The Real Value of a Customer

One of the reasons customer service is what it is (as in not nearly as good as it should be) is that most organizations grossly underestimate customer value (CV) seeing it as simply the difference between the cost of providing goods or services and what the customer pays for them at point of sale.

Say for example Neil, my youngest pictured above, buys a pair of skis on sale for $800 (a ridiculous amount if you ask me, but considerably less than the ones he really wants). If the total cost of those skis (what the manufacturer/distributor charges the retailer, plus a proportionate share of operating expenses such as salaries, commissions, rent, advertising, etc.) to the shop is $700, they are likely see his CV as $100.

On the surface this might seem reasonable, but it far from tells the whole story.

First, the skis mentioned above by no means represent my son's first pair, in fact, he currently has three pair in active service (don't ask) and there are at least as many cast offs in the basement. I prefer not to think how many pair of skis he has owned and how much they cost.

It should be noted that not all of those skis were bought from the same shop and even if they had, I can understand why the retailer is not all that likely to account for purchases of years gone by when calculating Neil's value as a customer, although a little acknowledgment would be nice.

But consider this - Neil typically buys a new pair of skis every two years, either because he wears them out (what he tells me) or because something 'way better' has come along (the real reason). Given his passion for the sport, he is very likely to continue this pattern for many years to come and it would not be out of line to suggest that in the course of his lifetime he will probably go through at least 25-30 pair.

So what we are really talking about here are sales over time of somewhere between $20,000 - $25,000 and based on a 10% margin, that translates into $2,000 - $2,500 in potential value for the retailer.

But that is only part of the story. In order to ski, Neil not only needs skis, but also boots - good ones go for about $500 to $600 (replace every 3-4 years); poles - $50 to $100 (lasting 2-3 years, unless stolen); gloves - $100 (at best 2 years, but only if he doesn't lose them); goggles - at least $100 for anything decent, considerably more if you go with the built in antifogging fans (who know how long they'll last); a helmet - his mother won't let him leave home without one - $100 to $150 (good for 3-4 seasons or until he head buts a tree)...and then there's the outer wear (jackets and ski pants)... inner wear (thermal underwear, fleece, etc.)...and après ski wear...let's not even go there.

But we're not done yet. When it comes to skiing, Neil is the expert in our family, so when his brother or I need new equipment, we follow his lead. And because he can recite equipment specs in his sleep, not to mention 'drop a line' (ski cliffs/shoots/tight trees) most of us wouldn't think skiable, there's also a broader circle of friends, acquaintances and people who just happen to be riding the same chairlift who turn to him for advice as per what to buy and where to buy it.

When you add everything up over the course of his life, Neil will directly or indirectly influence the purchase of well over $100,000 in ski equipment, which would suggest that to those who sell the stuff he has a potential customer lifetime value (CLV), even at very conservative margins, well in excess of 10 grand!

It would be silly to imply that all of Neil's 'customer lifetime value' will be realized by a single shop, but one thing is for sure, little if any will go to the one that calculates his CV as $100!

So if you happen to own a ski shop, you might want to think about that the next time some lanky kid in jeans and a hoodie strolls in and tips back his baseball cap to give you and your inventory a critical glance.

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Some People Wait A Lifetime

The other day I found myself on hold while waiting to inquire about a billing issue with my telephone service provider. Unlike many similar automated queueing systems, this one did not give any indication of wait times. That said, I knew I was in it for the long haul as every few minutes the background music was interrupted by the following message:

Interested in a career in telecommunications? We currently have several openings for call centre operators.

When I first heard this, I thought: Fair enough. They are short staffed, but at least they're trying to do something about it. By the fifth or sixth time I heard it, my thoughts were becoming somewhat less charitable.

But then, about ten minutes into my wait, something happened that really lit a fuse. At first I didn't catch on as by this time I was cradling the phone on my shoulder and going about some other business. When the penny did drop, I became painfully aware of the song playing in the background. Believe it or not, it was none other than A Moment Like This which, for those of you not familiar with the lyrics, repeats almost ad nauseum the line:

"some people wait a lifetime... for a moment like this."

Don't get me wrong. I have nothing against Kelly Clarkson, or this particular piece of music. But I did find it's placement a bit over the top. Either someone at the phone company has a very warped sense of humor, or attention to detail does not feature highly in their operational imperatives. Either way, while I had to laugh, I was not amused, if you know what I mean.

As it happens, I did not have to wait an entire lifetime. It just felt like one.

