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Customer Lifetime Value How much is your average customer worth over his or her lifetime? Don’t know? Finding the answer could go a long way towards helping you improve customer relationships and boost customer loyalty, says Jill Griffin, author of Customer Loyalty: How to Earn It, How to Keep It (Jossey-Bass, 2002). By looking at the big picture – or more importantly, making sure your employees understand the big picture – you and they will begin to see customers as worth far more than the dollar amount of today’s sale. The profitability of a loyal customer is significant. For Domino’s Pizza, an average customer’s worth about $5,000 in sales over the life of a 10-year franchise contract, says Griffin. “Phil Bressler, co-owner of five Domino’s stores, discovered that it paid big dividends to explain to every order taker, delivery person and store manager that a loyal customer was worth $5,000.” There’s no question that valuable customer is an over-used phrase that lacks impact. By using a dollar figure to show value instead, Bressler found his message had an immediate affect on his employees. Ford Motor Company uses the same tactic, says Griffin. The company has determined a single customer is an asset worth about $142,000 over his or her lifetime. Ford communicates this data to its employees, giving them a new perspective on their jobs. “An employee who is in charge of collecting overdue bills, for example, is less likely to view a customer as a delinquent deadbeat,” says Griffin, “ than as a valuable asset that must be nurtured.” Looking at lifetime value can help sales reps get beyond viewing a sale as a one-shot deal and instead begin regarding it as the first step in a long-term, profitable relationship. That’s how Scott Hansen Galleries has become so successful. An art gallery located in prime tourist spots, such as New Orleans and Rodeo Drive in Beverly Hills, its visitors often just browse and leave. Those who become customers, however, are extremely loyal. The average Hansen customer makes seven purchases in the first three years, says Griffin. The average invoice is $4,200, which means the customer is worth almost $30,000 to the company in those three years. Sales reps, called art consultants, know this. They spend a long time finding out who their customers are, what they do, where they live, what color their walls are. They write it all down on a customer card and use that information during follow-up calls to let customers know about new works, events and other pieces of information. In fact, consultants are required to spend half their time on the floor and half on the phone. The relationship-building activities pay off. The average Hansen sales rep brings in $500,000 to $1 million in sales each year – all because they know the value of turning first-time buyers into lifelong, loyal clients. This article was published in the May 7th, 2003 edition of www.SellingPower.com Presentation Excellence is a resource center for business professionals who want to achieve presentation excellence in all effort to grow their business. For more information, see www.presentationexcellence.com. |
