Lifetime value: spotting your customer’s true worth

Traditionally, companies have tended to treat customer service and marketing as separate concerns, but a recent event I attended at Henley Business School - which I was invited to by Capita - had me concluding that the two principles are often bound together inseparably. The fascinating insight provided by main speaker Moira Clark, a professor of strategic marketing, went way beyond the accepted wisdom that the customer is always right.

Here's a nugget of information that really struck a chord: the level of service a customer receives should have nothing to do with the amount he or she spends in any given transaction. That's not a simple warning against favouring high-spending customers over more thrifty ones - it's about the concept of Lifetime Value. In fact, businesses that trade in low-value, high-volume products should take special note.

To illustrate the point, Professor Clark used the example of a well-known food takeaway establishment, who train their staff to treat the customer like royalty even though any one transaction is generally just a breezy seven pounds or so. If the customer has a consistently good experience, he or she will spend up to £7,000 over ten years. The bigger figure is the one to keep an eye on - but treat the first transaction like it's trivial and that future revenue is in serious jeopardy.

We pay close attention to this at Make It Cheaper. The fact that our service is free means the amount we spend on establishing contact with a customer pretty much accounts for any revenue we might get from suppliers on their first switch. We place a huge emphasis on the customer having a fantastic experience the first time around, because our business is only sustainable if that customer uses us for future switches and other services.

The principle that it is more efficient to retain an existing customer than recruit a new one rings true for businesses of all shapes and sizes. Companies as large as Tesco are using Twitter to handle individual enquiries in the knowledge that customers want to be empowered and they want their voice to be heard. If that kind of social media activity doesn't suit the nature and scale of your business, you can encourage conversation simply by making yourself easy to contact. Taking it one step further; something as simple as a feedback form can make a customer an active stakeholder in your company or brand.

As well as giving you fresh insight, a positive, productive and personal two-way conversation with a customer helps foster the loyalty that will create Lifetime Value. It will also have a much larger reach, because a customer you retain is a customer who recruits new customers for you. This emphasis on retention and recruitment means customer service is not just about handling enquiries - it's a crucial weapon in your marketing arsenal.


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