After a little over 18 minutes, I was finally put through to a rather pleasant individual, who when challenged on the billing item in question (a charge of $3.99 for a 1 minute call to directory assistance) was quick to advise me that particular service was not one provided by her company, but rather one provided buy a third party and that I would have to take it up with them directly. I found it strange that they would farm out such a lucrative service (many lawyers charge less than what equates to a $239.40 hourly rate) but since they are the ones doing the billing, it is probably safe to assume they get a cut.

In any event, intrigued by this response, not to mention being somewhat opportunistic, I then asked if they also farmed out the design of their automated queueing systems. Needless to say, she failed to see the humor in this.

In the end I opted to eat the disputed charge and did not bother calling the number she gave me. Not all of us can afford to wait a lifetime for moments like this!

If your company has an automated call management system, you might want to take a moment and check out what impression it leaves with your customers. From the rest of you, we'd love to hear about any 'interesting' call management systems you may have encountered.

To comment, or read the comments on this blog click on 'comments' beside the little envelope below. To read previous articles (this is #24), see the Blog Archive (lower right) and to become a Wavemaker Blogs follower, click on 'Follow' (just above Archive).

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If you would like to know more about how Wavemaker Consulting can help your company improve the customer experience you provide, visit our Website, or email us at wmconsulting@live.com

Many Happy Returns!

Happy New Year! I hope you had a great holiday and got exactly what you wanted for Christmas. I also hope it was the right size, the right color and the right whatever it needed to be.

I suspect however, there are those among you who have already made, or are planning to make a visit back to the shops for some minor or major adjustments.

And for those of you, my further hope is for 'Many Happy Returns!'

Even as I write these words I realize this to be wishful thinking. After all, last year was very challenging for most retailers and by all accounts, the sales figures leading up to Christmas didn't exactly turn the tide.

What are the chances that shop owners, sale clerks and customer service folk are going to greet you and your returns with the same enthusiasm they displayed (or should have displayed) when the purchases were made?

The truth is - I've already heard a number of somewhat disturbing stories.

The first relates to the electronics store who has implemented a 15% restocking fee on all returns, a hefty price if the item in question is a computer or big screen TV. Apparently one disgruntled customer asking why this policy was not brought to their attention at the time of sale, was not so politely told "It's printed on the back of the sales receipt!" which it was.

Fair enough I suppose, but consider the fact the customer doesn't get the receipt until after the purchase; and just out of curiosity, when was the last time anyone actually read the back of a sales receipt?

Then there's the major department store that back in October and November, was so actively encouraging everyone to shop early, but now, when presented with a return, is so quick to point out their 30 day refund policy.

On the one hand, I can understand, even sympathize with these retailers. After all you can't really expect them to freely accept returns for an indefinite period; or can you?

What constitutes a fair and reasonable return policy? To be fair (and ethical) it most certainly has to be clearly understood by all parties at the time of purchase, not hidden away in small print on the back of a receipt. But what is a reasonable return period and what specific return terms and conditions actually make sense?

Not easy questions to be sure.

Perhaps the root of the answer lies in just how much the seller values the future business of their customers and how much they care about what those customers have to say about them.

Rather than explain, I'll share with you one more little story which, while not so current, may help make the point:

Some time back a pregnant woman walked into a linen store to return an unopened set of sheets purchased precisely 31 days earlier. The sales clerk, obviously annoyed by this intrusion, cleared a pile of other returns off the counter and pointed to a rather dog eared copy of their version of the 30 day refund policy.

After expressing her disappointment, the customer in question was told that if she didn't like the policy, she was welcome to shop elsewhere.

That woman just happened to be my wife and the child she was carrying is now 20. While she has since made her fair share of towel, bedding and related purchases, my wife has never forgotten the words of that clerk, and more to the point, has never once stepped foot back in that store. Furthermore, to this day, whenever someone as much as mentions the establishment in question, she recounts her experience with same level of emotion and disdain that she expressed to me on returning home that fateful day.

The lesson:

When it comes to customers expressing and acting on their dissatisfaction, there is no 30 day policy.


To comment, or read the comments on this blog click on 'comments' beside the little envelope below. To read previous articles (this is #23), see the Blog Archive (lower right) and to become a Wavemaker Blogs follower, click on 'Follow' (just above Archive).

If you would like to be notified whenever a new Wavemaker blog topic is posted, just drop us an email at wmconsulting@live.com with "Blog Me" in the subject bar. We promise never to provide your contact details to anyone else and you can unsubscribe from this service at any time.

If you would like to know more about how Wavemaker Consulting can help your company improve the customer experience you provide, visit our Website, or email us at wmconsulting@live.com