Each week I get emails from many of you who tell me how my weekly tidbits have opened new doors for you…or helped you enhance your vision of sales, marketing, and customer service…or break free from the old (and often tired) ways of doing things. And most importantly, provided you with innovative ways to increase your company’s profits.
But some of you write me and want me to discuss specific things.
Somebody asked me about determining customer value in their industry, and how important it is to understand what a customer is actually worth.
It’s hard to give one single answer or piece of advice because, in every company and every industry, the value can be radically different.
For example, the value of a customer might be related to total profits since the customer became a customer. Or, you might have a customer with high value because they act as a referral source. Web services, for example, might gauge value based on the total number of visits to their site, number of times a user logs in or makes a forum posts.
The point to remember is that every customer represents an asset to your company, and while each has value today, they also have future value.
Of course, we also recognize that our customers and clients are valuable because they are people, and we exist to serve them. Remember, nothing has ever been sold to a company. But in the narrow area of looking at lifetime value, we will use the somewhat mercenary lens of assets.
Their value today is determined by what value they’ve given to your business from the point of becoming a customer up until now. In this case, it doesn’t matter how you measure it. Everything after today is future value.
We can estimate future and potential value once we decide what we’re measuring and the history of that specific customer/client. In Evergreen, I walk readers through many different scenarios and options for determining customer value. It’s quite possible to have multiple definitions of customer value amongst your customer groups.
There are two important key points to all of this.
First, you need to know what you’re measuring and which customers fit the profile. You need to know who your high-value customers are, and what makes them distinct. What commonalities or traits are found in your top customers?
Are you doing enough to keep these customers happy? Are you paying enough attention to them? Are you recognizing them and rewarding them when the time is right?
Are you doing enough to move other customers into your group of high-value customers?
The second and most important point is to understand that every “asset” you lose today represents zero in future value.
So to answer the reader’s question in a roundabout way, “Yes, it’s extremely important.”