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Customer-Lifetime-Value

Personal story: I remember trying to help get a new account for a hotel. Our sales people could not even get a response. I knew someone at that company but still kept getting push-back from the contact. Finally, my connection told me that the CEO would never do business with us. He was once walked to another hotel* and vowed never to use our brand again. This cost the entire hotel brand millions of dollars per year.

My dad (family are networks too) knew this CEO and called him on my behalf. The CEO agreed to meet with me. After pleading not to be judged on one incident in a different location, he shifted the business to our hotel. He still wouldn’t use the rest of the brand. Eventually the CEO moved on and the company started using this brand again. I don’t recall the exact numbers but the business loss was somewhere in the neighborhood of $10 million. Why? Because we didn’t know the value of our customer. I say we because it could happen anywhere. The employee couldn’t have known the value of that customer. There was no information like that available. The employee couldn’t have planned better. When the incident happened at 2am, the decision was already made. __________________________________________________________

Most of us have heard an upset customer say one or all of these things.
“You don’t know who I am”
“I am the ____________ for _________ and I make the purchasing decisions”.
“When I get back, I am going to tell ________________”.

What is a customer worth?
There are:
Stats.
Analytics.
Metrics.
Studies.
Averages.
Estimates.
Gauges.
Rules of thumb.
Guesses.

Just plug the term ‘lifetime customer value’ into your favorite search engine. There are countless formulas, algorithms, and theories. There are also disturbing terms like churn and cycle. Maybe because we have only looked at them as numbers. There is no one single answer. That customer may buy a pack of gum and is never seen again. We only know what a customer is worth when we know who they are and what they do.

We should be an advocate for always taking care of the customer (or choose another way to make money) . We should make things right when we mess up. We should be constantly striving to turn an unhappy customer into a sales person.

Sometimes we might need to recognize that they are not the right customer for our particular business. Do both of us a favor and tell them where they may be happier. Give them directions and a phone number. They may call and thank us later.

We may never know who that customer is and what they are worth. The customer could be worth a pack of gum, or the start of something beautiful. Maybe they will send us business or maybe they will buy our business.  If we don’t know, let’s treat them like they are worth $10 million until they prove us wrong.

What is a customer worth? They are not all the same. Tell us about them. Tell us what they do. Tell us their position. Tell us how many connections they have. Tell us how many other [potential] customers they talk to. Just knowing their pattern isn’t enough. We have to know their sphere of influence. Could they be our next free sales person?

Have the courage to discover the value of our customer. Have the courage to look deeper. Have the courage to not to look at them as a statistic. The more we know may just change our perception about their value.

Do you have a story about the value of a customer? Maybe you under/over estimated someone? Please share it in the comments below.

*Walked to another hotel = moving to another hotel when oversold. Every hotel (and airline) has these situations. The bottom line is that hotels have to play the averages. They have inventory that expires every night. While they ask for a guarantee; plans change. People don’t show up. People show up early. People that were supposed to check-out leave their belongings in the room and leave for the day. Sometimes due to weather, emergencies, forgetfulness, someone else messed up the reservation, etc. Sometimes their credit cards are not valid. Hotels don’t like overbooking.  But with expiring inventory and no show reservations almost every night, there is no choice. The relocation of some guests will happen until everyone is perfect. When things go bad at 2am, it’s all about the recovery process. We might just turn that relocated guest into a lifetime customer.

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