What is a customer actually worth?

Any business owner knows these phases where you simply don’t know where to start. Ideally, you’d like to call all of your customers and give them intense support. But time and budget don’t allow it. There is an effective way out of this dilemma: customer value analysis. Customer value helps you to set a course and use your personal resources in the most profitable way. On customers that will really pay off.

Separate the wheat from the chaff

Customer value means you can prioritise customers by various criteria and, to put it simply, separate them into important and not important. After all, not every customer is profitable. How often do we put all our energy into a customer to hardly earn a cent while unfairly neglecting others completely? Customer value separates the wheat from the chaff so attention can be redirected to really important clients.

Important criteria in customer value analysis

First of all, a customer’s value can be measured by how much money they have spent on products and services up to that particular time. This allows an initial categorisation into high-sales and low-sales customers. But this observation is one-dimensional and solely based on the past. If you want to carry on doing good business, you should also look ahead and evaluate your customers with an eye on the future. Customer lifetime plays an important role, and therefore the prognosis of how long a customer relationship will foreseeably last. Here, you can rely on values from your experience or take a look at your customer’s personal circumstances in relation to the product portfolio: a person starting a family has different needs to a sporty single or a pensioner.

Is the cost-benefit ratio right?

A fact that is often neglected in practice when looking at income and sales: customers also create costs. Sometimes more than they bring in. Anyone that requires an enormous amount of advice, constantly returns goods or only pays their invoices after several reminders not only creates considerable costs but also blocks the time available to you. This is why it’s so important to include this criterium in your evaluation.

What value does my customer have as a multiplier?

But even low-sales customers can have a high customer value: namely, those a high potential for recommendations. Especially in this age of social media, recommendations are increasingly important and multipliers should be handled with the greatest care. If a customer has good credibility and a large network, this could significantly impact sales especially in the fields of consumer goods and luxury products.

Increase sales with your most important customers

If you use the criteria outlined above to regularly track your customers’ value, you can better allocate your personal and financial resources more effectively. And that means avoiding the scatter gun approach, instead providing the most profitable customers with the most support. Unprofitable customers will no longer take up unnecessary time and money.

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