What is your customer worth to you?

In a recent post, I wrote that based on my experience, I noticed that many businesses do not appreciate the lifetime value of their customers – what their customers are worth.

Time and money are spent on lead generation but not nurturing and maintaining the valuable relationships already established.

But how would you understand the value of a customer? Let me give an example, and I will use something we are all familiar with – a takeaway.

For the pedants in the room – these are approximate and for illustration purposes only:

* A takeaway for a family on Friday nights – £45
* Number of takeaways per year – 10
* Years patronise the takeaway 5
*Total for that customer – £2,250
* Referred 3 people who spent the same amount over the same
* Total – 4* £2,250
* Value of the customer – £9,000
Therefore, your initial customer who spent £45 is worth over £9,000.

These are approximate figures and can be much more or less for any service-based business.

Another familiar example could be a family of 4 (or a single person who lives alone) and do their monthly shopping at the local supermarket for more than 15 years; their lifetime value could easily add up to 5 figures.

This is why promotions like the Nectar card, Clubcard and more recently, the Lidl Plus app is marketed so heavily.

The way we live, buy and work is changing. Uber Eats, Deliveroo and Just Eat are the future in ordering our takeaway meals – which became even more common during the pandemic.

These businesses will keep the customer details and cross-market way beyond the original purchase and maximise customer lifetime value relationships fully. Data is the most valuable asset.

Small business owners need to understand this, be more proactive and develop systems to manage customer relationships better, otherwise face becoming dependent and ultimately losing control. The Uber Eats of this world will build those relationships instead.

The distinction, however, is that many of these relationships are typically transactional as opposed to value-based.

Here are a couple of tips on how to maximise your customer value:
1) Stop focusing on the customer’s current spend – like £45 for the takeaway. Calculate what the customer is worth over the lifetime
2) Follow up and keep in touch regularly as it’s easy to let old customers drift off into the sunset.
3) If appropriate, send gifts – have a look at my post on strategic gifting – where it does not have to be a blatant sales ploy. (https://lnkd.in/dCuYP4W
If you want help with knowing the impact of your service and developing value-based relationships, get in touch.

Have you calculated the Lifetime Value of your clients?
What do you think is your Lifetime value to a business like Amazon?