profitability with that individual. Do you know the average lifetime value of your customers?
To determine the average lifetime value of your customers, estimate how much they will spend with your business on a monthly or annual basis and multiply it by the number of years they could potentially use your products or services. For example, if an average grocery customer purchases $100 worth of grocery products per week, 52 weeks a year, for approximately 45 years—their average lifetime value will be $234,000.
Oops. Don’t stop there. Next, factor in how much your customers could potentially increase their spending each year because they are thrilled with your product and service. There’s more! Now start calculating the value of all of the new customers that your loyal customers will refer to your business.
Here are some examples of the average lifetime values of customers in a variety of industries:
q
Life insurance owner
$87K
q
Automobile owner
$200K
q
Grocery customer
$300K+
q
Medical patient
$1million+
Increasing customer retention by as little as 5% can translate into as much as a 100% increase in profitability. It costs five times more to get a new customer than it does to keep an existing one. It is important for all employees within an organization to understand the lifetime value of their customers. Then they can focus on building relationships with the very people who keep them in business.
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Emmy nominee, entrepreneur, author, television personality and winner of six national marketing awards, Debra J. Schmidt is one of the nation’s most versatile speakers and trainers. She is known as America’s “Customer Loyalty Ambassador” and author of Spe
Management