If you don't know how much a particular customer is worth, you can't determine whether or not you're getting a good return on your marketing investment.
Every customer does not have the same value to your business. A customer who uses you only once and spends $100 is worth significantly less than a customer who spends $1,000 and repeats annually.
When you understand that customers represent different values to your business, you will have greater control over your clientele.
There are four key elements that determine the value of a customer. Use these elements to help in your customer analysis.
Frequency
The more often you serve a customer, the greater his or her value to you.
A customer who calls you once a year is worth twice as much as one who calls you once every two years for the same amount of work.
Some cleaners assume that if they successfully service a customer they will automatically call again. This is a false assumption.
Many consumers go years between cleanings and feel no obligation to use the same company again, no matter how good the company performs its work.
The strongest indicator that a customer will repeat is that he or she has already called on you more than once.
Another way to determine the likelihood of a customer repeating is to ask how long it has been since their last cleaning.
If it has been a year since their last cleaning, in all likelihood they will call you again because they value regular maintenance of their carpet or upholstery.
If he or she can't remember the last time they had any cleaning done, it's unlikely you will see that customer a second time.
A customer who uses your company only once is worth a fraction of a customer that uses your services regularly.
Size of the invoice
Customers with larger invoice averages are more valuable to you than those who spend less on your services.
For example, a customer with a 3,000-square-foot house might have more carpet for you to clean than one whose house is half the size.
The other factor determining the size of the invoice is the customer's willingness to use more of the services you provide.
Customers willing to purchase fabric protection, upholstery cleaning or other services you provide — such as tile and grout cleaning — create larger invoices.
A customer with a $200 job average is worth more than twice as much as a customer with a $100 job average.
Not only is the dollar amount doubled, but you are doing the work in one service call. This saves you time on extra travel, setup, public relations and giving quotes that would be required if you did the same amount of work in two separate trips to the home.
Hourly revenue
The more money you earn per hour working for a customer increases his or her value to your business.
The major factors that affect hourly revenue include:
- Price charged
- Discounts offered
- Setup time
- Time spent on public relations/quoting the job
- Amount and type of soil.
The higher the price charged, the fewer discounts given, the easier it is to setup and clean the job and the less amount of time you spend with the customer quoting the price all increase the hourly revenue.
These factors vary from job to job and contribute to the different valuation of each customer.
Higher hourly rates can double the value of a customer. Here's how it works.
Let's compare a "one-time $100 customer" to a "$300 job average customer" that repeats five times and has a significantly higher hourly rate.
The customer with the larger invoice that repeats at a significantly higher hourly rate is worth 30 times more than the one-time customer.
Referrals
Customers that refer you to others are more valuable to your business than those who don't.
Determining which customers will refer you is hard to predict.
Some customers may refer someone to you only once, while others may refer dozens of new, high-quality customers.
Every new invoice that comes to you from a referral adds to the value of the referring customer.
When analyzing the profitability of a marketing campaign, make sure you know which type of customers it is producing.
It is not enough that an advertisement made the telephone ring and you felt busy.
Judging your marketing on the immediate creation of revenue is dangerously misleading. If the result of your marketing is merely the acquisition of mostly one-time customers, you are probably losing money.
Understanding that repeating customers are worth many times more than one-time customers should change your priorities. You should give preferential treatment to valuable, repeat customers.
If you have the choice between giving a prime scheduling time slot or a discount to either a new customer or a repeat customer, the repeat customer should win every time.
Analysis is important
Knowing which of your customers are the most valuable and which are worth less is important to planning the growth of your business, determining the value of your marketing efforts and for establishing a value for buying or selling a clientele.
Take the time to determine which customers qualify as the top 20 percent of your customer base.
Treat these valued customers with the appreciation and respect they deserve.
Failure to do so can result in losing them to your competition.
Steve Marsh is the creator of the Be Competition Free Marketing Program. He is a 30-year veteran of the carpet cleaning industry, an IICRC-approved instructor and a Senior Carpet Inspector. Marsh is a marketing and business consultant who provides a turn-key program for attracting better customers. For more information, log on to www.BeCompetitionFree.com.
