Did you know that loyal customers are worth up to 10 times what they spend on their initial purchase?
When it comes to paying customers, there’s more at stake than just the current transaction. There’s the loyalty that drives a continuing relationship, with a stream of future revenue hanging in the balance.
Take grocery stores, for example. Average consumers tend to shop in three grocery stores: the main store, visited regularly for most of their needs, the occasional store, for specialty items, and the emergency store, such as a quick shop. So for how long do they shop their main grocery store?
The National Association of Homebuilders estimates that homeowners move about once every 13 years. If you assume that they do their main grocery shopping once each week, and that they spend about $150 each visit, then the total revenue they generate over those 13 years is around $100,000!
This number is called the Customer Lifetime Value, or CLV, which is defined as how much business you can expect to do with a customer, over the anticipated length of your relationship.
For a grocery store, that time averages 13 years. For an auto dealer, it may be an actual lifetime.
It depends on the industry. But whatever your business, or your industry, you have a CLV, and one of the biggest mistakes you can make as an organization, is to ignore the role CLV plays in your relationships with customers.
91 percent of unhappy customers will not willingly do business with you ever again.
If you treat your customers badly, don’t answer their questions, or make them angry, you’re converting their CLV to zero! And, they’re telling their friends about it.
According to American Express, whenever you lose a customer, you’re shutting down an average of 16 other CLV money streams before they could even get started.
In our grocery example, that’s up to $100,000 lost with the current customer, and potentially another $1.6 million lost from the people who were told about it!
As you deal with customers, are you considering their CLV?
In every customer interaction, there’s a “today sale” going on. That’s what mediocre customer service organizations focus on. But what about the string of potential “tomorrow sales” at stake? Great organizations are always looking at the bigger picture of Customer Lifetime Value.
So next time you deal with a customer, don’t focus on the current transaction alone! Remember that great customer service is about forming a long-term relationship with you clients, whether they’re a person, a group of people, or a business.
If you’d like to learn more about customer service and sales fundamentals, check out a 1-minute preview of our new series “Fundamentals of Customer Service.” This series will teach your employees actionable tips on how to provide the best service to your customers.
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