The Value of a Long Term Customer

Most businesses understand that customer retention is important. Although there is some debate over the value of all loyal customers, at the very least all businesses and market researchers recognize that losing customers is bad for the company’s long-term revenue potential. Yet even though this is understood on a basic level, few individuals – especially at service end of a company – seem to truly grasp what losing a single customer can mean.

When it comes to customer service, car mechanics are notorious for falling short. I’ve had several run-ins with car maintenance companies that have been nothing short of abysmal – with employees that treated me and my car as though we were fools for needing their help. Car repair, however, is one of the best examples of how customer retention can bring in enormous company profits.

If the mechanics understood how much they lose in the long run, maybe they’d recognize the importance of good customer service. One day I left the light on in my car and my battery died. I know little about car repair, so I took the car to the mechanic to get it serviced.

The mechanic treated me with disdain. He acted like I should know how to fix a battery myself, and charged me for 3 hours of labor even though he called me to pick up the car after only two hours. It was a bad experience, and I had no intention of going back A year later I went out to my car in the morning and saw that my right break light had cracked.

It looked like someone had hit it during the night and didn’t leave a note. After my particularly horrific experience with the other car maintenance company I found a new mechanic that was pleasant and agreeable, and charged me the fairest price he could, based on the work he completed. Two years later my car was in a serious accident.

It needed over $5,000 in repairs. You can guess which mechanic I took it to. The first mechanic lost thousands of dollars in revenue.

The above example is why it is important to both monitor the long term value of a retained customer and communicate that value to the employees. Information is the greatest tool for making important changes within a company, and knowing exactly how much value a customer has will help create an environment that will work hard to keep the customers from defecting.