What is a customer really worth to you over their lifetime?
Sales revenue is important, but don’t forget that it is customers that are bringing you that sales revenue. Some business owners think that as long as products are moving off the shelves that all is well. Yet without customers coming into your store to make those purchases you would not be making any profit.
And how much is it costing you to find those customers?
Doesn’t it make sense to look at your business in terms of your customers instead of just products and profits? Do you really know what it costs for you to get a new customer? And do you have any idea what the real value of a customer is worth to you over time?
Making the most of your Marketing Budget
When you start to understand the real lifetime value of your customers you will see why making free and similar irresistible offers to your customers is the best thing that you can do for your business. Compare the cost of giving away a free offer to the lifetime value that the customer can bring you, and it is usually negligible.
Most marketing studies show that getting new customers is one of the most time consuming and expensive aspects of running a business. So if you have invested time and effort in getting a customer, it makes sense to optimize the potential of that customer, and that means looking after them. Why not do that from the outset and offer them something that is of real value. Here is an example that illustrates the lifetime value of a customer:
An Indian restaurant wanted to grow their business. They were located in a fairly prominent neighborhood so they took time to find out who the VIP’s and well known business people were in their area. The restaurant owner sent out 120 letters to these people inviting them for a free lunch. Of the 120 letters, 100 customers came to the restaurant to take him up on the offer. In addition to their free lunch most ordered extras or had someone with them who ordered a meal. In the end most of them became regular customers.
When asked why he did this, the owner replied that normally it would take him six months to get in that kind of business. But the offer of a free lunch brought him that business in six days. He simply couldn’t afford to wait six months for that business. He needed it now, and making that irresistible offer to his customers gave him that business.
Ways in which you can optimize the Lifetime Value of a Customer
- Offer them something of real value. A 5% or 10% discount won’t get a customer’s attention. Something that is free, even if it is just a trial, a brochure, a report or a gift is something that they will be far more interested in.
- If it is a free offer, attach a value to it. So if it’s a consultation tell them that it is worth £200 so that they know what they are getting.
- Look for ways in which you can continue adding value to your customers. Ways in which you can get them to keep coming back to you. Give them vouchers that they can use towards purchases or gift to friends. Be creative in your incentives.
When you look at the bigger picture and realize the potential lifetime value of a customer then giving something to them for free, or giving them something back seems small compared to the revenue that they will generate for your business. Once you have taken the time to target and attract customers don’t stop your investment there. Build and maintain the relationship with your customers so that they will continue to send you business over time.
There’s been a recession.
The economy is in shambles.
Better to save than spend.
No one is buying.
Who’s going to invest in what I’m offering at that price?
You’ve heard it all, right? And some of it is true. There have been financial difficulties, but here’s the thing: the world is abundant. The money exists. People will spend, but only on that which they believe is worth it. Your job in selling any product or programme is to ensure your clients believe it is worth every penny .
Never! Most people are only delighted to get something for nothing. It is such a rare occurrence these days that most people instinctively ask, “What’s the catch?”
When they discover that there isn’t one, they quickly line up to take advantage of the free offer. Now many business owners look at the cost and say that they can’t afford to just give stuff away. Their immediate thought process runs to
“Imagine how much money I could make if I sold that stock or charged for that service, it doesn’t make sense to give it away!”
Or does it?
Stay with me for a moment and I will let you into a powerful little secret behind growing your business through free offers.
Both people have the desire and are taking action whilst one person is having success and the other seems to have one set-back after another.
You may even have seen it within your own business too – suddenly you’ll have a rush of new clients and don’t really understand why and other times you’re taking all the action and nothing is working.
I have been doing some pretty intensive research recently into “success” and “failure” and I am pretty certain I know what the reason is. It might surprise you.
It’s the small things that can make a big difference. Just letting customers know how much you appreciate them can make them more loyal to you. Remember that your client base is one of your business’ most valuable assets. Looking after your customers and building relationships with them is one of the best things you can do to grow your business.
In business one of the most effective forms of marketing is referrals and word of mouth. Yet few businesses have a deliberate strategy to use that as a marketing tool. The relationship that you have with your customers will determine the long term profitability of your business. So it makes sense to be more deliberate in building relationships with your customers. You want to make them feel important.
Gestures that make Clients Feel Important
Taking on a challenge teaches you a lot about business.
On Saturday I shall be swimming Loch Ness, the largest lake in the UK. It has nearly double the amount of water in all the lakes and in England and Wales combined. No wonder it never warms up! It’s 22 miles long and just 9 degrees C. I shall be swimming with 5 other swimmers each of us swimming for an hour in turn. We may or may not see a monster!
I am raising money for Aspire, who help people with spinal injuries. I personally need to raise £1500 and so far have raised £1407.94 – so just £92.06 to go (although I’d LOVE to raise £2,000).
Both raising money and training for the swim has taught me so much about business.
Firstly, I started fundraising late – and Aspire were rather concerned as I had agreed to raise £1000 4 weeks before the swim – otherwise they could ask me to step down. Just 4 days prior to that I had raised £147! So I had some catching up to do.
However I had made a commitment and I was going to play full out to fulfill that commitment. So I posted on Facebook, I asked everyone I knew to support me and made clear my intention to raise £1,000 by 12th July.
I was relentless, continuously posting and reporting my progress. I didn’t doubt I could do it. Someone asked me “what happens if you don’t do it” and that thought hadn’t even entered my head. I knew that even if I didn’t hit quite the £1,000 I would have come close enough – not to be kicked out.
And by Friday I knew I had done everything I could – I had about £80 to raise but decided to take Saturday off and be with my family.
I woke up on Sunday morning to this:
I’d done it – I was thrilled!
And it taught me a LOT. Because I realised that there were things I wanted in my business that I didn’t apply this process to. Because to achieve anything you want, in life and in business, you have to:
What are you really giving your customers that’ll make them pay with a smile and keep coming back to you?
That’s what is going to increase your profits. Unless you can identify your target market and find a way to connect with them, offer them something that is of real value to them personally, you are just another business among a million others. No matter how good your products and services are, or how competitive your prices, you won’t get the customer’s attention. And you won’t get any revenue from them either. It’s like standing on a street corner talking through a megaphone just hoping that maybe someone will hear what you are saying. Now I am certain as a business owner you are smarter than that?
It doesn’t matter what business you’re in – whether you’re selling to businesses or consumers – the most valuable asset you have is your customer base. In today’s economic climate it is vital that you do everything in your power to nurture the relationship you have with them.
So, here are some tips you can adopt to ensure your customers love you and tell all your friends about you:
Make visiting your business an absolutely incredible experience
As a customer we have come to expect “good service”. Therefore to stand out today – you need to go above and beyond the norm. So, you need to introduce some extreme customer care initiatives.
You can spend a lot of time and effort trying to convert them and in the end they may still say no, and for valid reasons. Remember that if they only meet one or two of the qualifying criteria, then they aren’t likely to buy. Your valuable resources of time and effort could better be spent elsewhere, on customers who are more likely to sign up with you.
A company that says they offer top quality service or a customer that gives the same company a great review?
A company will never admit that their service levels aren’t up to scratch so a business promoting themselves isn’t always that believable.
If you have been in business for some time you have one of the most valuable resources at your disposal – your existing customers. How can you use those customer resources to your advantage?