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Have Customers for Life, But Not at a Loss

Posted by Tom Smith on Mon, Jan, 06, 2014 @ 06:01 AM

 

customers for life

 

 

 

 

 

 

I'm a big proponent of companies having a "customers for life" philosophy.

I believe such a philosophy generates long-term, mutually-beneficial relationships and more profitably businesses.

However, customers' needs change over time and so will your definition of the "ideal" customer as your business evolves.

While it is worthwhile to have a customers for life philosophy, it may not, and probably won't be , mutually-beneficial for you to have a particular customer for "life."

As a business owner, you need to know the lifetime value of each customer.

What's the cost of serving each customer? One customer may buy less frequently but never make any special requests while one of your most frequent customers may be "nickel and diming" you, or your employees, to death by making special requests.

Be aware of the service cost for each customer and work to reduce it.  If you can't reduce it, you must pass along the higher cost of service to the customer.

Many years ago I had a client that was very particular about what printer printed her jobs and the quality of the work. She sent back every other job to be reprinted. The printer just doubled their price to ensure they didn't take a loss on this demanding customer. Ultimately it was a "win-win" for both parties; however, not for the company that employed my client.

When a client's needs, or your business, changes to where you are no longer the best solution, help your client find the right solution.

For a small client that you've outgrown, this could be a former employee who has set up their own consultancy.

For a client who is a customer service nightmare, send them to your biggest competitor. They'll appreciate the business and if they're not keeping up with the lifetime value of a customer and the cost of serving customers, you're providing them an opportunity to learn.

My best friend owns a bus company.  He quoted a large contract for a local university.  His competitors came in well below him and got the business.  Today his competitors are no longer in business.

You must know your costs and ensure you are making a profit. Loyal customers understand this. That's one reason loyal customers are willing to pay more for great customer service. They understand you get what you pay for.

Strive to have trusting and transparent relationships with customers and vendors. People like to do business with those they know like and trust. They also want them to be successful.

Do you know the lifetime value of your customers?

Do you know the cost of serving your customers?

Do you vary your pricing based on the value and cost to serve?

 

Here's a fun infographic from my friends at The Website Group on different types of customers.

 

Download the Free e-book  "Customer Bonding Programs:  How to Get, and Keep,Customers for Life"

Tags: customers for life, outstanding customer experience, transparency, trust, people do business with those they know like and t