Training is a hot topic these days. Those of you who are regular readers of my blog know that members of the Millennial Generation (Generation Y) prefer to work for companies that train their employees. As a matter of fact, many times, they will choose training as a benefit over cash bonuses.
Smart companies know this and they are bringing back their training programs and adding new ones to meet today’s demands in the business landscape. But it’s the brilliant companies who know the importance of making sure that their employees know what a customer is worth to their organization, and they emphasize and repeat this information as often as they can.
When Market Viewpoint is hired by one of our client organizations to come in and train on topics such as customer retention, customer service, and sales skills, I am always sure to make certain that we include a module regarding customer worth. Most employees have no idea how to calculate this figure. It is management’s job to tell them how.
The Lifetime Value of a Customer (LVC) is calculated as follows:
Lifetime Value=Average Sale x Average # of reorders x Length of Time
A simple example might be the worth of a customer at a grocery store who comes in to make weekly family food purchases.
Average value of a weekly sale = $175.00
Average # of reorders = 52 (weekly purchases)
Length of time = 1 year
On a yearly basis, this customer is worth $9,100 per year in sales. Multiply this by the number of years that this customer will patronize you, and you have the Lifetime Value of a Customer calculation for the organization.
When employees begin to couple the Lifetime Value of their customers with an understanding of what the loss of those Lifetime Value dollars might mean to the organization, they may take a different approach to the idea of service and satisfaction.
How do you go about explaining to your employees what a customer is worth to your organization?
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