Four in ten senior executives in larger companies don’t know the lifetime value of their customers. That’s according to MarketingCharts, which quoted a Forbes and Sitecore study that surveyed 312 senior executives in North American companies. Not only did 40 percent of the leadership surveyed not know the financial value of their customers, more than half of them don’t plan to. In other words, they don’t care or see the merit in this important number.
This absolutely surprises me. If the leaders of these organizations don’t know, then you can expect that the employees don’t know either. Yet when employees know and have clarity about the lifetime value of the customer, they can make better customer-focused decisions.
Once you know the lifetime value, you must know what to do with it. Here is a six-step solution:
- Calculate: Determine the lifetime value of the customer. How much the average customer spends each time they buy, how often they buy in a year, and how many years do they buy? This is a bit of a simplification, but a good start.
- Communicate: Share this information with employees so they can make better decisions.
- Demonstrate: Give them examples of the kinds of decisions they can make; refunds, exchanges, upgrades, and more.
- Recognition: Recognize when employees make good decisions. Encourage them to do more of the same.
- Teach: Conversely, if an employee makes a bad decision, help the employee feel good about trying to make the right decision and confident about what to the next time.
- Share: Tell the story. Share the good – and even the bad – examples that demonstrate how employees are making decisions based on the lifetime value of the customer. It’s part of their ongoing training. In short, knowing the value of a customer makes sense. Here is a simple guideline: Manage the interactions you have with your customers with the lifetime value in mind, with each and every interaction.
Manage the interactions you have with your customers with the lifetime value in mind, with each and every interaction.
This is an excerpt from a story, written by Shep Hyken, that first appeared on Shep Hyken’s Customer Service Blog. Read the full version here.