Four in 10 senior executives in larger companies don’t know the lifetime value of their customers. That’s according to a study by Sitecore and Forbes Insights, which surveyed 312 senior executives. Not only did 40 percent not know the financial value of their customers, more than half said they had no intention of finding out. In other words, these corporate leaders don’t consider this information important.
This absolutely surprises me. If the leaders of these organizations don’t know this information, then you can expect that their employees don’t either. Yet if employees understand the lifetime value of a customer, they can make better, customer-focused decisions which can have an enormous impact on customer loyalty.
Let’s look at an example most of us can understand. Studies have shown that the average grocery-store customer spends between $80 and $200 each week. Let’s make this easy and say that the average customer spends $100. Assuming he and his family take a couple of weeks off for vacation, that’s 50 weeks a year that he buys groceries or $5,000 per year.
The average family moves house about every seven years. Assuming they move out of their neighborhood, that means the average family is worth about $35,000 in grocery business over those seven years. So the next time that customer complains about a carton of spoiled milk, give him his money back. Is it worth upsetting him over a few dollars, when he’s worth $35,000? Of course not!
Here’s a six-step plan for making the most out of this important information:
1. Calculate. Determine the lifetime value of your customer. How much the average customer spends each time she buys, how often she buys in a year and how many years she buys? (This is a bit of a simplification but a good start.)
2. Communicate. Share this information with employees so they can make better decisions.