An article in Forbes magazine caught my attention recently: What’s a Lifetime Customer Worth? You’d Better Know. One section, in particular, continues to resonate with me:
“Any business that isn’t thinking along these [customer lifetime value] lines is simply playing the wrong game. Granted, it’s not always easy to think this way; it’s only natural to push back from time to time when you feel a customer is asking for too much. For that reason, it’s critical to constantly remind yourself, and your team, that you are striving to capture the customer’s lifetime value. This helps put the little things into perspective.”
Isn’t it true that all the little things tend to pile up and, ultimately, become the thing that puts us over the edge? Suddenly, you find yourself in a defensive argument with a customer over a small issue that, in the grand scheme of things, makes little difference to the bottom line of your business.
Customer Lifetime Value puts the value of each of your customers into perspective, allowing you to put yourself in the mindset to start putting real customer service strategy in place. That perspective helps you and your team diffuse dissatisfied customers, rather than allow customer service situations to get out of hand.
Calculating Customer Lifetime Value is a simple equation, but it takes a bit of analysis work to get the right numbers for your business to plug in.
Average Value of Sale x Number of Repeat Transactions x Average Retention Time
What is the lifetime value of your customers? How will knowing this help improve your customer service strategy?