What is the True Value of a Customer?
In most cases a Customer is rarely the one item they originally buy from you – be it a service or a product. Knowing how much a customer’s real worth is to your business can make a very different impact on your mindset, marketing and future profits.
When a customer or client chooses to purchase a product or service from you there is usually the hope and expectation that this is just the first of many future sales. As a consumer you hope to find a Company that can provide you with a long-term service, not to have to research and scan for alternatives each time you buy. As a business owner, although your initial marketing may have secured that first sale, it is the follow-up and long-term value that is important to consider and build on.
Some possibilities for further sales may be:
- Repeat orders – when a customer comes back a number of times for the same or similar products or service.
- Testimonials/Reviews – when a glowing review helps others to try you, or secures another customer when used as promotional content
- Referrals – when your customer lets others know about you and your wonderful company, telling them to try you too.
- Up-sells – perhaps a special offer, or an additional complimentary item (Hand Cream when selling a nail product)
- New products – letting your existing customers know of new items available. It’s easier (and cheaper) to sell to existing customers than to find new ones.
Calculating the full Customer Value gives a clearer idea for your marketing spend too. If the Initial Sale is £10 you might spend £1-£5 to get the sale.
However, if over a year it becomes:
Initial Sale £10
Total Yearly Value = £85
– you might be more willing to spend £30-£40 to get this customer.
Think what a difference that would make to your mindset for marketing spend, and how you could go that much further to gain that first sale, knowing it could bring in nearly 9x the value.
Going further, perhaps this sale brings in more:
1 Testimonial used in a promotional post – brings in 1 more client spending £40;
1 Referral to their friend – brings in 1 more client @ £60 over a year;
Now the Customer Value has become £185!
That initial £10 sale produced £185 of value over the year.
Some easy calculations to do:
What is your average customer spend? (Annual £Turnover / number of customers)
e.g. £10,000 divided by 50 clients = £200 average customer spend
Then look at Customer Lifetime Value – average length of time someone is with you x average customer spend
18 months x £200/year – £300
6 months x £200/year – £100
Again, this gives a much fuller picture. Some may only be £10 sales, others a lot more – but by calculating this actual figure for yourself, based on your own sales, you get a clearer view of a customer’s potential.
Finally, look at ways to boost the average customer spend:
Premium Products – 20% of customers will pay more for a premium product, and 20% of them for something even more – do you have options for them to purchase?
Upsells/Cross Sales – what other things could be sold alongside, or to enhance the initial sale.
Bundles/Packages – think about what products or services could be put together to provide more to your customer at an attractive price to them – but without too much more cost to you.
Affiliate/Complementary products – do others provide products or services that you could recommend or provide to your customers
Raise Prices – yes you may lose some customers, but you often gain better ones that appreciate the quality of your product or service, and see the ‘value’ rather than ‘cost’ in what you provide
Loyalty Program – if the average individual sale is £32, offer an incentive at £40 (such as giving a £5 discount) – you will still make £3 more overall on the sale.
Know your customer – and their likes and suggest alternatives they may like. Make it easy for them to buy through you, knowing that you understand them and are looking to build on that relationship and trust.
By understanding the full value of your customer, rather than just focussing on the initial sale, it could give a much greater incentive to make a call, post some content, or invest in marketing.
Find out what your customer’s true worth is to you, and see if you can boost it even further.
App – Grammarly
(Caution – Wordsmiths may find the next sentence disturbing.)
If you cant see the would for the trees, or worry that tommorow you could make a simple misteak, then consider the Grammarly app to help keep a eye out for you.
It can be an extension to your browser to monitor content going on Facebook etc. or as an addition to Word. It gives you reasons for the suggestions, and the ability to accept, ignore or add it to your Dictionary, going that much further than standard checks. You can also have settings for Work, School or Other Projects, and British English (as opposed to American English) can be set in your account settings.
Social & Open Networking Event – 7th November (Now extended to 8pm)
As part of our 4th Birthday Celebration, Metis Women are sponsoring a free Social & Open Networking event on Tuesday 7th November at Judds Folly. Put it in your diaries now, and drop in between 5:00-8:00pm for a chat and meet-up. Open to both Men and Women.
Ashford-Folkestone – 3rd November, Westenhanger Castle – Learn Session: TBC
* Sponsored by Westenhanger Castle, Wedding, Meetings & Conferences,
Maidstone-Medway – 13th October, The Centre – Mind Body Sprit, Moto Services, M2 London Bound – Learn Session: Aimee Payne, Protecting your Business against Cyber Crime
* Sponsored by The Centre – Mind Body Sprit, Workshops, Healing, Therapies
Faversham – 21st October, Judd’s Folly – Learn Session: Barbara Luna, Customer Complaints as an Opportunity
* Sponsored by Judds Folly, Hotel, Restaurant & Wedding Venue
Meetings run from 9:30 (For networking) – 12:00
Book Now:We are currently not running any meetings, for further details see our facebook page
Have a great weekend
Amanda & The Metis Women Team