What Is a Clients Lifetime Value?

Matt Duray, President and CEO, The Connect Group

When we go through our daily lives, it is easy to overlook the transactions that ensue every day: a tank of gas here, a cup of coffee there, grocery shopping at night.

When looked at in isolation, the cost of customer dissatisfaction from these transactions seems minimal. For example, if I stop at Starbucks every day for a $4 cup of coffee, and I am treated without the respect deserving of each and every client, I may never return. We can look at that and say, “For a $4 cup of coffee, there is not much Starbucks can do to make that customer happy.” However, if we look at the total value of the client ($4 times 300 days per year, times five years), then the cost of losing that customer is $6,000, assuming a conservative gross profit of 50 percent on a cup of coffee.

Remember, Starbucks’ fixed costs do not change if they add or subtract one cup of coffee: Rent is the same, staffing is the same, advertising is the same. You get the picture. What could Starbucks afford to do to leave every transaction on a high note?

What could you do? I understand that in some instances you cannot do what it would take to please every client. However, how many times do you not take the steps that are financially feasible to make the client happy?

What can you do in your business to ensure that your staff is delivering the type of service that will scream to your customers: “I care about you!” After all, isn’t that what we all really want? We want to give our hard-earned money to a business that seems to care. I hear it all the time. We tend to frequent the smaller stores and shops because they know us by name, they know our preferences and they genuinely care.

In my company, we have instituted a follow-up system on all service orders to ensure that we are exceeding the expectations of the clients. In the event we score less than a seven out of 10, those reports are routed directly to the desk of the owner. We score on average of 9.41 out of 10.

Next time you have to deal with that difficult situation or client, take a minute to calculate the lifetime “cost” of the decision you are about to make.

Matt Duray is president and CEO of The Connect Group, which specializes in helping businesses increase their profitability and competitive advantage through the proper deployment of technology. Duray is a seasoned entrepreneur with more than 20 years in the telecommunications industry. He currently serves on the dealer advisory board for Great America, TAG National and Samsung Telecommunications America. He graduated from DeVry Institute of Technology in 1991 with a bachelor’s degree in telecommunications. He also is a member of the 2009-10 PHONE+/Channel Partners Conference & Expo Advisory Board.

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