Customer potential equals lifetime value

Dry Cleaning Service Business

Customer service is vital to long-term success in a “service” business.

In a perfect world, businesses would create moments of truth or magic… 100 percent of the time. Unfortunately, ‘stuff’ happens, and the best of intentions go sideways or upside down, even when we’re trying our best to satisfy the wants and needs of our customers. It’s simply the ‘human factor’ in the equation.

When these moments of misery happen, focus on the ‘lifetime value’ of your customer in trying to sort things out and fix the situation. Compare the cost of making things right to the potential value of your customers if they stay with you another year, two years, five years, ten years…

Lifetime Value Scenario

Early in my career, I spent between $75 – $100 a month at a local dry cleaner, laundering and dry cleaning suits, dress shirts and pants. After two years of service, I dropped off my weekly laundry, which included a newly purchased white dress shirt that cost me $75. When I picked up the clothes, I noticed the white shirt had a grease mark on the front pocket. Guessing it probably brushed up against some cleaning machinery, the provider immediately acknowledged the mark and offered to clean it again, at no cost. Subsequently, it took them several tries to get the mark off the pocket and the end result was a shirt that looked more like white, see-through gauze than a solid white cotton dress shirt. I thanked them for their efforts, but indicated the shirt had been ruined by the chemicals used to remove the mark. The first words out of their mouth were that the shirt was in that condition when it came in and under no circumstances would they pay to replace it. Even after showing them the receipt for the new shirt, they refused to budge from their position. Needless to say, I never returned.

Let’s look at my lifetime value to that dry cleaning business. At the time of the incident, my customer value was conservatively $1,800 (24 months X $75). If I had stayed with them five years, my value would have been $4,500 (60 X $75)… ten years would have made me worth $9,000.

Question: Would you spend $75 to keep or attract a customer who was willing to spend $1,800… $4,500… $9,000 with your business?

Conclusions

I understand you may not want to keep or attract all kinds of customers. There are those customers who complain about everything and are always looking to get something for nothing. However, in this case, I had never complained about their service or asked to be reimbursed for anything prior to this instance.

On a side note, I have been with my current cleaners for over ten years. There have been a couple of times where the service didn’t meet expectations, but they have always been quick to accept responsibility and correct the mistake. They understand my lifetime value to their business!

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Russ Moorehead

Russ Moorehead is a veteran Marketing Professor at Des Moines Area Community College as well as the chair of the Marketing/Management Department. He holds an MBA from Northern Iowa University.

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1 Response

  1. So true. Customers will refer their friends when they’re impressed by a fixed mistake as well.

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