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Lifetime Value
March 19, 2008
In several blogs we discussed customer issues, conflict resolution procedures, and customer loyalty. We talked about how one printing company kept there customers even though they charged more and a franchise lost customers even though they offered a free service. We also discussed how changing a resolution conflict process can jeopardize customer loyalty.
A few years ago the concept of customer lifetime value became popular talking point. According to the Wikipedia it is the “the present value of the future cash flows attributed to the customer relationship. Use of customer lifetime value as a marketing metric tends to place greater emphasis on customer service and long-term customer satisfaction, rather than on maximizing short-term sales.
(http://en.wikipedia.org/wiki/Customer_lifetime_value).
Like other ideas, this one made so much sense that now people think of it as common sense. But as evidence from my rental car problems sometimes common sense is not so common.
For example, how could this company jeopardize the life time value of me one of their best customers for some minor incremental increase in revenue. I read a book once about targeting customers and it said that the best car rental customers would fit into one football stadium. I would be on the 50 yard line because I rent about 30 times a year and pay about $5000 /year. In the last 2 decades years that’s $100K and considering I could rent for another 15 years, that’s LTV of $175K.
Granted this story is talking about a car rental, but really it is no different then the customer experience in any business including the graphic arts. Like most customers I have a primary and secondary supplier. The primary is who I go to first and most -while my secondary business is there as a just in case precaution. And like any customer after a bad experience this single bad experience and the lack of concern to resolve the issue is really making my backup company look better then my primary.
Before this bad experience I used my first choice 90% time and my backup 10% time. After this experience I am changing to a 60 – 40 split. One more bad experience and it will be 90% for what used to be my backup and 10% for what used to be my primary vendor.
My suggestion, when a conflict occurs the first thing to consider is the LTV. Simply compare the LTV to the disputed amount. Regardless of your decision, at least it will be an informed decision.
Posted by Howie Fenton on March 19, 2008 | Comments (1)
