Perhaps you’ve heard of Lemonade Day. It’s a day for teenagers to learn about becoming entrepreneurs by selling lemonade from their own lemonade stands. These young business people learn how to attract customers by making their “brand” of lemonade stand out from the competition. One youngster had a character with a lemon head waving at passersby. Another sold several flavors and added real pieces of different sliced fruits to distinguish hers. A 16-year-old male even sold other products like water to joggers. How are you locking your customers into your products and services?
There are three elements that keep the competition from wooing your customers away, giving you a competition advantage and that also tells you what your average customer is worth in time and dollars.
Customer Magnet – This element measures the strength of the quality of your products and services that keep your customers coming back to you. Simply saying your product or service is of high quality, just doesn’t cut it anymore. Rather, the proof in the pudding is how you stand behind your products and services and the experience the customer has when things do not go well from their perspective.
Barrier to Entry – Can your product or service be replicated by every other Lemonade Stand? Just as the young entrepreneurs learn, your business must hold something unique for your customer. If you are just a cookie cutter product or service, there’s no answer to the question “So what?” when you say we offer, “Blah, blah, blah and this, that and the other.” Well so does every other lemonade stand!
Lifetime Value of the Customer – Wouldn’t it be great to know how long a customer is likely to stay with you and how much the lifetime value of a customer is to your company? Well there’s an app for that, ur, I mean a formula for that. Here’s how it works.
Take the average dollar amount a customer spends with you over a 12-month period.
Determine how long you expect to keep that customer in months or years.
Example: A customer, on average, spends $10,200 a year and you expect that customer to be with you for three years.
Lifetime value = $30,600
The above example is based on a customer spending $850 a month. On the surface, this may not seem like a large client for you. However, when you consider or calculate the life time value of this customer and see that they will spend over $30,000 within three years, the perspective shifts. This is a customer who deserves your very best customer service. Customer service was another valuable lesson our lemonade entrepreneurs learned. Here’s why this is important to understand.
According to Bain & Company, in a Harvard Management Update
“80% of companies believe they deliver superior customer service.
8% of their customers agree!”
This is one of those YIKES! moments. To help prevent similar upside down statistics from souring your customers on your lemonade, here are a few questions you should be exploring in your organization.
- Is there a customer intelligence plan for staying ahead of your customers’ needs?
- Does the company understand its customers’ customer?
- Is customer service a part of your performance plan?
- Do you reward employees for exceptional customer service?
Resolving gaps in your customer service is important because it’s simply a matter of good business and creating a profitable business.Just a 5% increase in customer satisfaction can have up to a 125% payoff, according to the Gartner Group.It’s nearly six to seven times more expensive to obtain a new customer than it is to keep current customers so says Frederick Reichheld of Bain & Company. The loss of a good customer creates both a financial as well as a public relations debacle. “Satisfied customers tell nine people how happy they are. Dissatisfied customers tell twenty-two people about their bad experience.” Allbusiness.com. What are people saying about your lemonade stand?