The Value of a Customer:
What does it cost?
Sponsored by (Your Company Here)
You may not think of customer service as a cost but it can have a significant impact on the cost of your product or service. Increasing costs are a fact of life for all businesses. The price of oil has had a significant impact on costs; add to this the cost of credit, the cost of insurance, labor, shipping, travel, and now the cost of customer service, wow!
If you can pass all of these costs along to your customer and remain competitive, great. If not, then your profit margin takes a hit. My experience is that someone has to pay every cost. The choice is either you or your customer. If it is you are your pockets that deep? Or is there a way to take charge and control these costs?
These are scary times to be in business and determining the real cost of doing business; may be something you would rather not know. The good news is that we can closely examine our costs and focus on methods for identifying controllable costs and minimize those costs. Let me give you one area you can control that will produce a win/win for you and your customer.
Advertising and Marketing should always be looked at as an investment in your business. You are investing in your business by buying customer leads to convert into sales. Creating and implementing effective advertisement and marketing campaigns are a great ways to increase sales. Should you look at this as a cost of business or and investment?
If the advertisement effectively attracts potential new customers and if they can be converted to a customer that will return again and again; then your investment has paid off. If, however, a potential customer has a bad buying experience then your investment in advertising and marketing has turned into a cost of doing business.
There are a number of factors that can contribute to a bad buying experience, which we’ll discuss in later issues of B/NV. Now we want to use a simple tool to calculate the direct and indirect value of that potential new customer. Attached is a worksheet that will help in your calculation. The sheet is available in two formats, one an Excel spreadsheet which contains formulas. The second is a PDF file for hand calculation.
The good news during this economic downturn is that you will have time to examine your business make improvements and be ready for the inevitable upturn returning with a leaner more profitable company. Knowing the value of a customer, new and old may not only pleasantly surprise you but will be a helpful tool in evaluating and quantifying advertising and marketing returns. Your staff will also see the value of providing good customer service all of this will go along way toward promoting the success of your business moving it to the next level.
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Library of Congress Cataloging-in-Publication
Business/News & Views® / by David. W. Weatherholt
ISBN: 978-0-9823041-1-2 (electronic format)
Published in the United States of America through www.waconsult.com
Published in an electronic format by Weatherholt & Associates, LLC
First Trade Publishing: October 2008
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