The Lifetime Value of A Customer

by Willie Crawford

One of the biggest factors of business success both on and offline, far too often overlooked - is THE LIFETIME VALUE OF A CUSTOMER.

What is that? It's simply the profit stream that customer will generate over the life of a business relationship.

A quick example of this principle is the classic example from Econ 101 classes. You have a customer who buys a shirt or gizmo from your business once every 6 months. Let's say you make $5 profit off each sale. Also let's say this customer buys from you steadily for 10 years. On the surface, that first sale appears to be worth only $5 profit. But if that customer remains loyal and satisfied, the real value of that first sale is the profits from all future business. If the customer is dissatisfied after the first sale, you loose the 19 sales you would have made over the next 10 years!

That one incident creating dissatisfaction with that customer has costed you not $5 in profit, but (19X5) $95 in profit. It has also costed you any customers you would have gained from word-of-mouth referrals. In-fact, a dissatisfied customer is very likely to kill many potential sales with negative word-of-mouth.

A satisfied customer will tell a few acquaintances, but a dissatisfied customer will tell many more. This principal needs to be always kept in mind when considering customer complaints and how fast you respond to them. If you cannot agree on an equitable settlement to a dispute, let the customer win.

It will often keep them as a longterm repeat customer. This is what your business success requires. If you loose a customer, you loose much more than just the one sale. Let this principle be foremost in your mind during all dealings with all customers. It will suprise you the difference it will make in your bottom line.

Over the life of a business, the wrong attitude can cost hundreds of customers. It's these hundreds of customers you did not need to loose that will make the difference between business success and failure.

A very simple, common sense principle - but one that we all need reminding of from time to time.

Willie Crawford is a well-know internet marketing consultant and writer.
His website is filled with articles designed to help you succeed.
Visit http://www.williecrawford.com today!
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