Understanding the Real Value of Keeping Your Clients Loyal for Life


When you ask a business owner the question, “Why are you in business?”, the answer you will usually get is, “To make money.” However, when you take a closer look at this assumption, you will see why this is not the correct response. Here’s why this is the wrong answer.

Self development philosopher Earl Nightingale once said, “The only person who truly makes money, works in a mint. The rest of us have to earn our money.” And, as management consultant, Peter Drucker, once stated, “the primary purpose of a business should be to acquire and retain customers”.

So, what that comes down to is this. When we attract, acquire and retain clients, then and only then, do we create the opportunity to “earn” a profit. If we can retain those clients over a long period of time, the return on investment for acquiring those clients goes up significantly.

Why is this type of thinking so critically important to the long term financial well being of your small business? This is simple. A, acquiring clients is expensive and losing them is even more costly. When you add up all the dollars it takes to pay your employees’ salaries, bonuses, benefits, unemployment insurance, your building rent, equipment and maintenance costs and taxes, all of this to support the process of attracting, acquiring and retaining clients, it is extremely expensive.

So it stands to reason that every action performed by you and your employees should support this goal of attracting, acquiring and retaining clients. If the action does not support this premise, it should not be performed.

Let’s talk about the value of keeping your clients for life. How much is the return on investment from your clients, worth, to your business? Let me ask you this question. In terms of dollars and cents, how much is one of your good clients worth? Do you really know? Most business owners have not thought this question through. They just don’t know. That kind of approach to running a business is not for you.

If you don’t know, it stands to reason your managers and employees don’t know either.

Here is an easy exercise to get a good idea of the lifetime value of one of your typical clients. Take a few moments and fill in the blanks.

Determining the Lifetime Value of Your Client

1. Name one of your typical clients: _____________________________

2. On average how much does he or she spend each year they use your service?


3. How many years do you expect to retain that person as a customer or client?

_______ years

4. So, the formula for knowing how much your customer/client is worth is:

$ __________ average amount spent each year

X number of years as a client = ____________

$ ______________ amount of money spent by your lifetime client.

For example, let’s say Joe and Mary Wilson are a family that spends $1300 every year they use your company’s services. They are also the kind of client that could easily use your services for 4 years. So $1,300 per year times 4 years equals $5,200.

The Wilson family is a $5,200 client!

This kind of thinking makes it mandatory that even though Joe has a few quirks in his personality, and they are only purchasing a measly $1,300 worth of services this year, they are still an extremely valuable client.

Most business owners agree that one of the real keys to success in running a profitable business is repeat business. When you look at your clients as lifetime relationships, it can help make your employees and your supervisors aware of the fact that they are extremely important to the long term success of your franchise.

As the oil tycoon, J.P. Getty once said, “Don’t be surprised by trouble.” In any normal business relationship, from time to time, you are going to have misunderstandings and misconceptions that need to be clarified and resolved. It is critically important to do your best to prevent these misunderstandings from occurring in the first place, but when they do, be prepared to deal with them in a professional manner.

One of the factors that complicate misunderstandings is the egos of both the client and members of your team that get in the way. Far too often, people have a tendency to take these situations personally and it goes downhill from there. As I tell all of my clients, it is important to maintain a level headed mindset when dealing with complaints.

One of the best ways to do this is by taking the time, and investing in education and training for you and your employees on a regular basis. As I have mentioned in previous articles, good training doesn’t cost, it pays. So, make sure you include that in your annual budget.

To drive home this concept of truly understanding the lifetime value of your clients, I suggest you hold a team meeting. During this meeting discuss the time, activities, efforts, and amount of money that is invested to attract one new customer. One of the ways you can arrive at this total, is by dividing the number of new customers acquired during the last month into the total amount of dollars invested in marketing to attract these new customers.

Remember to include in the total, the amount of dollars invested in the employees who were involved in those marketing activities. This includes things like wages, unemployment insurance, benefits, and any other costs associated with the employees you have hired. Remember to add to that total other costs such as computer services, telephone, and vehicle expenses that were incurred when used for the purpose of marketing and selling to those new customers. Include any other ancillary costs associated with those marketing activities to secure those new customers.

Once the figure for attracting one new customer is identified, you can create a true appreciation among your employees for how much a new customer actually costs to acquire.

Next, walk your team through the exercise of determining the lifetime value of your clients. Let them experience the awareness of figuring out just how much a typical lifetime client is worth.

Discuss the importance of doing everything possible to retain those new customers and turn them into loyal, lifetime clients.

Ask your employees what they perceive as some of the company policies that are making it difficult to service those customers and if, in fact, may be driving them away from your company.

Be open minded and proactive in addressing these issues as they are identified. Formulate a plan and identify individuals who will be responsible to follow through and resolve those concerns.

When your team meeting is completed, both you and your team will have a new appreciation for the real reason why you are in business.


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