true value of customer
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Calculate The True Value of a Customer

Calculating the true value of a customer, or potential customer, puts a value on the total sales and profits generated by one individual customer over their lifetime with a business. The actual numbers can be astounding.

For example, one of the first salary tax return clients I gained when starting my accounting practice in Osborne Park twenty four years ago started at an annual fee of $80. But over a twenty year period this one client started a business, made investments, and ended up generating over $200,000 of tax fees.

When you calculate the potential value of a customer you realize:

  • That the first sale to a customer is rarely profitable. The costs involved in gaining and servicing a customer’s first sale are really a long term investment.
  • The profits from a customer are generated over many years from repeat sales. The key is building a long term relationship with the customer.
  • Repeat customers are satisfied customers and bring new customers to your business. They are your best advertisement, marketing company and public relations firm as they actually use your services or products and recommend you to their family, friends, and work colleagues.
  • Repeat customers need to be valued and serviced to a high standard or they will be lost.

The only way to maximize the true value of a customer is ensuring they are retained as a twenty year repeat customer. To do this businesses must be customer focused and actually add more value to the customer than they charge.