Customer Interactions Four in ten senior executives in larger companies don’t know the lifetime value of their customers. That’s according to MarketingCharts who quoted a Forbes and Sitecore study that surveyed 312 senior executives in North American companies. Not only did 40% of the leadership surveyed not know the financial value of their customers, but […]
Four in ten senior executives in larger companies don’t know the lifetime value of their customers. That’s according to MarketingCharts who quoted a Forbes and Sitecore study that surveyed 312 senior executives in North American companies. Not only did 40% of the leadership surveyed not know the financial value of their customers, but over half of them don’t plan to. In other words, they don’t care or see the merit in this important number.
This absolutely surprises me. If the leaders of these organizations don’t know, then you can expect that the employees don’t know either. Yet when employees know and have clarity about the lifetime value of the customer, they can make better customer-focused decisions.
Let’s look at a simple example that most of us can understand. We’ve all gone grocery shopping. Several studies indicate that an average customer of a grocery store spends from $80 to $200 each week. Let’s make this easy. Let’s say that the average customer spends $100 each week. Assuming he or she takes a couple of weeks off for vacation, that’s 50 weeks they buy groceries, which comes out to $5,000 each year. But it’s even more than that because we’re talking about the lifetime value – not the annual value.
The average family moves about every seven years. Assuming they move out of the neighborhood, that means that the average customer or family is worth about $35,000 in business over those seven years. So, the next time they complain about a carton of spoiled milk, give them their money back! Is it worth upsetting a customer over a few dollars, when they are worth $35,000? Of course not!
Once you know the lifetime value, you must know what to do with it. Here is a five-step solution:
In short, knowing the value of a customer makes sense. Here is a simple guideline: Manage the interactions you have with your customers with the lifetime value in mind, with each and every interaction.
Shep Hyken is a customer service/CX expert, award-winning keynote speaker, and New York Times bestselling author. Learn more about Shep’s customer service and customer experience keynote speeches and his customer service training workshops at www.Hyken.com. Connect with Shep on LinkedIn.
(Copyright ©MMXIV, Shep Hyken)
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