Quite a few years ago I wanted my team members to know the magnitude of what our customers were really worth to us. I decided to determine what the average guest spent in our business. As I started the project, I quickly figured out that there were other factors that determined the value of the customer other than what they spent on a yearly basis.
I decided to take an in depth look at all the critical numbers that we looked at to determine success and then see how our customers contributed to that success. What I found out was actually surprising to me and it blew my staff away.
As I looked at it I decided I had to divide the customers into two distinct groups, those who just received our basic service and those who purchased the more expensive add-on service. You should do this with your business also.
Here is what I found out; Customers who purchased the basic service had a lifespan with us of 6 years. Customers who purchased the higher end service stayed with us for 10 years. Also, the higher end customer purchased more additional products from us and sent us more referrals. Don’t forget to factor referrals into the equation.
What does this tell us? The higher end customer is our Ideal Customer.
The final findings put the lifetime value of the higher end customer 4.5 times greater than the basic service customer and the lifetime value of our higher end customer was $77,101.00 on an average ticket of $87.00.
Needless to say, this exercise was enlightening. I encourage you to figure out what the lifetime value of a customer is in your business. Perhaps it will change the way you see the customer and the experience you provide for them.