Lifetime Value of
Knowing how much a customer is worth to you over the long-term is the
best way to convince yourself and your staff to become more committed
and determined to treating your customers right and keeping them happy.
Calculating the lifetime value of a customer is reasonably simple.
the example of your local grocery store. A typical family of four will
spend approximately $175 each week on groceries. Given that they are on
vacation for two weeks a year, and say they are away for other reasons
for another 2 weeks, that means they will shop at their grocery store
for 48 weeks each year.
Over the course of a year, this single family will spend approximately:
(48 x175) = $8,400
at that grocery store.
Now, let's assume that the
average family stays in their community for 15 years. Without taking
into account inflation or the time value of money, that one family is
Lifetime Value =
$126,000 ($8,400 per year times 15 years)
to that grocery store.
Now imagine the quality of service -- be it speed, friendliness or
special treatment - that family would get the next time they bought
groceries if the cashier knew they were worth $126,000 to the store (not
just the $175 they were spending that day). It would probably be much
better, wouldn't it?
Suddenly, when you and your staff realize the lifetime value of
customers to your business over the long-term, making decisions to
benefit them (and not just your short-term interests or profits) become
much easier. Take the time to figure out the lifetime value of YOUR
customers. You might be surprised.
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