What is the Lifetime Value of a Customer?
We all hear it, one satisfied customer with tell 15, but one unsatisfied customer will tell 1,000. I don't know if that is the actual quote, but I believe it has some legs when talking about customer service in definitely the hospitality industry.
People like to be heard when they have a good experience, but sometime we believe that everyone already knows about it....However when we have a terrible experience we like to have vengeance on that establishment and become "keyboard warriors" telling everyone about it, even if we didn't understand that employee has their side of the story as well un-heard.
That being said however, we are talking about these people and the impact each customer has in this industry in a lifetime if we do our best.
- What is the average sales per person that comes in?
- How many visits does one person have a month on average?
- How many years on average does that person visit your store before moving on?
- Do those people refer their friends about your business?
These are all the questions you need to ask yourself first to understand the rest.
- For every satisfied customer:
- Figure out on average how much one person spends at your business a year.
- Than figure out how much that person spends in an average lifetime with your business.
- Than times it by how many that person would refer to your business (include that person)
= Lifetime value of one person who likes your business
- For every un-satisfied customer:
- Knowing the average of what percentage of negative referrals don't become a customer is in your niche market is important to understand.
- For most markets the average is 25% of every negative referral won't come in.
- So play around with this and see how many people would one person refer not to go and times it by the lifetime value calculated above.
Might help you rethink some of your customer service trainings.