Let me ask you a question…
Do you know what the average value of a customer is to your business?
From a first time purchase to repeat business over months and years, what’s the typical value a customer can bring to your business?
Your success in any business is measured directly by your ability to continually attract new customers and to keep existing customers buying from you again and again. So whether your business has 10 or 100 customers on its books, you need to make the effort of continually marketing to these customers in order to gain the maximum value out of each customer.
How Do You Do This?
The way you go about this, is to consistently attract first-time buyers and continue to market to these customers in order to stimulate repeat business from them. This strategy allows you to acquire a customer in the red, but over a period of time move from red to black as you continue communicating and marketing to these customers. The profit margin increases over time.
To get that repeat business, you need to continue stacking value. This can be offering educational content to your customers, or special offers that are irresistible to turn down. You can also reward your customers through a loyalty program.
Your existing customer list is the first port of call you attend to when you want repeat business, or want to introduce a related product or service. You have delivered and established trust between these good folks and they understand what it’s like to do business with you. When customers are satisfied with their purchases, they’re more likely to buy again and with much less scrutiny than the first time around.
So to figure out what the value of a customer is for your business, you need a few metrics in place. We need to understand the following –
- How often are they going to do business with you?
- What’s’ the average value per job?
Let’s breakdown a couple of examples below –
Using a cleaning business as our example:
Residential Client –
Let’s suppose the average first time value of a cleaning visit serving the residential market is $125 and typically the cleaning company returns twice in the month. That means the total for that month is $250 .
If this cleaning company has served the client to the standards expected, then its safe to say they will be asked to return next month to offer the same services at the same price. Now let’s assume for this particular cleaning company, that they typically hold onto a cleaning client for six months.
$250 average per month X 6 months = $1500
$1500 is the Average Lifetime Value of a customer for our residential cleaning company.
Commercial Client –
For our commercial cleaning client example, let’s say the average first time value of a cleaning visit serving the commercial market works out to about $1200 a month.
Just like our residential example, if this commercial cleaning company do a satisfactory job and manages to hold onto the client for one year, the expected turnover will be $14,400.
$1200 average per month x 12 months = $14,400
$14,400 is the Average Lifetime Value of a customer for our Commercial Cleaning company.
How About We Take This a Step Further?
Lets again hypothesize that for our residential cleaning company, we manage to have a customer that is so thrilled with our service that they wish to rave about us to their network of friends and neighbors. We’ll call this customer “A”.
Customer A decides to tell ten of their friends about your service and three of these friends end up trying your service. That’s an additional $750 on average from three new referrals that you didn’t have to spend any money on.
$250 average first time purchase x 3 new customers = $750
Considering that this residential company does a great job with these new customers and manages to keep them for a minimum of six months. That works out to $4,500 in revenue from these new customers.
$750 per month from 3 new customers X 6 months = $4,500
What if those 3 newly acquired customers also referred others, the cash- generation picture gets even brighter! All of this started from an initial $250 residential cleaning job.
This is why it’s so important to be building long lasting relationships with your customers. Satisfying their needs and having great rapport turns customers into raving fans and that is what you want to accomplish. Successful marketing is about building positive, long-term relationships with people. Never forget that simple fact because it will serve you well in your business.
Repeat business is the name of the game and where the true fortune lies. That’s why I always recommend to my clients that honesty, integrity and reputation are so important to a business that wants to grow and flourish. The real profit is generated from sales beyond the initial purchase.
Cost Absorption
The initial sale often absorbs most of the costs associated with acquiring a customer. Therefore, each subsequent sale has a higher percentage of built-in profit, than the one before. It doesn’t take long for the profit margin to increase, less of course the cost of service (Staff, Cleaning products etc etc)
Additional Products or Services
Understanding your clients needs really well is important. Once you have this knowledge, you can offer additional services and products.
Using the residential cleaning example again –
How about offering a carpet and/or upholstery cleaning service as well as your standard house or deep cleaning service? Maybe you could even sell them handy spillage cleaning wipes for when those accidents happen where someone has knocked over their wine glass and caused a nasty stain on the carpet?
Or how about a nice fresh fragrance spray your customers can use when they want to freshen up the house and clean out some of those odors from pets?
I hope you are starting to see the potential here right? Get to know the true value of your customer and you’ll be able to make educated decisions on how much you are willing to acquire a customer.
