EditorialsLeadership

What is the lifetime value of your customer?

Businesses tend to focus on real-time transactions. When we make a great sale, we pat ourselves on the back, put it in the books and then forget about it. Sale complete — time to pivot to the next prospect. But have we missed the possibility of future sales? Have we discounted the lifetime value of our customers?

Maybe it’s time to think about sales as a lifecycle. Each sale has the potential for future sales of similar product or service to the same customer. Sometimes those are next week, sometimes 10 years later. Either way, they’re worth it.

Long-term value of the customer
At Tractor Supply we emphasize the long-term value of a customer. A Tractor Supply customer who owns a horse will spend somewhere between $10,000 and $30,000 at our store during the lifetime of that horse. Therefore, it is our goal to make sure that every transaction is positive and successful.

But it’s not important whether a customer is shopping in the store three times a week or three times a year. In either case, we know it’s to our advantage to build a long-term relationship by believing in the long-term value of the customer.

Long-term relationships with the customer
How often do you and those in your organization contemplate the next sale to the same customer regardless of the timeframe? Keeping customers should be a priority. Whether through an intentional strategy or everyday conversation, continuing positive contact with a customer will only boost your business reputation, not to mention sales numbers down the line.

Unfortunately, long-term relationships are often forgotten. Car salespeople, for example, are smart to remember that each customer will be in the market for another car some day. For example, my wife and I recently went shopping for a new SUV. With no ongoing relationship from our last car purchase, we simply started at the most convenient dealership. If a salesperson had stayed in touch, we would likely have started there. A potential sale — and a large one at that — was lost.

Similarly, when you shop for groceries price and quality are certainly important factors, but so is service. At a store close to me I’ve experienced surly and unhelpful employees. There is another store where everyone seems to be smiling and employees even take time to walk with you to make sure to find what you are looking for. You know where I shop!

A competitive advantage
There are only upsides to staying in touch with your customers: revenue, retention and competitive advantage. The more your organization communicates with customers, the easier it will be to continuously assess the true value of your product or service. The more you know, the better you can hone your follow-up service strategy and prepare for future sales.

In addition, ongoing communication is just good practice; it might just help you improve your own selling skills. Going one step further, setting up friendly team competition to measure who does the best job staying in touch can demonstrate an organization’s strong commitment for building a better customer experience.

Long-term customer relationships can pay off this week, next year or a decade in the distance. Challenge yourself: How can you build a stronger bond with your customers?

published Nashville Business Journal

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One Comment

  1. Well said and well written Joe, spot on! Always enjoy your keen insights and look forward to many more in the future.
    All the best to you and yours,
    Sal Cinquemani

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