January 19, 2021

How much are your customers worth to you ?

This may be a question that a marketing person asks you, but do you know how to calculate it?

The first element will be how much does a ‘typical’ client add to your turnover in a year? This then begs the question, what is typical? So, you might wish to group them and do a calculation for each type. That’s fine as you are already identifying that not all clients are the same.

Tax return sooner rather than laterHaving decided contribution to turnover, the next element is contribution to profit. You may have some clients where there is only a small contribution, but it is regular and there are no hassles involved in these types of clients/customers. They do what they are told, give you plenty of notice and always pay on time. You may also have a group who seem to apply the 80/20 rule. They use 80% of your time for 20% of the rewards. If you are accurately measuring profit, have you included enough follow up and administration time to answer all their queries and spend days on the phone and writing trying to collect payment.

The next element is how many purchases do they make from you? Have they driven you down on price, purely to move on next time to the next special deal they can find. Do they value consistency and may even be prepared to pay more for the knowledge that you will charge them a fair price and offer a quality service rather than skimping to keep within budget?

The final element, which is what made me choose this topic, this week, is how much marketing do they do on your behalf? Sometime this may be a direct referral, sometime it may be that several of your clients/customer have spoken positively about their experience of your service/product, or it may be that you have signage on your car/van and others have seen you in the area and built up a certain trust. If you had not been in the area for a particular customer, others would not have seen you.

So, I have not given you a precise formula for how to work out the answer, but hopefully food for thought.

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