The lifeblood of any business is its customers. They are the purpose of our business—and any purpose other than serving your customers puts your company in a vulnerable position.
The fact is, demanding customers make us better. Their needs help bring about never-ending improvement as we make changes for their benefit.
Since customers are the purpose of our business, it’s important to understand and calculate the lifetime value of a customer.
There are many ways to look at the value of a customer—here is one way:
Calculating the Lifetime Value of a Customer in the Print Industry
Annual Revenue. Calculate the annual average revenue of each customer.
Longevity. Calculate the number of years this customer will be with your company.
Referrals. Calculate the number of people who buy print that this customer will refer you to in the future.
Referral Longevity. Calculate the number of years this referral customer will be with your company.
Here is an example:
Annual Revenue for Customer = $100,000
Longevity = 20 years
20 years x $100,000/year = $2,000,000
Average number of referrals = two
Longevity = 20 years
20 years x $100,000/year/referral x 2 referrals = $4,000,000
Current Customer Lifetime Revenue = $2,000,000
Referral Customer Lifetime Revenue = $4,000,000
Total Current and Referral Customer Revenue from one current customer = $6,000,000
Wow … $6,000,0000 of revenue over 20 years as the result of one current customer! This shows the significant revenue impact of taking care of our customers.
There are several ways you may want to use this tool:
Communication to Your Team
Take the time to talk with all of your team members about the lifetime value of your customers, whether your team members are in sales, customer service, or any other position. They probably never thought of this value before now. It will open their eyes to the importance of retaining each customer over a long period of time.
Improve Your Processes
If you develop a better understanding of the lifetime value of a customer then you will want to improve those processes that have a positive effect on the customer experience. As a result, your customer will feel more appreciated and be more likely to stick with you for the long haul.
Place the Customer First
All of us say that the customer comes first, but many of our companies could do a better job removing the roadblocks to better serve them.
Survey Your Customers
Find out what is actually important to your customers and then develop a plan to make those desires happen. In the process of surveying your customers, you will create loyal customers.
There is much value in understanding the lifetime value of a customer. It opens people’s eyes to how much keeping a customer means to a business, as well as serves as a motivator to improve the customer’s experience.
How do you calculate and use the lifetime value of a customer in your print business?