What is the lifetime value of a client and what is their contribution to your business?

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A two-part question and one which a lot of organisations find surprisingly hard to answer.

Sure, an accountant can look back historically and quote revenue, a sales person can quote sales figures. But is that as far as it goes? What about intangibles that don’t get measured such as referrals, contribution to new product and service developments, insights to winning new business, reduction in waste?

Oh, and by the way, when we are looking at value, what about the negative side of the equation and the cost to service that client? Poor relationships generally demand an inordinate amount of time – time that could be used more effectively elsewhere. What about the negative referrals given and damage to the business?

Maybe it’s time to think about the value of your customers in a different way. Maybe even cease to have a relationship with those that on balance, cost more than they return.

In my youth in the oil retail sector, our chief accountants’ mantra was to deliver full tanker loads to our closest customers as they are the most profitable ones – low cost of transport and maximum margin – and ignore everyone else! In reality, life isn’t that simple and any enlightened CFO understands that.

Maybe it’s also time to look at your customer relationships differently, bring insight and knowledge into the business that helps properly evaluate them over the lifetime and improve the return on the investment you both make in the relationship.

Rob Brickle
Rob Brickle is Managing Director of Bsquared Consulting, a company which specialises in helping organisations improve their business-to-business customer engagement and loyalty. Rob has many years experience advising business leaders on change and strategy and has a passion for helping organisations maximise the lifetime value of their relationships with key customers, suppliers and other key stakeholders.

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