“Just because the product the customer purchased is out of warranty, it doesn’t mean the customer is also out of date.” –Seth Godin
Quick, what is the lifetime value of your top five customers? Your top 10 customers?
Those of us in the entrepreneur-preaching, consulting, business coach and general advice marketing business can often talk a good game about customer value. I like long term. Yet, those who know me know I certainly have failed at times in not marketing or selling for the long term during the last 40 years. And have paid dearly for it. Hence, I never miss a session on customer value right up front.
Quick war story. I had a business coaching client in Dallas Texas who owned two office supply stores. We never met each other until after a year into our relationship as is often the case with coaching. But my assignment given to the owner in the second month, he told me, was worth whatever he paid me for the year many times over. Here’s the assignment I gave him.
How Many Customers Are On Your Mailing List?.
This varies with the client’s industry of course, because some clients have only a few others have thousands. But I first asked him to give me the gross number all the customers he had in his database–whatever the criteria for getting on his database was.
He figured right at 1,192 total customers were on his list between the two stores. These were the people who purchased at least $50 worth of merchandise over the last 18 months to two years (his criteria). He didn’t attempt to snag anyone’s e-mail or address if their purchase was below $50.
He had been in business right at 15 years and he had plateaued in his sales to right at $23,000 per month in revenue. He came up with a goal for our business relationship of $45,000 a month that he needed to reach.
Obviously, most business coaches who work with companies under $5 million (as I did during my working life) have different approaches to get their clients where they need to go. And it usually takes until the second or third month to really get a feel what one’s client has in their skill set and resources and personality or aptitude to get where they want to go. (Yes, I’ve resigned clients, maybe to my own loss, whom I felt were setting themselves up for failure.)
My assignment for that ’fateful session’ (as he called it) was to list your customers by revenue received in a descending sequence. And then, for our session a week from Monday, tell me how many customers it takes to equal 50% of your revenue. And stop there.
When we got on our call on that Monday, his first words were “I can’t believe it.” It seems that this one exercise had given him so much insight into his own business, he could see why he had plateaued in sales. The customer number, with 1,192 customers all numbered in revenue descending sequence that he stopped on that gave him 50% of his revenue was with his FIFTH customer!
Talk about a hyper Pareto Principle as to value of customers! Just five customers supplied right at 50% of his revenue. He said, “I knew those five customers ordered quite regularly from us but I never knew my entire business depended on them so much until now.”
Lifetime Value Really Means the Same Thing to Car Dealers, Publishers And…
Yet we shouldn’t stop there with those two industries. The slogan ‘We want to be your car dealer for life’ could just as easily morph into ‘We want you to subscribe to our trade magazine for life’ or ‘We want you to buy every stick of furniture for life’ or ‘I will crunch every tax return and Schedule C for life’ and so forth through every industry.
Grocery stores have lifetime value figured out. So do a lot of online sellers–ever buy something online that came with a bonus that you felt was as valuable or more than the item you purchased and you wondered how they could afford it? On the front end it is simply called buying customers.
What are you doing next week that will endear more customers to you?
Do you even have a mailing list of your customers–whatever your criteria?
One of the most amazing things I found years ago, maybe it is different today, was the number of retail, brick and mortar businesses, who rarely or never kept a list of their customers. Or those who were insisting on keeping their customers on cards in a shoebox when a terrific mailing list program was easily in reach thinking, “It’s just too complicated for me to learn.”
Joint Ventures With Mailing Lists Is Only Your First Strategy
Paying attention to customers through your app or mailing list means not leaving money on the table. Lifetime value means keeping in touch with your customers and enriching them win-win-win. There are many no-cost, low-cost ways. I’ve said it before, but there is a lot of great talent over at Business Solution Network (www.TheBusinessSolutionNetwork.com) that you can access–and access it very inexpensively–right now.
For further info on setting up a mailing list, having an app for your business or to see about hiring a business coach, and on and on check out www.TheBusinessSolutionNetwork.com
Article first appeared in www.QuadStateBusinessJournal.com