The Harvard Business School promotes its version of the “Customer Lifetime Value Calculator.” This is a method of determining the true potential financial impact of your customer to your business.
There are 5 main pieces to the impact-calculating puzzle:
· Base profit – Transactional profit
· Profit from increased purchases – Profit from multiple transactions
· Profit from price premium – Profit from willingness to pay more per transaction
· Profit from reduced operating costs – Profit from less expenditures to retain than acquire the customer
· Profit from referrals – Profit from less expenditures to get customers via referrals than marketing/advertising to acquire them
So if this is the financial “Why” of customer retention, what is the “How?” The “How” comes from 3 things:
· First, you have to have what we call a Client Relationship Development (CRD) strategy to continually “touch” and develop relationships with customers over time – even when they’re not spending a dime with you.
· Second, you need to have a Client Experience Management (CEM) strategy – where you build a service and sales experience that hits all the key hot buttons.
· Third, you need a Service Culture that creates the people, processes, attitudes, structures, communications, and general alignment of everything the organization is about…toward the customer.
Calculate your customer’s potential lifetime value, and then create the “How” strategies to tap into those dollars.
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