We all know that customers are super important in our businesses. They are the blood that drives us. But what some of us- or most of us for that fact- have not looked at is: what’s the value of a customer? What is the price that a customer is worth? Ever since we started our companies, the big goal has been to get as many customers as we possibly can. But, we never really stop to think about what one single customer is worth in a lifetime.
Why is it that companies like Home Advisor, Thumbtack, and others charge for leads? I mean we all know that the potential is worth something, but how do we know if it’s worth it? I mean I have customers that only pay $149- that’s not a lot. But there’s something that we should look at when valuing a customer. There’s a few things that some of us may not even notice. Customers are worth way more than you would think.
I know, I know- you think that you know where I’m going with this, right? The lifetime of that $149 customer could be the next 10 years of a $149 job right? That’s $1,490 that customer is worth to me. What we forget to realize is that that particular customer is going to be our cheerleader. That customer is going to tell anybody and everybody that ever talks window cleaning with them all about how awesome you and your company are. If their friends at card club mentioned that they have to spend all weekend cleaning the windows, they’ll chime in and tell them how awesome you are, and how affordable you are. That customer loves you! They’ll tell everyone, and we all know how the game goes. One person tells someone, that person uses you, loves you, and tells more people. That cycle is going to repeat on and on.
Let’s do some average ticket math. My personal average ticket is $289. If I do that customer’s service for the next 10 years that is $2,890. But how many people will she talk to about you in a year? How many people will she talk to about you in 10 years? For simple math lets say that in one year she happens to give your information to 2 people, just 2. Now, the math goes like this- in the first year you do one person for $289, you do her, and her two friends each for $289. That is $867 worth of work in year two. Now following that math, over 10 years you will have 512 new customers, all from that one single customer. That is $295,647 worth of new work over 10 years all stemming from one customer.
Now I know, not everyone will tell two people, and people will move or die- I get that. But think about this for a second. This is how companies can be not just good, but great. This is how companies grow! If you nurture one single customer as if they are 512 customers you will see a huge return. It’s that simple. We all go back to that one customer that first average ticket of $289, and then we move on to try to find the next customer, then the next, then the next. We forget about the value of what we have in existing customers.
Do you know what your cost of acquisition is for a customer? For most of us it’s not cheap. It can be over $25 per customer. That is our cost of acquisition. Now, what if those 512 new customers that we got over 10 years were free? I mean after all, referrals are free right? That is a customer acquisition cost of $12,800. By that one person telling two people and so on, and so forth, we just got a free $12,800 worth of acquired customers.
All because we nurtured our existing customers. We reminded them every year that we would love referrals. We create an amazing experience that they want to tell their friends about. Now, if you want to keep that up at notch you ask them. You ask them for referrals. You tell them how important they are to you. You let them know that you are a small family run business that thrives on referrals. Now your adoring fans really want to help. They want to thank you in their own way. Now they make their mission to get you referrals.
They tell everyone they know about you. You’ve created an army of sales people, all working for free. All singing your praises. This is how growth happens. Not only from new customers, but more from the existing customers you have. People love you, right? Why not get them to tell everyone else that they love you?