Customer Lifetime Value vs Transaction Value

In the 1st small business sales strategy to massively boost your sales, we established that a more sustainable sales strategy is to build a trusted relationship with your clients so that they buy from you consistently rather than just selling to them.

This then raises the following question “How do you form a relationship with your clients where they buy more from you, and you don’t have to sell to them?”  

This 2nd proven sales strategy is understanding the difference between the lifetime value of your customer Vs a transactional value today. 

Getting this strategy correctly set up could mean the difference between a successful business that has continual business growth from new and repeat customers or one that struggles with cash flow year after year.

I believe this philosophy’s understanding is one of the most potent weapons a small business owner can have. It helps create an edge needed to grow your business and to compete in today’s highly competitive business world.

Don't struggle with cashflow year after year

Treating Your Customer Like a $ Sign

When you buy something, do you often feel like a dollar sign rather than a customer who feels appreciated for spending money?

Let’s analyse the long term effects that a few seconds at the counter has on the customer’s long term option of your business.

What does treating your customer as a $ sign signal? Your company cares more about the value of the transaction happening right now than the lifetime value of your customers. 

I am amazed at how badly some businesses treat their customers while others bend over backwards to please their clients. Whether it is staff with a bad attitude or staff who could not care less, it doesn’t matter; the customer endures a bad experience. 

In most instances, if they’ve had a negative experience, they will never deal with that company again and will probably tell at least ten people about their ordeal. This negative word of mouth marketing is not what any business needs, especially a small business that’s already struggling with cashflow and needs new customers to grow.

If a business does not have the skills to train and motivate staff to look after customers and retain them, there is very little point in trying to attract new customers.

What Happens When You Focus on the Transactional Value and Not the Customer Value

Besides the obvious fact of losing customers and slowly poisoning your business, what are the real implications of not valuing the customer? 

Staff members or managers who are unable to provide resolution to an unhappy customer and do little to protect the relationship probably have no idea about what the value of that customer is to the business.

Here’s a real-life example that illustrates this point.

I recently received a phone call from one of the trucking companies I regularly use. The previous day they had misplaced some paperwork that resulted in the company missing my scheduled pickup from the shippers. 

The following day the trucking company was back at the shippers waiting to pick up my shipment for delivery. That’s when I received a phone call. 

The staff member from the trucking company I use informed me that there was a queue at the shippers and that they would be charging me an extra fee for the downtime. I explained that they made a mistake the day before, and that’s why their truck was in the queue. That’s when the “fun” started. 

She informed me the problem was NOT her fault and that they were swamped, and there was nothing she could do. If I wanted my shipment, I would be charged the extra fee. I asked her to please review my account with them as I had been a client for almost 1 1/2 years and had regular monthly purchases of around $1500, which over one year equates to $18 000.

Here I was making her aware of my customer value to her company. She was focussed on the value of the transaction today by demanding I pay her the extra $65 per hour for something that was not my fault.

Here’s what should have happened.

If this lady had been trained properly to understand the difference between the value of a transaction occurring at the moment versus the value of a long term client, she would have phoned me the day they lost the paperwork and arranged, at their expense, for my shipment to be delivered.

A professional and courteous gesture like that would have saved my account with them. Instead, her lack of understanding cost their business $18,000 as I changed trucking companies the very next day.

So, when discussing the implementation of a customer value culture into their business, I ask this very important question to my business coaching clients:

“Do you know what the value of your customer is?”

Very few can give me an answer. My feedback on this is, “If you, as the business owner of the company, don’t know, how will your staff or managers know?”

They won’t, and this can be very costly.

So what’s the tip?

The lady over the phone at the shipping company was not to blame. The business owner is responsible for this misalignment.

If you have staff or managers dealing with customers on a daily basis, make sure they clearly understand the difference between the Customer’s Lifetime Value vs a Customer’s Transaction Value.

This simple understanding is the difference between companies that continue to grow revenues while others see declining graphs.

Find Out How a Business Coach Can Help You Get More Customers & Grow Your Business Today

Luke Fatooros Experience Business Coach
Real Business Coaching For Small Business Owners

Trying to survive in business can be exhausting, especially if you are always trying to solve the problems yourself. Are you frustrated, confused, and not sure what to do next? This is not how the picture of your business should look.

I understand this completely. I have been doing this for most of my adult life, and many times I have had to deal with struggles and pain alone

Being a small business owner doesn’t have to be a lonely ride.

  • Do you want help systemising your entire business operation, so you do not have to worry each day?
  • Need a practical exit strategy to turn your business into a valuable asset to set you up for life?
  • Want a proven marketing plan that has helped many other “offline” businesses just like yours to successfully integrate and grow their brand online?
  • Do you want to remove yourself from the daily grind and get your life back?
  • Do you want to optimise your business, improve efficiency, ramp up sales, maximise profits, reduce overheads and improve cash flow?
  • Need help managing and motivating your team to operate at optimum performance?

If so, we should have a chat.

You can learn more about my business coaching services here, and how to book in a free, no-obligation chat with me today. (valued at $295)

In the meantime, have a look at some real results from our previous clients. Many of them are small business owners who were struggling with similar issues you may be experiencing right now. 

I hope that you find this useful. If you would like a no-obligation, pitch-free business discovery session to see if we can help you get to where you want to go, then please book a time here.

I certainly would enjoy helping you on your business journey, whatever stage you are at, to reach your lifestyle of choice.

Thanks for sharing your time with me. I look forward to discussing how we can get your business working for you.

As always, I wish you all the very best. 

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