Calculate the True Value of a Customer

True Value of a CustomerBy calculating the true value of a customer, or potential customer, it places a value on the total sales and profits generated by the customer over their lifetime with the business. The actual numbers can be astounding. For example, although the initial sale may only be $100, the value of repeat sales over a 20 year period can end up totaling over $200,000.

When you calculate the potential value of a customer you realise:

  • That the first sale to a customer is rarely profitable. The costs involved in gaining and servicing a customer’s first sale are really a long term investment.
  • The profits from a customer are generated over many years from repeat sales. The key is building a long term relationship with the customer.
  • Repeat customers are satisfied customers and bring new customers to your business. They are your best advertisement, marketing company and public relations firm as they actually use your services or products and recommend you to their family, friends, and work colleagues.
  • Repeat customers need to be valued and serviced to a high standard or they will be lost.

The only way to maximise the true value of a customer is ensuring they are retained as a 20 year repeat customer. To do this, businesses must be customer focused and actually adding more value to the customer than they charge.

If you need help to work out how to calculate the lifetime value of your most loyal customers, please contact Tradies Advantage to book in for a FREE Profit Improvement Discovery Session.

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Please Note: Many of the comments in this article are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.