How Much Is A Customer Worth To You?

customer value

“GREAT CUSTOMER SERVICE IS WHAT SHOPPERS EXPECT. AWESOME CUSTOMER SERVICE IS WHAT THEY REMEMBER” – Leon Skaliotis

When a customer spends $50 in your store is their purchase worth $50 to your business? The answer is that it depends. Below are five points you must consider.

1. If Gross Sales = $50, If Gross Margin = 50%, Gross Profit = $25

Next, you need to subtract your fixed and variable costs. The end result is that your initial $50 sale may only be worth $20 in net profit! More on retail maths in future editions.

2. If the same customer is delighted with your awesome customer service and their purchase and they return three times over the next year and make a similar purchase:

If net profit = $20, Sales = 3, Net Profit = $60

3. If the same customer is “blown away” by your awesome customer service and they rave about your business to just two of their friends who also make similar purchases:

If net profit = $20, Sales = 9, Net Profit = $180

4. Let’s take this scenario one step further and assume that because of your consistently awesome customer service, your two referred customers each also refers two more friends who go on and make similar purchases:

If net profit = $20, Sales = 15, Net Profit = $300

5. What is the cost to your business if for any reason your original customer is merely satisfied but never returns?
What is the cost to your business if for any reason at all your original customer is dissatisfied and tells their friends about their bad experience?

A dissatisfied customer will tell 9-15 people about it. And approximately 13% of your dissatisfied customers will tell more than 20 people about their problem. Source: the White House Office of Consumer Affairs, Washington, DC.

Leon Skaliotis

Leon Skaliotis is Founder and Principal Advisor of Retail Fundamentals. With over 30 years experience in specialty retail, hospitality, financial, franchising and advertising industries services, Leon has gathered, learned and distilled the best ideas, practice, systems, techniques, strategies and success principles that have made average businesses great, and struggling business owners realize good health, wealth and prosperity.
Together with his own knowledge and experience, Leon can draw on the expertise of many partners, (each an expert in their own field), to consult business owners and advise on ways to grow revenue through building, analysing, and improving customer experience programs, supplier relationships, financial advice, exit strategies, staff acquisition and retention, and internal and external marketing strategies.

Leon Skaliotis
M: 0425 833 344
E: leon@retailfundamentals.com.au

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One thought on “How Much Is A Customer Worth To You?

  1. Veronica

    Love this! Yes, a business owner should always take into account how much a customer is worth. Even if someone doesn’t spend hundreds of dollars, you STILL want them to return later on. You can think of it like this. One person can come in and spend $500 in one day, while the other person comes in and only spends $50 that day. Person A never returns to the store, but person B returns 15 more times that year. Which customer spent more money in your store overall? The math is simple. Treat every customer the same, and your business will thrive.