How Much are your customers worth?
At this time of year, I am often reminded of a story told to
me by my favorite sales manager, Lou Mate, early in the eighties, at the
beginning of my sales career.
Apparently, just after the holiday season, a new customer service representative
employed by a grocery store in the States was approached by an irate woman about
the quality of the turkey she had bought and cooked for the holiday.
As the story goes, the very agitated woman confronted the customer service
representative and told her that the turkey she had bought was bad because it
came out of the oven dry and tasteless. The customer service representative
argued strongly that there was nothing wrong with the turkey, that it was in all
likelihood the way the woman had cooked it that caused it to be dry.
Fortunately, the store manager happened along just as the woman appeared about
to blow a gasket. The store manager inquired as to what the problem was and upon
hearing the woman’s story, apologized, refunded her money and gave her a fresh
turkey, as well.
The customer service representative was aghast and immediately asked the store
manager for an explanation.
The wise manager explained to her that the average customer spends one hundred
dollars a week on groceries. That adds up to fifty two hundred dollars per year
or one hundred and four thousand dollars over twenty years. He went on to tell
the customer service representative that twenty dollars was a pretty inexpensive
investment to retain a customer worth over a hundred grand. What an interesting
way of assessing the value of your customers!
Not all customer retention is good, but the beginning of the year is a good time
to ask yourself what is the value of each of our accounts. I am often amazed to
hear my clients say that they determine which accounts will be “key” or
“strategic” based on historical revenue. My suggestion is, yes, existing revenue
is important, but the potential for increased market share and penetration is
even more important in deciding where to allocate the assets of your
organization.
To assess whether your account is at risk, has the potential to grow or needs to
be maintained, implement the following steps:
1. Identify the key buyers with whom you need to have a relationship in order to
understand and advance their perception of your organization.
2. Remember to target buyers higher and wider than your existing base of
contacts. Avoid getting stuck in a silo.
3. Interview each of the key buyers that you identified to determine the
stability of your relationship with the account and to understand the customer’s
short and long term organizational and operational objectives.
4. Determine the total market potential of the account over three years.
5. Implement an account plan that aligns with the type of account that you have
determined they are: growth, at risk or maintenance.
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