How to get maximum value from your customer relationships by thinking about how you can develop long-term relationships with them and considering their life time value
Fact – it costs five times more to attract a new customer than to retain an existing customer. (eMarketer 2002)
Fact– a 5% increase in customer retention yields profit increases of 25% taking it up to 95% (Bain and Company 1990)
It therefore, seems common sense to look after the customers we already have, really get to know them and develop a personal long-lasting relationship with them.
Life Time Value of Customers
Building on this approach of developing long-term and understanding relationships with our customers, we can now start to think about them in terms of what is known as their Life Time Value (LTV) rather than a “one-off” transaction.
Many organisations have been taking this approach for many years and plan their future capacity and growth using their customer’s LTV. This also encourages businesses to think about different and innovative ways with which they can engage with their customers. Examples of organisations who use LTV calculations include BMW, Rolex and Rolls Royce. The same approach can be used for any sized organisation in any sector.
Many marinas already take this approach to LTV, ensuring that they work closely with berth holders and tenants to provide a great environment and experience.
Creating Long-Term Relationships
Here are some thoughts about how you can apply the concept of LTV to your business and reap the benefits of this approach.
Many of the ways we can really engage with your customers seem to be common sense, however in the day-to-day rush to get the everyday tasks completed, we sometimes forget what we know is good practice.
Have a look at your customer base and identify your really loyal, regular, less frequent and “one-off” customers.
Having categorised your database, work out approximately how much each of those customers spend with you in a year and also what they spend it on. Pay particular attention to your really loyal customers, as your goal will be to develop your regular, less frequent and even “one-off” customers into loyal customers.
Understanding why your loyal customers fit into this category is essential so that you can replicate that service to the other customers. To do this, really get to know your customers and why it is that they enjoy doing business with you. Clearly, a great customer experience can vary from customer to customer and can be a very personal view, so your job is to pick the services and experiences that consistently feature in your loyal customer’s expectations.
Identify where you can add value to your regular, less frequent and “one-off” customers such as when a boat owner plans to moor for just one night at your marina, and develop a plan to convert these customers to loyal customers. In your plan, include the cost of adding the value as well as the forecast of the income your customers will generate over the year.
It is also worth remembering to “under promise and over deliver”. By this, we mean services such as delivery times when you promise to deliver the service or product within a certain timescale and actually deliver it sooner than your customer expects, or providing your customer with some unexpected surprises that differentiate you from another service provider. So for example, a UK-based marina regularly put additional care and attention into taking care of their customer’s boats through the winter at no additional cost. It is very often the little things that make a big difference to your customer.
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