How Much Is Your Customer Worth?

How much is your customer really worth?

I’m sure you have heard about maintaining a customers lifetime loyalty. You can easily arrive at the value and cost of your sales, and your operating expenses. So, how do you calculate the value of your customer’s lifetime loyalty?


In my retail experience, not everyone is good at sales data analysis, or business calculations. For us to promote our people from within the organization, we need to make things simple. Simple enough that they can understand the concept and use it on a daily basis. When you take about a concept like customer loyalty, it sometimes sounds like a flavor of the month. It is something intangible to people, so how do you make your organization understand the concept?

You see, people will only accept a concept if it is measurable. If one of your goals is to create a customer focused business culture, you better make sure everyone understands the financial impact of their actions. For that to happen, you need to determine what your customer is worth, and what your customer is worth over his lifetime. I’m going to show you a simple formula that has worked for me. It will make the whole concept of customer lifetime loyalty crystal clear to everyone in your organization.

Now, I realize that this is not totally scientific, but it does shows you that it is possible to calculate what your customer could be worth to you in dollar terms. Your POS system should give you an idea of what is the per customer spending in your store. As an example, I’ll use a realistic figure of $100 per week. So, it looks like this:

  1. In one week, your customer spends an average of $100 in your store.
  2. In one year, your customer will spend $100 X 52 weeks = $5,200.
  3. Factor in a lifetime of 10 years spent in your area, $5,200 X 10 = $52,000.

That’s how much your customer’s lifetime loyalty is worth to you.

That’s how much business you are driving away every time:

  • your customer service fail
  • when you experience out of stock situations
  • when your pricing isn’t competitive
  • when your sales associates aren’t doing their job well
  • when the management can’t see what’s going on

That shows you why we should place the focus of your business on your customer’s satisfaction. For more information on Customer Service and Retail Marketing, visit here.

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