Now that we know what the value of a customer is, what is their lifetime value? Are the customers who purchased the discounted item you had listed worth anything more? What can you do to increase their value?
At times we see people who make small purchases or a series of purchases as not being very valuable to us. Let me share a story from my past that will illustrate the value of small purchases over a period of time.
I owned a specialty grocery store. We had implemented a new rewards program for our best customers. After a few months we looked at the reports of our 100 customers who had purchased the most from us. Then we broke this list down by people who spent the most and people who had visited our store the most. What we found was that several of our customers who came in regularly and bought $5 and $10 worth of groceries at a time were high in the rankings. We had other people who came in only one or two times a month, and they spent $200 to $300 every time. We always enjoyed their visits and they were valuable, but the total amount of money that we accrued from their sales was often less than that from the people who came in every day.
Given that story, how did we figure the lifetime value of customers? We looked at how many times people came in, as well as their average sale, and got a good idea of what they were worth in a year. Then we looked at how many years the average customer stayed with us. We found that the people spending $5 per day five days a week were bringing us over $1,300 per year. In our area people remained loyal customers for a long time; we had people shopping with us for at least seven years. That put the lifetime value of each new customer at $9,100 or more. This really opened our eyes to what people we attracted were worth, even if they spent only a small amount each time.
Have you sat down and figured out these numbers for your business?
Some of these numbers we have been talking about aren’t tracked by all businesses. Many businesses don’t track because it takes too much time. It does take a little time, but not much once you develop a process to make it happen. The businesses that do know these numbers are the most successful ones.
Take the time to find out the numbers, and start moving your business to the top of your industry. If you would like help with this, contact Brian at Go Social Experts by replying to this email, and set up a time for a free consultation call.